Key Takeaways:
Peloton Interactive reported Q4 revenue of $607.7 million, beating consensus by $9.7 million, and posted its first full year of net income.
"Fiscal 2026 was a defining milestone as Peloton delivered its first full year of net profitability driven by our improved revenue trajectory and substantial improvements in our cost structure," Chief Executive Officer Peter Stern said.
GAAP net income for the quarter was $61.6 million, or 13 cents per diluted share, up 185 percent from $21.6 million a year earlier. For the full year, net income reached $63.2 million, compared with a net loss of $118.9 million in fiscal 2025, while operating income hit $161 million. Total revenue for fiscal 2026 was $2.446 billion, down 1.8 percent from $2.491 billion in the prior year.
The subscriber base continued to shrink. Paid connected fitness subscriptions ended the year at 2.553 million, down 8.8 percent year-over-year, while app subscriptions fell 9 percent to 503,000. Average net monthly churn rose to 2.2 percent in Q4 from 1.8 percent a year earlier, which the company attributed in part to a change in its payment reactivation algorithm that it has since reversed. Subscription revenue rose 7 percent to $436.6 million, helped by an October price increase, while hardware revenue fell 14 percent to $171.1 million.
Adjusted EBITDA was $142 million for the quarter and $468 million for the full year, up 16 percent. The company booked a $23.8 million legal contingency related to a $20.5 million jury verdict against it in NEC Corp.'s streaming patent case. Free cash flow reached $378 million for the year, and net debt fell 80 percent to $92.6 million.
Shares dropped roughly 12 percent in pre-market trading after the report. The stock closed at $6.52 on Aug. 5, up 5.8 percent year to date but down 94.6 percent from its 2021 peak.
For fiscal 2027, Peloton guided revenue of $2.3 billion to $2.4 billion, a 3.9 percent decline at the midpoint and about $70 million below the consensus estimate of $2.42 billion. The company expects gross margin of roughly 54 percent, adjusted EBITDA of $475 million to $525 million, and minimum free cash flow of $350 million. Q1 revenue is expected at $545 million to $565 million, with paid connected fitness subscribers of 2.455 million to 2.475 million.
The guidance reflects a year of transition as Peloton prepares to launch the Commercial Series bike and treadmill this fall and its first products in new consumer categories in fiscal 2028. The company said its commercial business unit grew revenue double digits in fiscal 2026 and now serves more than 80,000 facilities across 60-plus countries.
The profit milestone signals management's cost cuts are taking hold even as the subscriber base contracts. Investors will watch the Commercial Series launch this fall and the new consumer product categories slated for fiscal 2028, which the company expects to return it to revenue growth.
This article is for informational purposes only and does not constitute investment advice.
