RESOLVING THE LEDGER
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Peloton delivered its first full year of net profit and operating income in fiscal 2026, but said it expects sales to fall in the coming fiscal year as it begins to lap price increases on its hardware and subscription plans.
Peloton shares tumbled nearly 13% in morning trading Thursday as the outlook disappointed investors. Even so, Peloton CEO Peter Stern highlighted the major strides the company has made in becoming profitable.
"This was the year where Peloton sort of grew up," Stern told CNBC in an interview, calling fiscal 2026 a "landmark" year for the company financially. "That solid foundation positions us for what we need to do to get to long-term growth to deliver on our strategy of becoming a connected wellness company and puts us in really our strongest position to date."
In the year ended June 30, Peloton posted net income of $63.2 million, up from a loss of $118.9 million in the year-ago period, helped in part by the brand's decision to raise prices last fall.
Looking ahead to fiscal 2027, the company expects another year of positive free cash flow. It also anticipates gross margin and adjusted earnings before interest, taxes, depreciation and amortization will grow compared with the prior year.
Aside from its fiscal year, Peloton issued mixed results for its fiscal fourth quarter.
Here's how the company performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
Peloton's reported net income for the three-month period that ended June 30 was $61.6 million, or 13 cents per share, compared with $21.6 million, or 5 cents per share, a year earlier.
Sales rose to $607.7 million, up slightly from $606.9 million a year earlier.
Though it raised prices last fall, Peloton's annual sales still dropped in fiscal 2026 compared with the year-ago period. In the current fiscal year 2027, Peloton said it expects sales to fall nearly 4% to between $2.3 billion and $2.4 billion, worse than the $2.42 billion analysts had been looking for, according to LSEG.
It shows that while Peloton has made enormous strides in becoming a stronger, more profitable business with more say over its destiny, it's still struggling to sell its pricey hardware and keep subscribers engaged and paying.
"We are gradually improving the trajectory of our gross adds and our connected fitness sales while we're keeping churn flat," said Stern. "We're not at the stage yet where we turn the net of all those things positive, but we're getting better and better so that's basically the story of [fiscal year] '27. We're a work in progress on that one but the trajectory is getting better in '27 than it's been in a long time."
Peloton recently hired Sarah Robb O'Hagan as its new chief content and member development officer, succeeding company veteran Jen Cotter, as Peloton looks to stabilize churn, or subscribers dropping off memberships. In the role, Robb O'Hagan will focus on accelerating innovation and driving engagement and loyalty, said Stern.
"We've kicked off a major project under Sarah focusing on member development. This looks at everything from onboarding through to the experience of live classes," said Stern.
"The other thing that Sarah's done is at the same time that we're adding new instructors, she has re-signed contracts with a significant portion of our existing instructors. So we're continuing to deliver on what our members love about Peloton while also sort of challenging them to broaden their experience," he added.
Peloton is pursuing a number of new revenue streams under Stern. It recently announced a partnership with Spotify and is working to launch its first-ever commercial Bike and Tread this fall, which will allow Peloton to expand into commercial gyms. Stern couldn't yet say which gyms the company might be partnering with as it just finalized pricing on the machines, but said there's been "plenty of interest."
"We're having lots of conversations, but we're not actually making sales yet," said Stern.
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