Peloton Q4 2024 Earnings Report: Revenue Exceeds Expectations, Stock Soars

Recently, Peloton Interactive Inc (NASDAQ: PTON) released its Q4 2024 earnings report, revealing that both its net revenue and earnings exceeded market expectations. Following the announcement, the company's stock surged by 12% in pre-market trading. This marks a significant turnaround for the connected fitness company, which has been navigating through challenging times.

Revenue Exceeds Expectations, Significant Improvement in Profitability

According to the earnings report, Peloton's net revenue for Q4 2024 was $643.6 million, representing a 0.2% year-over-year increase and surpassing the Zacks Consensus Estimate of $626 million. Although the growth is modest, this marks the first time Peloton has achieved year-over-year revenue growth since the holiday quarter of 2021, indicating a positive trend in sales.

More impressively, Peloton reported an adjusted loss per share of 8 cents, significantly better than the market's expectation of a 17-cent loss. This is a substantial improvement from the 68-cent loss per share reported in the same quarter last year, showcasing a notable enhancement in the company's profitability.

Subscription Revenue Grows, Connected Fitness Product Revenue Declines

Breaking down the revenue, Peloton's subscription revenue was particularly strong. In Q4 2024, subscription revenue reached $431.4 million, a 2% increase year-over-year. This growth is largely attributed to the company's continuous introduction of new classes and content, attracting more users to subscribe to its services.

On the other hand, revenue from connected fitness products declined. In Q4 2024, this segment generated $212.1 million, a 4% decrease year-over-year. The decline is primarily due to weakened market demand and increased competition.

Effective Cost Control, Significant Reduction in Operating Expenses

Peloton has also made significant strides in cost control. In Q4 2024, the company's total operating expenses, including restructuring and impairment charges, were $375.3 million, down from $426.8 million in the same period last year. Additionally, general and administrative expenses decreased by $23.3 million to $186.2 million.

These cost control measures have further improved Peloton's profitability. The company achieved $70 million in free cash flow in Q4 2024, marking the first time it has done so since the peak of the COVID-19 pandemic.

User Growth and Churn, Market Outlook Remains Cautious

As of the end of Q4 2024, Peloton had 2.98 million paid connected fitness subscribers, with a net loss of 75,000 subscribers and an average monthly churn rate of 1.9%. Despite the increase in churn, Peloton's performance in the secondary market shows potential growth opportunities, particularly in subscription revenue. Users who purchased fitness equipment from the secondary market exhibited lower churn rates.

Future Outlook: Focus on Profitability and Cash Flow

Looking ahead, Peloton's management has indicated a shift in focus towards improving profitability and free cash flow rather than merely growing its user base. The company plans to achieve this through further cost control and operational optimization.

Interim co-CEO Karen Boone stated during the earnings call, We will continue to align our cost structure with the current size of our business to improve profitability and deliver meaningful free cash flow without relying on growth to get there.

Conclusion

Peloton's performance in Q4 2024 exceeded market expectations, with improvements in both net revenue and profitability. Despite the decline in connected fitness product revenue, the increase in subscription revenue and effective cost control measures have significantly improved the