Peloton Surprises with Q4 Profit, Cuts Costs, and Boosts Revenue Guidance

Peloton's Q4 revenue beat estimates at $606.9 million, and earnings landed at 5 cents per share, ahead of the expected 6-cent loss. The company plans to cut 6% of its workforce, relocate offices, and slash indirect costs, which could save $100 million over the next fiscal year. Gross margin from connected fitness products improved by 900 basis points to 17.3%, driving a 96% increase in gross profit. Peloton expects fiscal 2026 revenue to land between $2.4 billion and $2.5 billion, slightly ahead of Wall Street estimates.

Peloton Interactive, Inc. (PTON) reported its fourth-quarter earnings, beating Wall Street's expectations with a revenue of $606.9 million and earnings per share (EPS) of 5 cents, ahead of the expected 6-cent loss. The company's connected fitness products gross margin improved significantly by 900 basis points to 17.3%, driving a 96% increase in gross profit. Peloton's plans for cost cuts and growth were outlined by CEO Peter Stern in a letter to shareholders.

The company expects fiscal 2026 revenue to land between $2.4 billion and $2.5 billion, slightly ahead of Wall Street estimates. However, to achieve this, Peloton is planning to reduce its workforce by 6%, relocate offices, and slash indirect costs, which could save $100 million over the next fiscal year. These cost-cutting measures are part of a broader strategy to stabilize the business and generate free cash flow.

Peloton's fourth-quarter results show a significant improvement from the previous year. The company's net income for the three-month period that ended June 30 was $21.6 million, or 5 cents per share, compared to a loss of $30.5 million, or 8 cents per share, a year earlier. Sales dropped to $607 million, down about 6% from a year earlier. This quarter also saw a 25% reduction in operating expenses compared to the previous year, driven by significant cuts to sales and marketing, research and development, and general and administrative costs.

Peloton's latest round of layoffs comes just over a year after the company announced plans to cut 15% of its staff. The company's efforts to cut costs and stabilize its business have started to bear fruit, with the company generating $320 million in free cash flow in fiscal 2025, ahead of its own internal expectations.

For the current quarter, Peloton expects sales to be between $525 million and $545 million, weaker than the $560 million that analysts had forecast. However, for the full year, it expects sales of between $2.4 billion and $2.5 billion, in line with expectations of $2.41 billion. The current quarter is forecast to be worse than expected, largely because it falls during the summer months when people tend to pause their subscriptions and pull back on new workout gear. But the remainder of the year implies improving sales patterns in the quarters ahead.

Peloton's Q4 results and plans for cost cuts and growth reflect a strategic shift aimed at stabilizing the business and ensuring its long-term health. The company's ability to execute on these plans will be closely watched by investors and analysts.

References:
[1] https://www.nasdaq.com/articles/peloton-pton-tops-q4-earnings-and-revenue-estimates
[2] https://stocktwits.com/news-articles/markets/equity/peloton-reportedly-laying-off-6-percent-of-its-staff-in-another-round-of-job-cuts-to-trim-expenses/chrm2gcRddA
[3] https://www.cnbc.com/2025/08/07/peloton-pton-earnings-q4-2025.html