Peloton Q1 Earnings & Revenues Surpass Estimates, Stock Up

Core Insights - Peloton Interactive, Inc. (PTON) reported first-quarter fiscal 2026 results, with earnings and revenues exceeding expectations, although revenues declined year over year while earnings increased [1][4][10] Financial Performance - Adjusted earnings per share (EPS) for Q1 was 3 cents, surpassing the Zacks Consensus Estimate of breakeven earnings, compared to breakeven EPS in the prior-year quarter [4][10] - Quarterly revenues reached $551 million, exceeding the consensus mark of $541 million by 1.8%, but reflecting a 6% decline year over year [4][10] - Connected Fitness segment revenues were $152.4 million, down from $159.6 million in the prior-year quarter, while subscription revenues were $398.4 million, down from $426.3 million [5] Operating Metrics - Peloton had 2.73 million Ending Paid Connected Fitness Subscriptions, a 6% decline year over year, with an average net monthly churn of 1.6% [6] - The company registered 542 thousand Peloton App subscribers, reflecting a net decrease of 8% year over year [6] Margin Performance - Operating expenses decreased by 17% year over year to $242.4 million, while gross profit totaled $283.7 million, down 7% year over year [7] - Gross margin contracted by 30 basis points to 51.5%, attributed to a $13.5 million inventory accrual related to Bike+ seat-post costs [7] - Subscription gross margin improved by 80 basis points to 68.6%, while Connected Fitness Products margin decreased by 230 basis points to 6.9% [7] Adjusted EBITDA - Adjusted EBITDA for the quarter was $118.3 million, up 2% year over year, exceeding management's guidance by $18 million due to lower operating costs and improved execution [8][10] Balance Sheet & Cash Flow - As of September 30, 2025, Peloton held $1.10 billion in cash and cash equivalents, an increase from $1.04 billion at the end of fiscal 2025 [11] - Net debt decreased to $395.1 million from $777.3 million in the prior-year period [11] - Net cash provided by operating activities was $71.9 million, up from $12.5 million in the prior-year quarter, while free cash flow was $67.4 million compared to $10.7 million previously [12][11] Outlook - For Q2 fiscal 2026, Peloton expects revenues between $665 million and $685 million, indicating a slight year-over-year growth at the midpoint, with paid connected fitness subscriptions projected to decline by 8% [13] - The company anticipates fiscal 2026 revenues between $2.4 billion and $2.5 billion, reflecting a 2% year-over-year decline at the midpoint, with adjusted EBITDA expected to rise by 12% year over year [15]