Peloton (PTON) Turns The Corner, But Subscribers Keep Slipping

Peloton Interactive (PTON) has finally achieved a full year of positive net income and operating income, marking a significant turnaround for the company. Total revenue for the fiscal 2026 ended June 30 was $2.446 billion, with quarterly revenue increasing by $1 million from the previous year. However, the growth in revenue is overshadowed by the shrinking subscriber base, which decreased by 8.8% year over year to 2.553 million paid connected fitness subscriptions.

Monthly churn rose to 2.2% in the fourth quarter, up from 1.8% a year earlier. Despite these challenges, Peloton managed to cut net debt by 80% to $93 million, and free cash flow rose to $378 million. The company's CEO, Peter Stern, attributes the turnaround to improved revenue trajectory and cost restructuring, and the company exceeded its target of more than $100 million in run-rate savings by the end of the fiscal year.

Peloton has also expanded its digital footprint through a partnership with Spotify and closed the acquisition of Skōp, pushing further into connected Pilates. The company's commercial business unit grew revenue by double digits for the year, and it plans to double the number of microstores in fiscal 2027. However, the profitability story is not hidden from the customer base, with the core subscription engine still contracting.

Management's guidance points to more contraction in fiscal 2027, and the stock trades at a forward P/E of just 4.55, suggesting that the market is skeptical about the future growth.