Peloton Interactive, Inc. - 10-Q Summary (Q2 FY2026)
Business Context and Reporting Period
This report covers the quarterly period ended December 31, 2025 (Q2 of Fiscal Year 2026). Peloton Interactive, Inc. operates as a global fitness and wellness company with two primary segments: Connected Fitness Products and Subscription. As of December 31, 2025, the company reported approximately 5.8 million Members. In October 2025, the company launched the "Cross Training Series" and "Pro Series" product portfolios while discontinuing sales of the Original Series Tread, Tread+, and Row.
Key Financial Metrics
| Metric (in millions) | Q2 2025 (3 Months) | Q2 2024 (3 Months) | YTD 2025 (6 Months) | YTD 2024 (6 Months) |
|---|---|---|---|---|
| Total Revenue | $656.5 | $673.9 | $1,207.3 | $1,259.9 |
| Net Loss | $(38.8) | $(92.0) | $(24.8) | $(92.8) |
| Operating Income (Loss) | $(14.3) | $(45.9) | $27.0 | $(33.4) |
| Adjusted EBITDA | $81.4 | $58.4 | $199.7 | $174.2 |
| Free Cash Flow | $71.0 | $106.0 | $138.4 | $116.6 |
| Cash and Equivalents | $1,179.6 | (Balance Sheet as of Dec 31, 2025) | ||
| Total Debt (Principal) | $1,534.0 | (Includes $199M 2026 Notes, $350M 2029 Notes, $985M Term Loan) |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 2.6% year-over-year (YoY) for the quarter and 4.2% YoY for the six months. Connected Fitness Products revenue fell 3.7% (Q2) due to lower deliveries, while Subscription revenue declined 1.9% (Q2) due to fewer paid subscriptions.
- Improved Profitability: Net loss narrowed significantly to $38.8M in Q2 2025 from $92.0M in Q2 2024. Operating loss improved to $14.3M from $45.9M. The company achieved positive operating income of $27.0M for the six months ended December 31, 2025, compared to a loss of $33.4M in the prior year period.
- Margin Expansion: Subscription Gross Margin increased to 72.1% (Q2 2025) from 67.9% (Q2 2024), driven by price increases and lower music royalty costs. Connected Fitness Products Gross Margin improved to 13.9% from 12.9%.
- Cost Reductions: General and Administrative expenses decreased 21.6% YoY ($102.9M vs $131.3M) due to lower headcount and reallocation of executive compensation. Sales and Marketing expenses remained relatively flat.
- Impairment and Restructuring: Impairment expense increased to $23.0M (Q2 2025) from $16.7M (Q2 2024), primarily due to asset write-downs related to corporate office footprint reduction. Restructuring expense was $2.7M for the quarter.
Guidance, Outlook, and Risks
- Restructuring Plan: In August 2025, Peloton announced a new restructuring plan targeting at least $100 million in run-rate savings by the end of fiscal year 2026. The company expects to incur approximately $25 million in additional cash charges and $5 million in non-cash charges related to this plan.
- Product Strategy: The company is transitioning to the Cross Training Series and Pro Series. The Original Series Bike+ recall (announced Nov 2025) involves approximately 833,000 units in the U.S. and 44,800 in Canada. An accrual of $7.5 million was recorded as of December 31, 2025.
- Debt Maturity: The $199 million principal of the 0.00% Convertible Senior Notes due 2026 matures on February 15, 2026. Holders may convert these notes starting January 1, 2026, if stock price conditions are met. The company intends to settle conversions in shares if triggered.
- Key Risks: Risks include the ability to execute restructuring initiatives, manage inventory levels accurately, maintain brand reputation amidst product recalls, and navigate global trade policies and tariffs. The company also faces ongoing legal proceedings related to previous product recalls and securities litigation.
Investor Verification Checklist
- Debt Refinancing/Conversion: Verify the status of the $199M 2026 Convertible Notes maturing in February 2026 and the company's plan for settlement (cash vs. equity).
- Restructuring Execution: Monitor the realization of the projected $100M run-rate savings and the timing of the remaining $25M cash restructuring charges.
- Recall Costs: Track the final cost of the Original Series Bike+ seat post recall against the current $7.5M accrual to ensure no material under-accrual.
- Subscription Churn: Review the trend in "Average Net Monthly Paid Connected Fitness Subscription Churn," which increased to 1.9% in Q2 2025 from 1.4% in Q2 2024.
- Inventory Levels: Assess inventory reserves ($95.3M as of Dec 31, 2025) and the impact of the new product portfolio launch on inventory turnover.