Peloton Interactive, Inc. reported a surprise net income of $21.6 million, or $0.05 per share, for its fiscal fourth quarter 2025, a significant turnaround from a loss of $30.5 million in the prior-year period. Sales for the quarter were $607 million, a decrease of 6% year-over-year. For the full fiscal year 2025, total revenue was $2.49 billion, down 7.8% year-over-year, with Connected Fitness Products revenue declining 17.6% to $817.1 million and Subscription revenue decreasing 2.1% to $1.67 billion.
The company achieved a substantial financial turnaround for fiscal year 2025, delivering $403.6 million in Adjusted EBITDA, with $140 million contributed in Q4. Connected Fitness Products gross margin surged to 13.6% for FY25, up from 4.9% in FY24, marking the first time hardware margins reached double digits in over three years. Subscription gross margin also increased to 69.1% for FY25.
Operating expenses in Q4 FY25 decreased 20% year-over-year to $299 million, driven by a 28% reduction in sales and marketing, a 33% decrease in general and administrative, and a 20% drop in research and development expenses. For FY25, stock-based compensation expense decreased by 25% year-over-year. These aggressive cost management efforts were critical to the financial recovery.
Peloton generated $323.7 million in Free Cash Flow for FY25, a dramatic increase of $409 million year-over-year, and ended the year with $1.04 billion in unrestricted cash. Net debt was reduced by $343 million, or 43% year-over-year, to $459 million. The company plans to reduce run-rate expenses by an additional $100 million by the end of FY26, which includes a 6% staff cut.
For fiscal year 2026, Peloton projects total revenue between $2.4 billion and $2.5 billion, representing a 2% year-over-year decrease at the midpoint. Adjusted EBITDA is guided to a range of $400 million to $450 million, a 5% increase year-over-year at the midpoint. Free Cash Flow is targeted at 'at least $200 million' for FY26, despite an anticipated $65 million impact from tariffs.
CEO Peter Stern outlined a strategic plan focusing on holistic wellness, expanding into strength, mental well-being, sleep, recovery, nutrition, and hydration, leveraging AI for personalized coaching. The company will optimize its retail footprint by reducing larger showrooms from 37 to 13 and testing smaller 'micro-store' concepts, with plans for eight more. Other growth initiatives include expanding the Peloton Repowered marketplace, boosting instructor presence at in-person events, and forming a unified Commercial Business Unit integrating the Precor brand for commercial partnerships.
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