Peloton Interactive, Inc. Q2 FY2026 earnings call

• Evolving from a connected fitness to connected wellness company, focusing on cardio plus strength, global commercial footprint, and AI-driven personalization.
• Unveiled updates including Peloton cross-training series, hardware portfolio refresh, Peloton IQ, and new instructors. Q2 delivered 39% adjusted EBITDA growth year over year.
• Strong member retention with lower-than-expected churn despite price increase. Installed base of equipment is durable with high member satisfaction.
• Scaled retail footprint to 10 microstores, which drove more sales on average than legacy showrooms. Commercial business unit showed strong performance with 10% revenue growth.
• Saw 7% year-over-year increase in workout time per connected fitness subscription. Rapid adoption of Peloton IQ, with 46% of active members engaging with performance insights and recommendations.
• Launched loyalty program Club Peloton, with 24% of active members engaged, and launched new official teams. Achieved $100 million run rate savings goals by end of fiscal 2026.

In Q2, total revenue was $67 million. Connected Fitness products revenue was $244 million, a decrease of 4% year over year due to lower equipment sales and deliveries, but offset by a 10% increase in commercial business unit revenue and higher average selling prices for the cross-training series. Subscription revenue was $413 million, a decrease of 2% year over year, primarily due to lower ending paid Connected Fitness and app subscriptions and lower content licensing revenue, partially offset by subscription price increases. Commercial business unit achieved 10% revenue growth year over year.

• Full-year fiscal 2026 total revenue outlook: $2.4 billion to $2.44 billion (3% decline year over year midpoint).
• Raised full-year gross margin guidance to roughly 53%, with Q3 gross margin expected to be ~54%.
• Raised full-year adjusted EBITDA guidance to $450 million to $500 million. Q3 adjusted EBITDA outlook: $121 million to $135 million.
• Q3 total revenue outlook: $605 million to $625 million. Q3 ending paid Connected Fitness subscriptions guidance: 2.65 million to 2.675 million.
• Raised full-year minimum free cash flow target to at least $275 million.

No specific detailed risks discussed in the call transcript; however, it's noted that actual results may differ materially from forward-looking statements due to risks and uncertainties associated with the business, which can be found in SEC filings and the press release.

Q: Do you expect hotel partners to upgrade to Peloton Pro products as assets reach end of life? And how should we think about the pipeline for new hospitality and enterprise relationships?

A: Yes, we launched the Peloton Pro series for light commercial environments like hotels. We have a healthy pipeline of commercial equipment, transitioned commercial technical support to Precor, and have strong relationships with Hyatt and Hilton with Peloton equipment in their hotels.

Q: How does Peloton Interactive, Inc. think about creating new revenue streams and deeper monetization of the brand beyond the core subscription and hardware sales?

A: We see opportunities in content licensing, in-person events, brick-and-mortar expansion, and the commercial business unit. We're pursuing content licensing, expanding brick-and-mortar, and growing the commercial business unit which had 10% revenue growth year over year.

Q: Can you talk about the elements giving confidence that growth is around the corner?

A: Developing complete product offerings, appropriate pricing for subscriptions, improving net churn, exploiting new avenues like commercial business unit, and being on track for cost savings to enable sustainable growth.

Q: How much of the recent headcount reductions is incremental and what's accounted for in guidance?

A: The headcount reductions were part of the $100 million run rate savings plan, reducing G&A and sales and marketing as a percentage of revenue, enabling reinvestment in R&D while reducing total OpEx as a percentage of revenue.

Q: What's the outlook on new hardware product roadmap over the next 12-18 months?

A: Hardware takes time to design, engineer, and test. Our teams are capable, and we're confident in making meaningful announcements in the next 12-18 months to create new growth opportunities.