10-Q: Peloton Interactive Reports Q3 2025 Results: Cost Cuts Drive Improved Cash Flow, But Revenue Declines Persist

• Peloton Interactive reported a net loss of $47.7 million for Q3 2025, compared to a net loss of $167.3 million in Q3 2024.
• Total revenue decreased by 13.1% to $624.0 million from $717.7 million year-over-year.
• Connected Fitness Products revenue decreased by 26.6% to $205.5 million, while Subscription revenue decreased by 4.4% to $418.5 million.
• The company generated $96.7 million in net cash from operating activities and $94.7 million in free cash flow.
• Operating expenses decreased by 23% year-over-year, driven by reductions in sales and marketing, and research and development.
• Peloton is on track to achieve $200 million in run-rate cost savings by the end of fiscal year 2025.
• The company is addressing material weaknesses in internal control over financial reporting related to inventory and Precor's business process controls.
• Ending Paid Connected Fitness Subscriptions were 2,880,176, a decrease from 3,051,451 in the prior year.
• Ending Paid App Subscriptions were 572,775, a decrease from 675,190 in the prior year.

Score: 6

Explanation: The document presents a mixed sentiment. While cost-cutting measures and improved cash flow are positive, declining revenue and subscriber numbers raise concerns. The ongoing material weaknesses in internal control also contribute to a neutral-to-slightly-positive outlook.

• Net loss improved significantly year-over-year.
• Operating expenses were substantially reduced.
• The company generated positive cash flow from operations and free cash flow.
• Gross margins improved for both Connected Fitness Products and Subscriptions.
• Peloton is on track to achieve significant cost savings.
• Member happiness, as measured by Net Promoter Score (NPS) and Member Satisfaction Scores (MSAT), continued to improve.
• The company is expanding its reach through partnerships and new initiatives, such as the pilot program with Precor and the Peloton workout space at the University of Texas at Austin.

• Total revenue decreased by 13.1% year-over-year.
• Connected Fitness Products revenue decreased by 26.6% year-over-year.
• Subscription revenue decreased by 4.4% year-over-year.
• Ending Paid Connected Fitness Subscriptions decreased year-over-year.
• Ending Paid App Subscriptions decreased year-over-year.
• The company continues to address material weaknesses in internal control over financial reporting.

• The company's ability to achieve and maintain profitability and positive free cash flow remains a risk.
• The company faces risks related to forecasting consumer demand and managing inventory.
• The company's ability to execute and achieve the expected benefits of its restructuring initiatives is uncertain.
• The company faces risks related to increased competition and its ability to compete effectively.
• The company faces risks related to product recalls and legal or regulatory claims.
• The company faces risks related to changes in global trade policies and tariffs.
• The company is addressing material weaknesses in internal control over financial reporting related to inventory and Precor's business process controls.

Peloton expects to achieve over $200 million in reduced annual run-rate expenses by the end of fiscal year 2025 and is focused on operating more efficiently, optimizing pricing and promotional strategies, and expanding gross margins.

• Member happiness continued to improve in the three months ended March 31, 2025, as measured by Net Promoter Score (NPS) and Member Satisfaction Scores (MSAT).
• We see an opportunity to be a more holistic wellness provider by offering solutions to our Members that address strength, mental well-being, sleep & recovery, and more.
• We are committed to delivering elevated experiences at each stage of the Member lifecycle, by optimizing the journey from point of purchase to delivery, installation, onboarding, and beyond.

Peloton's results reflect the ongoing challenges in the connected fitness market, with companies needing to balance growth with profitability. The company's focus on cost reduction and strategic partnerships aligns with industry trends of seeking sustainable business models.

• While specific competitor data isn't provided, Peloton's focus on subscription revenue and improving gross margins aligns with the strategies of other connected fitness companies like iFit and Hydrow.
• Peloton's efforts to expand its reach through partnerships with companies like Hilton and universities mirrors similar strategies employed by competitors to broaden their customer base.
• The company's emphasis on AI-powered features and personalized workout plans reflects a broader industry trend of leveraging technology to enhance user experience and engagement.
• Peloton's restructuring efforts and cost-cutting measures are similar to actions taken by other companies in the connected fitness space to address profitability concerns.

• Shareholders may be concerned about declining revenue and subscriber numbers, but encouraged by improved cash flow and cost-cutting efforts.
• Employees may be affected by ongoing restructuring and headcount reductions.
• Customers may benefit from improved member support and new features, but could be concerned about product recalls and safety issues.
• Suppliers may be impacted by changes in purchase commitments and supplier settlements.

• Continue implementing the 2024 Restructuring Plan to achieve cost savings.
• Focus on improving member outcomes and engagement.
• Expand reach through partnerships and new initiatives.
• Address material weaknesses in internal control over financial reporting.

• The company is involved in several legal proceedings, including stockholder derivative actions and securities class actions.
• The company is cooperating with the U.S. Department of Justice and Department of Homeland Security regarding a subpoena related to the company's statutory obligations.

• 2015: The 2015 Stock Plan was created.
• 2019-08-01: The Board of Directors adopted the 2019 Equity Incentive Plan.
• 2019-09-01: The Employee Stock Purchase Plan (ESPP) was adopted.
• 2019-09-25: The ESPP became effective.
• 2021-02-01: The Company issued $1.0 billion aggregate principal amount of 0.00% Convertible Senior Notes due 2026 (the 2026 Notes) in a private offering.
• 2022-02: The Company announced and began implementing a restructuring plan to realign the Company's operational focus to support its multi-year growth, scale the business, and improve costs (the 2022 Restructuring Plan).
• 2024-04: The Company's Board of Directors approved a new restructuring plan to expand upon its 2022 Restructuring Plan (as expanded, the 2024 Restructuring Plan, collectively, the Restructuring Plans).
• 2024-05: The Company entered into separate, privately negotiated transactions with certain holders of the 2026 Notes to repurchase $801.0 million of aggregate principal amount of the 2026 Notes for an aggregate of $724.9 million of cash.
• 2024-05-30: The Company entered into a Third Amended and Restated Credit Agreement.
• 2024-05: The Company issued $350.0 million aggregate principal amount of 5.50% Convertible Senior Notes due 2029 (the 2029 Notes) in a private offering.
• 2025-03-31: End of the quarterly period.
• 2025-05-06: Date as of which the number of shares of the registrants Class A and Class B common stock outstanding was reported.
• 2025-05-08: Date of report.
• 2025-06-13: A final approval hearing is scheduled for June 13, 2025.