Q2 2026 Earnings: Peloton’s AI-powered product overhaul fails to reverse revenue decline

Peloton posted fiscal second-quarter revenue of $657 million (€627 million) in the three months ended Dec. 31, missing Wall Street expectations of $674 million (€643 million) and falling short of the company’s internal sales targets. The connected fitness company saw revenue decline by $17 million (€16 million) compared to the same period last year.

Hardware sales generated $244 million (€233 million) during the quarter while subscriptions produced $413 million (€394 million), both below analyst expectations of $253 million (€241 million) and $424 million (€404 million) respectively. The shortfall signals weak unit sales despite the company’s revamped product assortment launched earlier in the fiscal year.

The company’s loss per share came in at nine cents, wider than the six cents analysts had anticipated. However, Peloton generated $81 million (€77 million) in adjusted EBITDA, exceeding expectations of $73 million (€70 million) and demonstrating continued progress on profitability despite top-line challenges.

AI-powered products fail to drive equipment upgrades

Peloton’s product overhaul centered on the Cross Training Series featuring artificial intelligence-powered capabilities including advanced computer vision on the Plus line, which received positive reviews from major media outlets. The company also released Peloton IQ to all members, delivering AI-powered personalized guidance, with nearly half of active members engaging with the feature by quarter end.

CEO Peter Stern acknowledged the innovation achievements while addressing revenue challenges. “Our second quarter represented the most substantial period of innovation at Peloton since our founding,” Stern said in the earnings release. “At the same time, our financial performance demonstrated our continued operational discipline, resulting in 39 percent year-over-year growth in Adjusted EBITDA and reducing Net Debt by 52 percent year-over-year, proving we can simultaneously innovate and increase our profitability.”

However, according to Stern on the company’s analyst call, Peloton overestimated existing members’ willingness to replace older equipment with the new AI-enhanced models. The company had expected its current subscriber base to drive upgrade cycles similar to when it launched the Bike Plus several years ago, which represented a fundamental reinvention of the bike’s frame.

Paid connected fitness subscriptions declined seven percent year-over-year to 2.66 million, partly driven by membership price increases announced in October that contributed to higher churn, though the company saw better-than-expected retention following the price hikes.

Profitability advances despite revenue pressure

While revenue disappointed, Peloton continued advancing profitability goals. The company’s adjusted EBITDA of $81 million (€77 million) for the holiday quarter marked significant improvement from $58 million (€55 million) in the year-ago period and exceeded the high end of company guidance. 

Total gross margin reached 50.5 percent, an increase of 320 basis points year-over-year and 150 basis points above guidance. The margin improvement reflects Peloton’s focus on operational efficiency and cost management.

Following layoffs affecting 11 percent of staff announced in late January, Peloton raised its full-year adjusted EBITDA guidance to between $450 million (€429 million) and $500 million (€477 million). Net loss for the quarter totaled $39 million (€37 million), or nine cents per share, a significant improvement from the $92 million (€88 million) loss, or 24 cents per share, posted in the prior-year period.

Engagement metrics show positive momentum

Despite subscription losses, Peloton reported improvements in member engagement. Average workout time per connected fitness subscription increased seven percent year-over-year, suggesting existing members remain committed to the platform.

The company’s 12th annual Turkey Burn event on Thanksgiving Day drove a six percent year-over-year increase in live workouts and delivered the largest live strength class in company history. Peloton also expanded its content offerings with three new instructors teaching highly requested yoga sculpt and pilates classes, and released the third installment of Emma Lovewell’s “Crush Your Core” program, which became the third biggest program of all time.

A menopause study conducted with Respin Health involving 267 women found that 84 percent experienced overall symptom improvement by participating in a tailored 60-day program combining cardio and strength workouts with online coaching and community support.

Weak guidance signals continued challenges

Peloton forecast third-quarter revenue between $605 million and $625 million, below analyst estimates of $638 million, representing a one percent decline year-over-year at the midpoint. The company expects paid connected fitness subscriptions to decline roughly eight percent year-over-year to between 2.65 million and 2.675 million members.

For the full fiscal year, Peloton expects total revenue of $2.40 billion to $2.44 billion, representing a three percent decline year-over-year and a decrease from previous guidance. However, the company raised its full-year gross margin outlook to approximately 53 percent, reflecting a 210 basis point improvement year-over-year and a 100 basis point increase from prior guidance.

The company also announced Chief Financial Officer Liz Coddington will leave Peloton in March to “pursue an opportunity outside the industry.” The company is searching for its next finance chief as Coddington stays on through the transition.

Peloton shares closed down 26 percent following the earnings release, reflecting investor concern that the company’s product innovation strategy has not yet translated into renewed growth despite meaningful improvements in profitability and operational efficiency.