Peloton reported its first-ever annual net profit in fiscal year 2026, marking a turnaround year driven by cost cuts, new revenue streams, and stronger cash flow under CEO Peter Stern.
Peloton has finally crossed a financial threshold it has chased for years: a full fiscal year of positive net income. The connected fitness company released its fourth-quarter and full fiscal year 2026 results on Thursday, confirming what analysts had been anticipating for months — the company’s first-ever annual GAAP net profit since going public.
For a business that burned through billions of dollars during its pandemic-era expansion and faced real questions about its survival as recently as 2023, this milestone represents a genuine turning point. It’s the clearest sign yet that CEO Peter Stern’s turnaround strategy, built around aggressive cost discipline and diversified revenue, is actually working.
How Peloton Got Here
The road to profitability wasn’t about a single strong quarter — it was a steady build across all of fiscal 2026. Peloton posted positive net income in three of its four quarters this year, with trailing twelve-month net income reaching $23.2 million as of the third quarter, before the full-year results confirmed the company had closed the books firmly in the black.
Cost-cutting played a major role. Peloton trimmed its adjusted operating expenses by 16% year-over-year, bringing them down to $267 million in the third quarter alone, and the company says it cut more than $100 million in annualized run-rate costs over the course of the fiscal year. Stock-based compensation, long a drag on reported earnings, also fell sharply — down 22% year-over-year.
At the same time, Peloton leaned into higher-margin revenue streams that didn’t exist in its business just a couple of years ago. Its content licensing partnership with Spotify generates income with minimal added cost, and its commercial division — which sells to gyms and fitness facilities — grew 14% year-over-year. Those newer revenue channels helped offset continued softness in hardware sales and a shrinking subscriber base.
The Numbers Behind the Milestone
Peloton entered its fourth quarter with strong momentum and a notably cleaner balance sheet than it’s had in years. Heading into the full-year report, the company was sitting on $1.126 billion in cash and carried a net leverage ratio of just 0.4x — giving it far more financial flexibility than it’s had since its early public-company days.
Full-year revenue guidance heading into the final quarter stood at $2.42 billion to $2.44 billion, roughly a 2% decline from the prior year, while adjusted EBITDA guidance sat between $470 million and $480 million — representing 18% year-over-year growth at the midpoint. The company also raised its free cash flow target to approximately $350 million, a $75 million increase from its earlier forecast.
Subscriber numbers, however, remain a soft spot. Connected Fitness subscriptions continued to decline through the year, falling roughly 7-8% year-over-year by the third quarter, even as the company’s subscription revenue actually increased thanks to pricing changes and improved retention.
Why This Matters for Peloton’s Future
Turning an annual profit changes the conversation around Peloton in a meaningful way. For years, the dominant question was whether the company could survive its post-pandemic hangover at all. Now, with a profitable year on the books, a strengthened balance sheet, and clear evidence that cost discipline paired with new revenue lines can work even as hardware demand cools, Peloton has more room to think about growth again rather than just survival.
That said, challenges remain. The core Connected Fitness subscriber base is still shrinking, and much of the profitability gain so far has come from cutting costs rather than reaccelerating growth. Whether Peloton can pair this new profitability with actual subscriber growth in fiscal 2027 will likely determine if this “landmark” year marks a genuine turnaround or simply a more stable version of a shrinking business.
Frequently Asked Questions
Q: Is this Peloton’s first-ever profitable year? Yes. Fiscal year 2026 marks the first time in Peloton’s history as a public company that it has reported a positive GAAP net income across a full fiscal year.
Q: What drove Peloton’s turnaround? A combination of aggressive cost-cutting — including over $100 million in annualized savings — reduced stock-based compensation, and new higher-margin revenue sources like the Spotify content partnership and its growing commercial fitness business.
Q: Are Peloton’s subscriber numbers growing? Not yet. Connected Fitness subscriptions have continued to decline year-over-year, even as subscription revenue has grown due to price increases and improved retention rates.
Q: How strong is Peloton’s balance sheet now? The company entered its fourth quarter with $1.126 billion in cash and a net leverage ratio of just 0.4x, giving it significantly more financial flexibility than in recent years.
Q: Who is leading Peloton’s turnaround? CEO Peter Stern has overseen the restructuring effort, focused on cost discipline, operational efficiency, and diversifying revenue beyond hardware sales.
