Peloton Interactive, Inc. (PTON) stock soared in pre-market trading on Thursday after the company reported better-than-expected fourth-quarter results. The company’s revenue reached $643.6 million, a slight increase of 0.2% year-over-year, surpassing the consensus estimate of $630.5 million and exceeding the company’s own projected range of $618 million to $643 million. This marked the first time since Q2 FY22 that Peloton experienced modest year-over-year revenue growth.
The company’s subscription segment delivered strong performance, generating $431 million in revenue, a 2.3% increase. However, revenue from the connected fitness segment declined by 4% to $212.1 million. Despite these challenges, Peloton outperformed earnings expectations, reporting a smaller-than-expected EPS loss of 8 cents. This beat the consensus estimate of a 16-cent loss and was significantly lower than the 68-cent loss reported in the same period last year.
Peloton ended the quarter with 6.4 million members, a 2% decline from the previous year. Paid connected fitness subscriptions also decreased by 1% to 2.981 million. However, the company achieved a notable turnaround in profitability, reporting an adjusted EBITDA of $70.3 million, compared to a loss of $(34.7) million a year ago. This marked the second consecutive quarter with positive adjusted EBITDA and free cash flow, a milestone last achieved in Q2 FY21.
Peloton’s paid app subscriptions reached 615,000, a significant decrease of 26% year-over-year. The company’s average net monthly paid connected fitness subscription churn stood at 1.9%, while the average monthly paid app subscription churn was 8.4%. Churn, also known as attrition, represents the rate at which customers cease their relationship with a company.
Looking ahead, Peloton anticipates continued sales headwinds in the first quarter of 2025 due to an uncertain macroeconomic environment. The company forecasts revenues of $560 million to $580 million, lower than the analyst estimate of $609 million. For the full fiscal year 2025, Peloton expects sales between $2.4 billion and $2.5 billion, compared to the consensus estimate of $2.698 billion. The company projects first-quarter ending paid connected fitness subscriptions in the range of 2.88 million to 2.89 million and 2.68 million to 2.75 million for fiscal year 2025. Peloton also anticipates first-quarter ending paid app subscriptions between 0.56 million to 0.57 million and 0.57 million to 0.62 million for fiscal year 2025.
In response to the positive earnings report, PTON stock surged by 10.40% to $3.71 during the pre-market session on Thursday. This surge reflects investor optimism about Peloton’s ability to navigate the challenging economic landscape and potentially rebound in the future.
