Peloton Interactive (PTON 7.00%) went public in 2019 at $29 per share, and by December 2020 it had more than quintupled to a peak of around $163. Consumers were lining up to buy the company's at-home exercise equipment at the height of the pandemic so they could stay fit while lockdowns and social restrictions were in effect.
But Peloton experienced a collapse in demand when society returned to normal, which led to plummeting revenue and surging losses at the bottom line. The company was even fighting for survival at one point, until management made a series of changes to slow the bleeding.
Peloton isn't totally out of the woods just yet, but its recent financial results suggest the company will live to fight another day. With the stock down 95% from its all-time high, could this be a good time for investors to buy?
Image source: Peloton Interactive.
Let's start with the bad news
Peloton has two sources of revenue. First, it sells exercise equipment such as stationary bikes, treadmills, and rowing machines. Second, it sells subscription products that offer virtual classes and other benefits to help fitness enthusiasts extract the most value out of that equipment.
Peloton generated $2.5 billion in total revenue during its fiscal year 2025 (ended on June 30), marking the fourth-straight year that revenue declined after peaking at $4 billion in fiscal 2021. Management's guidance suggests a fifth annual decline could be in the cards, with revenue expected to come in as low as $2.4 billion during fiscal 2026.
Weak equipment sales have been the main source of Peloton's issues. They came in at $3.1 billion in fiscal 2021, but were down to just $817 million in fiscal 2025. Management tried to revive sales by introducing payment plans to create a cheaper entry point for consumers, and by tapping into third-party retailers like Dick's Sporting Goods and Amazon, but these strategic moves haven't offset the raw decline in demand.
Subscription revenue, on the other hand, doubled between fiscal 2021 and 2025 to over $1.6 billion, but the dollar increase wasn't enough to offset the sharp decline in equipment revenue. Plus, Peloton's connected fitness subscriber base (which includes customers who own Peloton's equipment and pay to access virtual classes) is steadily shrinking.
There were 2.8 million members at the end of fiscal 2025, down 6% from the year-ago period. Management is forecasting further declines to start fiscal 2026. Shrinking businesses can't create value for shareholders over the long term, so investors typically avoid them, which is the main reason Peloton stock is down 95% from its all-time high.
Now, here's the good news
In fiscal 2022, Peloton was spending money as if its business would continue to grow. When its revenue actually declined that year instead, it resulted in a staggering $2.8 billion net loss on a GAAP (generally accepted accounting principles) basis. With a dwindling cash balance, the company was on the fast track to bankruptcy at that point, unless it could return to growth or dramatically slash costs.
Since we know Peloton's revenue never returned to growth, cost cuts were the only way to secure survival. Its operating costs totaled $1.3 billion in fiscal 2025, representing a 62% reduction from fiscal 2022, led by cuts to everything from marketing to research and development.
Peloton still lost $118 million on a GAAP basis in fiscal 2025, but the company was actually profitable after stripping out one-off and non-cash expenses like stock-based compensation, generating adjusted (non-GAAP) EBITDA of $403 million for the year.
This is great news because it means Peloton is no longer at risk of going out of business. However, management will eventually run out of costs to cut, so the company's profitability won't be sustainable over the long run unless its revenue starts growing again (or at least stops shrinking).
Is Peloton stock a buy?
Peloton recently laid out a fresh growth plan that includes opening new microstores (small retail locations, usually inside malls) and expanding its pre-owned equipment business to more cities, which helps customers join Peloton at a lower price point. Given the company's track record over the last few years, I would adopt a wait-and-see approach to these changes because there is no guarantee they will yield results.
Until Peloton proves it can deliver sustainable sales growth, it remains a shrinking business, and that will keep a lid on its stock price. Plus, the company's new growth plan also involves cutting operating costs by another $100 million in fiscal 2026, which could actually hurt its ability to grow from here, especially if money is sucked out of areas like marketing.
Therefore, Peloton stock isn't necessarily cheap just because it's down 95% from its all-time high. Investors might want to sit on the sidelines until the company proves it can deliver sustainable growth.
