Peloton's first profit came with 247,000 fewer members

Peloton’s fiscal 2026 ended on 30 June with a net profit of $63.2 million. Every annual report the company has filed since fiscal 2018 showed a loss, including $2.83 billion in fiscal 2022. The milestone is real.

The same filing reports 2.553 million paid Connected Fitness subscriptions, down 247,000 from a year earlier. Subscription revenue did not fall with them. It came in at $1,675.6 million against $1,673.7 million — flat, on a base that shrank 8.8%.

Two facts in one document: fewer members, same subscription revenue. The arithmetic between them is where the profit came from.

The two businesses inside Peloton

Hardware is 31.5% of revenue and 7.0% of gross profit. Subscriptions are 68.5% of revenue and 93.0% of gross profit. Peloton sells bikes at close to cost and earns on the membership attached to them.

That makes the subscriber count the number that matters, and it fell.

Fewer members, more revenue each

FY2025   $1,673.7M ÷ ((2.976M + 2.800M) ÷ 2)  =  $579.54 per subscription
FY2026   $1,675.6M ÷ ((2.800M + 2.553M) ÷ 2)  =  $626.04 per subscription
Increase:  +8.0%

Revenue per subscription rose about 8.0% while the base shrank. Subscription gross margin rose from 69.1% to 71.4% at the same time, so the remaining members are both paying more and costing less to serve.

That combination has a ceiling. Churn moved the wrong way in each of the last two years — 1.4%, then 1.6%, then 1.7% a month — and price increases are one of the things that move it.

The hardware line is shrinking faster

Connected Fitness Products revenue fell 5.7% to $770.4 million, and its gross profit fell 18.7% to $90.4 million. Margin went from 13.6% to 11.7%.

Hardware sales are how a subscription business of this shape acquires members. A hardware line that is shrinking is a member-acquisition channel that is shrinking, which shows up in the subscriber count one to two years later rather than immediately.

Revenue has now fallen five years running

The cash flow is real, and a fifth of it came from inventory

Operating cash flow was $387.6 million, more than six times net income. That gap is normal — non-cash charges sit between the two — but its composition decides whether it repeats.

Net income                          $63.2M

stock-based compensation       $198.6M     ← non-cash
depreciation and amortisation   $57.2M     ← non-cash
inventory released               $70.2M    ← one-off, cannot repeat indefinitely
─────────
Operating cash flow                $387.6M
− capital expenditure               $9.9M
─────────
Free cash flow                     $377.7M

Two-thirds of the operating cash flow (66.0%) is the two non-cash add-backs. Another 18.1% is the inventory release. Inventory has fallen from $329.7 million in fiscal 2024 to $135.4 million. That lever has roughly $135 million of travel left, once.

Capital expenditure of $9.9 million against $2.4 billion of revenue is the other half of the cash picture. This is now an asset-light business that is not building anything.

What deferred revenue says about next year

Deferred revenue is cash already collected for subscriptions not yet delivered. It is the closest thing a subscription business has to a forward order book, and it moves before reported subscription revenue does.

Down 14.8% in two years, in the same direction each year — while subscription revenue was flat. Flat revenue on a falling prepaid balance is the pattern you get when price increases are holding up a shrinking base.

What the profit still has to clear

Interest takes most of it. Operating income was $160.7 million; non-operating interest expense was $123.8 million — 77.0% of it. The $63.2 million that reaches the bottom line is what survives that.

Equity is still negative. Liabilities of $2,195.6 million against assets of $2,055.9 million leave stockholders’ equity at −$139.7 million, improved from −$519.1 million in fiscal 2024.

The share count keeps rising. Diluted weighted-average shares went from 365.5 million in fiscal 2024 to 436.2 million, up 19.3%. Company profit and per-share profit move at different speeds.

Cash is genuinely stronger. Cash and equivalents rose from $697.6 million to $1,206.6 million over two years, against $344.9 million of non-current convertible debt.

A note on where the capex figure lives

Peloton does not file capital expenditure under PaymentsToAcquirePropertyPlantAndEquipment, the tag most screeners read. It uses PaymentsToAcquireProductiveAssets. Query the standard tag and you get nothing, and nothing frequently becomes zero somewhere downstream — turning $377.7 million of free cash flow into $387.6 million without any warning.

This is not unique to Peloton. Amazon has filed capital spending under the same alternate tag since 2017, and a screen of large filers found seven of sixteen companies using it. The rule we apply to every figure here is that standardised data locates a number and the filing confirms it.

What would make this wrong

• The subscriber and churn figures are company-measured. The 10-K states these metrics are calculated “with internal methods, which are not independently verified by any third-party.” They are the only counts that exist, and they are not audited financial statement line items.

• Revenue per subscription is our calculation, not a reported metric. We divided subscription revenue by the average of beginning and ending counts. Using ending counts instead gives a larger increase; either way the direction is the same.

• These are as-filed figures and can be restated, as of 19 August 2026.

• Forward guidance is not analysed here. Management’s fiscal 2027 outlook is a statement about the future, not a filed figure.

• A cost-driven profit is not automatically fragile. Margin gains can be structural. The filing shows the direction of costs, not whether they stay down.

• One year is not a trend. Fiscal 2026 is the first profitable year in nine filed years.