Peloton shares jumped on Thursday after the company raised its profit guidance for the 2025 fiscal year and named a new chief executive officer, a step in the right direction for its turnaround.
The New York City-based company’s revenue was $586 million in the first quarter for their 2025 fiscal year, which beat Wall Street analysts expectations of $573 million. Net income increased by 10% from the previous quarter to $294.9 million from $285.3 million, analysts expected a net loss of nearly $1 million. Adjusted diluted EPS was flat, where analysts expected a loss of $0.16 cents per share.
The company boosted its EBITDA forecast for the 2025 fiscal year to $240 to $290 million, from their previous goal of $200 to $250 million. Shares jumped by 28%, closing at $8.50 per share.
Despite continued declines in sales and app subscriptions, the pandemic darling is inching closer toward profitability. A reduction in their operating expenses by 30% and 44% in marketing spend helped drive the unexpected gains in profits.
“The business is seeing improvement and profitability. However, the revenue and subscriber decline issues have not been remedied yet, given guidance,” said Paul Golding, US Lifestyle, Payments, and Digital Commerce Analyst at Macquarie. “Outlook will depend on the extent to which the profitability generated can be reinvested to drive an improvement in the revenue and subscriber trajectory.”
On Thursday’s earnings call, Peloton’s executives announced their plan to slightly up their media spending for the upcoming holiday season, as they hope will be the breakthrough to a new market, men.
But as they shift their focus towards their typically most profitable quarter, executives at Peloton warn about a mellow holiday season.
As high interest rates continue to grip consumer spending, they anticipate a slight decrease in subscribers in their second quarter as a result of limited app media spend. Peloton also expects slightly higher churn rates to slightly increase for the rest of the 2025 fiscal year.
“We’ve seen big ticket discretionary goods have been under pressure, most of the year continues to be under some pressure,” said Joseph Feldman, senior research analyst at Telsey Advisory Group in a call weeks ahead of the report. “The hope is that with the Fed cutting interest rates and starting the easing cycle, that you may see a bigger appetite for discretionary goods from consumers.”
However, Feldman thinks it will take some time for the cuts to completely restore consumer confidence and encourage high-cost purchases.
Andreas Grein, marketing and international business professor at Baruch College echoed Feldman. Grein said that while the economy remains strong, inflation has turned consumers price-sensitive.
“Consumer spending is probably going to slow down and manufacturers and retailers are going to have to cope with that,” said Grein.
In addition, on Thursday Peloton announced their new chief executive officer, Peter Stern, effective January 1, 2025.
According to Peloton’s press release, Stern is a “seasoned strategist with over 20 years operating experience at the nexus of hardware, software, content and services.” Most recently, he worked at Ford Integrated Services and Apple.
Analysts welcomed the appointment of a permanent CEO as it will help guide the future of the company.
“The company reaching a determination and making an announcement regarding a new, permanent CEO, is a positive development in that it removes the concern of when a CEO might be appointed and the uncertainty of what they could mean for the business,” said Golding.