Peloton Sees Decline in Subscription Churn to 1.2% in Q3, Raises Full-Year Guidance

Peloton Interactive reported strong results Thursday (May 8) for the third quarter, surpassing guidance on key metrics and showcasing progress on profitability. The company also raised its full-year fiscal 2025 guidance across several key financial measures.

CEO Peter Stern highlighted achieving key metrics, improving member outcomes, expanding market reach, and enhancing efficiency during the company’s earnings call on Thursday.

Personalized Plans, introduced in January, have been started by nearly 500,000 members by the end of Q3. Engagement metrics indicated higher participation. The company observed year-over-year growth in running workouts (5%) and walking workouts (11%) engagement, with over 80% of Tread users using Pace Targets, up from just under 60% the previous quarter. Strength, mobility, and meditation engagement also increased year-over-year.

Paid Connected Fitness subscriptions ended the quarter at 2.88 million, a 6% decline year over year. However, subscription churn improved to 1.2% in Q3, down from 1.4% in Q2, according to the company’s shareholder letter. Net Paid Connected Fitness subscriptions saw slight growth quarter-over-quarter. Paid App subscriptions totaled 573,000, a net increase of 12,000 in the quarter. The company described its subscription business as resilient with strong retention.

Peloton said it is testing new models, including a micro-store test in Nashville and collaborations with Amazon. The company is also testing new models for placing Peloton in gyms, including at the University of Texas at Austin.

Read more: Peloton Continues Comeback With Strong Subscription Metrics

Financial Highlights

Q3 revenue was $624 million, exceeding the midpoint of guidance by $9 million. This included $205 million from Connected Fitness products and $419 million from subscriptions. Total gross profit was $318 million, an increase of $8 million or 3% year over year. Connected Fitness products’ gross margin increased to 14.3%, while subscription gross margin was 69%.

Operating expenses decreased 23% year over year. The company is on track toward achieving its target of $200 million in annualized run rate cost savings by the end of fiscal 2025.

Adjusted EBITDA for Q3 was $89 million, exceeding guidance.

Management expressed satisfaction with the Q3 results, describing them as strong, surpassing guidance and showcasing effective cost discipline and strategic growth initiatives.

Outlook and Guidance

Peloton increased its full-year 2025 guidance across several metrics.

Paid Connected Fitness Subscriptions: Raised to a range of 2.77 million to 2.79 million.

Total Revenue: Raised to $2.455 billion to $2.47 billion. This represents an increase of $8 million at the midpoint.

Adjusted EBITDA: Raised to $330 million to $350 million. This represents an increase of $15 million at the midpoint.

Total Gross Margin: Outlook of 50% remains unchanged.

Free Cash Flow: Expecting roughly $250 million for the full year, including a roughly $5 million headwind in Q4 from tariffs.

CEO Stern highlighted the strong Q3 performance, stating they achieved key metrics at the high end of or above guidance. He emphasized the strategic objectives of improving member outcomes, expanding market reach, and enhancing operational efficiency.

CFO Liz Coddington said, “We are pleased with our third quarter results as we delivered at the high end of or exceeded guidance on key metrics and continued to make meaningful progress on improving unit economics and profitability.”