Peloton (NASDAQ:PTON) shares dropped more than 15% in premarket trading on Thursday after the connected fitness company issued fiscal 2027 revenue guidance that fell short of Wall Street expectations, overshadowing stronger-than-expected fourth-quarter earnings and revenue.
By 07:40 ET, the stock had fallen sharply as investors focused on the company’s cautious outlook despite improving profitability.
Fourth-quarter results exceed forecasts
Peloton reported adjusted earnings of $0.13 per share for the fourth quarter, narrowly beating analysts’ consensus estimate of $0.12.
Revenue totaled $608 million, broadly unchanged from a year earlier but above the market forecast of $597.44 million.
Subscription revenue increased 7% year over year to $436.6 million, while revenue from connected fitness products declined 14% to $171.1 million as hardware sales remained under pressure.
Adjusted EBITDA improved by $2 million from the prior-year period to $142 million, while total gross margin expanded by 260 basis points to 56.7%.
Subscriber base continues to contract
At the end of the quarter, Peloton had 2.553 million paid connected fitness subscribers.
That represented a decline of 247,000 subscribers, or 8.8%, compared with the same period last year, although the result remained within management’s previously issued guidance.
Outlook disappoints investors
For the first quarter of fiscal 2027, Peloton expects revenue of between $545 million and $565 million, below analysts’ consensus estimate of $566.7 million.
The company forecasts adjusted EBITDA of $135 million to $145 million, representing year-over-year growth of approximately 18.4% at the midpoint. Gross margin is expected to reach roughly 57.0%, an increase of 550 basis points from the prior year.
For the full fiscal year 2027, Peloton projects revenue of $2.3 billion to $2.4 billion, below Wall Street’s consensus forecast of $2.43 billion.
Management expects adjusted EBITDA to range from $475 million to $525 million, implying growth of approximately 6.8% at the midpoint, while total gross margin is forecast to improve to around 54.0%, up 140 basis points year over year.