Peloton’s Q3 FY25 results revealed a mixed but strategically promising quarter for the connected fitness brand. While total revenue declined 13% year-over-year to $624 million and hardware revenue dropped 27%, Peloton maintained its paid connected fitness subscriber base at 2.88 million, beating guidance by 10,000. Churn was flat year-over-year at 1.2%, with a slight improvement over the previous quarter.

The company delivered its fifth consecutive quarter of positive adjusted EBITDA and free cash flow, signaling that cost-cutting and subscription optimization efforts are beginning to pay off. Adjusted EBITDA surged to $89.4 million, up from just $5.8 million a year earlier, while free cash flow hit $94.7 million.

“Our net churn rate reflects the continued resilience of our Connected Fitness subscription base,” said CEO Peter Stern in the shareholder letter.

Subscription Strategy in Focus

Subscription revenue declined modestly by 4% year-over-year to $418.5 million, but this segment now comprises 67% of total revenue. Gross margin for subscriptions rose to 69%, with a healthy contribution margin of 72.9%. Notably, the company also reported improved new subscription attach rates to Tread hardware, and a growing share of male subscribers driven by targeted marketing and product mix shifts.

Peloton’s strategic roadmap is centered around four objectives: improving member outcomes, meeting members wherever they are, deepening retention, and operating with efficiency. Highlights this quarter include:

• Personalized Plans: Over 500,000 members started AI-generated training plans, which are driving higher multi-disciplinary engagement.
• Strength & Wellness: With 2 million members engaging in strength content quarterly, Peloton added kettlebell workouts and saw 70,000 completions in the first month.
• Mental Health Content: Meditation engagement rose 7% YoY, reflecting the shift toward holistic wellness offerings.
• Commercial Expansion: Partnerships with Hilton and Precor are expanding reach beyond the home, while a microstore test in Nashville outperformed traditional showrooms.
  
  

Member Retention and Community

Member satisfaction (MSAT) continues to improve, with support MSAT reaching 4.3 (up 20% YoY) and service MSAT hitting 4.5. The new “Community Teams” feature is also driving engagement: nearly 100,000 teams have been created, fostering community-driven stickiness.

Financial Discipline and Deleveraging

Operating expenses dropped 23% year-over-year, and Peloton reduced its net debt by nearly $312 million (35%) compared to last year. While the company posted a net loss of $47.7 million, that’s a significant improvement from the $167.3 million loss in Q3 FY24.

Looking ahead, Peloton raised its FY25 adjusted EBITDA guidance to $330–$350 million and reiterated its expectation of $250 million in free cash flow for the year.

INSIDER TAKE

Peloton’s Q3 paints a clear picture of a company working hard to stabilize its business model—and it’s working, especially on the subscription front.

For subscription executives, the big takeaway is Peloton’s disciplined shift from growth-at-all-costs to retention-first profitability. The company is investing in personalization (via AI plans), diversifying its wellness offerings, and deepening community engagement to increase lifetime value.

While hardware remains a drag, Peloton is effectively pivoting toward being a content-and-community-powered fitness platform. The blend of connected devices, software intelligence, and lifestyle content (including partnerships like Marvel’s “Train Like a Superhero”) is giving Peloton a multi-channel subscription strategy that others in health, media, and consumer subscriptions can learn from.

Peloton’s success in holding churn steady at 1.2%—even while revenues fell and app subscriptions declined—shows that member satisfaction, lifecycle orchestration, and brand affinity can be as valuable as growth in driving sustainable recurring revenue.