Peloton reported its Q3 2025 earnings today, emphasizing that the impact of tariffs is being minimized due to the company’s focus on its subscription model. Despite potential macroeconomic uncertainties that could affect the sales of its high-priced equipment, Peloton remains optimistic about its business model.
CFO Liz Coddington referenced historical data during the earnings call, noting that consumer spending on fitness remained robust during the economic downturn from 2008 to 2009. “This suggests that the fitness sector retains some resistance to wider economic challenges,” she explained, highlighting the company’s loyal subscriber base as a crucial factor in its revenue stability. Coddington reiterated that fitness is typically not among the first expenditures consumers choose to cut back on during tough financial times.
In a shareholder letter, Peloton outlined how tariffs are affecting its business operations. The company faces a 25 percent tariff on its hardware due to the use of aluminum and additional tariffs on its apparel, depending on future regulations from China. The company projected approximately $5 million in negative impacts on free cash flow in their Q4 forecast, linked to these tariffs.
While Peloton is adjusting to tariff challenges, its products are still relatively high in price. To mitigate this, Coddington pointed out that Peloton offers 0% financing plans, a bike rental program, and refurbished lower-cost models. Additionally, CEO Peter Stern mentioned the initiative to improve customer satisfaction through piloting dedicated vans stocked with spare parts for on-site repairs. He also announced the appointment of Charles Kirol as Chief Operating Officer, tasked with enhancing supply chain logistics and cost management.
Stern indicated that the company is also reevaluating its pricing strategy while considering tariff implications. He refrained from commenting on subscription pricing, noting that it has been almost three years since the last increase.
In a broader assessment, Peloton experienced a decrease in hardware sales, which fell by 27% year-over-year, alongside a 4% drop in subscription revenue. Nevertheless, the company adjusted its earnings outlook slightly upward from $247.6 million to $247.7 million.
Stern also highlighted the transformative potential of artificial intelligence for enhancing customer experience and operational efficiency. He expressed enthusiasm about using AI to empower staff, detailing how AI tools assist customer support personnel in documenting calls. Additionally, Peloton has implemented AI for translating and subtitling its classes, with 3,300 classes translated using AI technology in Q3 alone, and plans to increase that to about 100 classes per day.
Stern also mentioned the deployment of Google Gemini across the Peloton team, aimed at allowing creative thinkers within the organization to innovate. He further explained how AI is being utilized in creating personalized training plans, which combine the expertise of human instructors with tailored coaching approaches. Launched in Q3, this initiative has already yielded half a million personalized plans.
