Breaking the cycle: Peloton's core business ain't what it used to be, literally

Breaking the cycle‍

‍Peloton shares fell almost 9% yesterday after the company announced it would be recalling 2.2 million bikes owing to a fault with the seat posts which sparked injury concerns for the company’s die-hard legion of fans.

That capped off a rough week, month, and few years for the at-home exercise giant, as the company has reported disappointing earnings almost every quarter since early 2021. The latest set of results revealed wider-than-expected losses and forecasted a drop in subscribers for the first time in the company’s history, which also caused shares to plunge 13% last Thursday.‍

‍Subscription service

‍While it may sound odd given it’s a fitness company rather than a streamer à la Netflix or Disney+, investors were right to be concerned by the forecasted drop. Peloton’s subscription service, where users pay each month to access live workouts, leader boards and a wide library of fitness content, has been the company’s main profit source for the last 8 quarters.

That’s a vast shift from how the company’s model looked even a couple of years ago, when selling bikes and other products was still at the heart of the business — Peloton netted over $900m in profit from product sales alone in their 2021 financial year. The wheels have since come off, however, and the company hasn’t turned a profit on the product-selling side for 5 consecutive quarters, with a whopping $290m loss in the last quarter of 2022.