How Does Peloton Make its Money?
Peloton is a connected fitness company that sells exercise bikes (Bike, Bike+), treadmills (Tread, Tread+), and a rowing machine (Row), paired with streaming fitness content accessed through monthly subscriptions. Peloton’s business model has evolved since its pandemic-era peak: the company now focuses primarily on growing and retaining subscription revenue rather than hardware sales.
Revenue Breakdown
| Segment | FY2024 (Jun) | FY2023 (Jun) | YoY Growth |
|---|---|---|---|
| Subscription Revenue | $1.71B | $1.67B | +2.4% |
| Connected Fitness Products | $0.82B | $1.09B | -24.8% |
| Total Revenue | $2.51B | $2.70B | -7.0% |
Subscription — 68% of Revenue
The recurring revenue engine:
- All-Access Membership ($44/mo): Required for the connected equipment. Includes unlimited live and on-demand classes (cycling, running, strength, yoga, meditation, rowing). 2.88M subscribers.
- App Membership ($12.99/mo): Content-only subscription, no equipment required. Competes with Apple Fitness+, Nike Training Club, and YouTube fitness. ~0.6M subscribers.
- Peloton for Business (commercial): Subscriptions for hotels, corporate gyms, and multi-family housing properties.
Subscription is the strategic focus — high margins, recurring, and growing even as hardware revenue declines.
Connected Fitness Products — 32% of Revenue
Hardware sales:
- Peloton Bike ($1,445) and Bike+ ($2,495): The flagship product
- Peloton Tread ($3,495) and Tread+ ($4,495): Treadmills
- Peloton Row ($3,195): Rowing machine launched in 2022
- Accessories: Weights, heart rate monitors, shoes, mat
Hardware revenue has declined significantly from the pandemic peak as demand normalized and Peloton shifted to a lower-price, higher-volume strategy.
Income Statement Overview
| Metric | FY2024 | FY2023 |
|---|---|---|
| Total Revenue | $2.51B | $2.70B |
| Gross Profit | $1.13B | $1.01B |
| Operating Income | -$0.39B | -$0.75B |
| Net Income | -$0.55B | -$1.26B |
Key Financial Metrics
- Subscription Gross Margin: 68.1% — High-margin recurring revenue. Content production costs are relatively fixed, so each incremental subscriber is highly profitable.
- Hardware Gross Margin: 6.9% — Hardware is essentially sold at cost now. The strategy is to get households to buy the equipment at accessible prices, then monetize through subscriptions.
- Connected Fitness Subscribers: 2.88M — Down from the peak of 2.96M. Stabilizing this metric is critical.
- Monthly Churn: 1.4% — Translates to ~83% annual retention. Healthy for a subscription product but any increase is a red flag.
What to Watch
- Turnaround progress — Peloton is restructuring under new leadership,cutting costs, and refocusing on core products. The path to GAAP profitability is the key milestone.
- Subscriber stabilization — After losing subscribers post-pandemic, Peloton needs to prove it can grow (or at least maintain) its connected fitness subscriber base. New content, partnerships, and hardware refreshes drive this.
- Hardware-as-a-service model — Peloton is experimenting with rental and financing programs to reduce the upfront cost barrier and drive subscriber growth.
- Third-party distribution — Peloton now sells through Amazon and Dick’s Sporting Goods (beyond its own stores and website), expanding reach to price-sensitive consumers.
- Content differentiation — Peloton’s live classes and instructor community are its competitive moat. Maintaining content quality against Apple Fitness+, Lululemon Studio (Mirror), and free YouTube alternatives is essential.