Is It Time to Buy Peloton Stock? Here's the Good News and the Bad News.

Peloton Interactive (NASDAQ: PTON) stock was a pandemic darling. It peaked at around $163 in late 2020, an eye-popping 460% increase from its initial public offering (IPO) price of $29 from 2019. Consumers were buying the company's at-home exercise equipment hand over fist when pandemic-related lockdowns and social restrictions went into effect, which fueled stellar operating results.

But demand collapsed when social conditions mostly returned to normal in 2022, resulting in a plunge in Peloton's revenue and blowout losses at the bottom line. The company was in a fight for survival as its cash balance dwindled, forcing management to drastically cut costs.

Peloton still faces monumental challenges, but it's finally turning a profit, which ensures it will live to fight another day. Its stock remains 95% below its all-time high, so could this be a good opportunity for investors to buy?

Image source: Peloton Interactive.

Let's start with the bad news

Peloton has two main sources of revenue. First, it sells stationary bikes, treadmills, rowing machines, and other at-home exercise equipment. Second, it sells subscription products that offer virtual classes and other tools to help fitness enthusiasts get the most out of their workouts.

Peloton's annual revenue peaked at $4 billion in fiscal 2021 (which ended June 30, 2021), and it has since declined for four straight years, coming in at $2.5 billion in fiscal 2025. The company's guidance suggests revenue could come in as low as $2.4 billion in fiscal 2026, which would mark the fifth consecutive annual decline.

Shrinking equipment sales have been the main source of those declines. Peloton just reported its operating results for the fiscal 2026 first quarter (ended Sept. 30).

Here's how much equipment revenue it generated relative to the same quarter in prior years:

Data source: Peloton Interactive. Table by author.

As you can see, sales were down by a whopping 74% compared to five years ago. Peloton has tapped into third-party retailers like Amazon and Dick's Sporting Goods over the last couple of years in an attempt to reach more customers, but not even that has reversed the company's shrinking sales.

Subscription revenue, on the other hand, almost doubled between fiscal 2021 and fiscal 2025 to $1.6 billion, but the dollar increase wasn't enough to offset the decline in equipment sales. Plus, it actually shrank during the first quarter of fiscal 2026 as total paying members fell 6% year over year to 5.9 million, suggesting the momentum in this part of Peloton's business might also be stalling.

Moving on to the good news

During fiscal 2022, Peloton spent money as if its business would continue to grow. When its revenue declined instead, it resulted in a staggering $2.8 billion net loss on a generally accepted accounting principles (GAAP) basis. With a dwindling cash balance, the company was at risk of going out of business.

But management has since slashed Peloton's total operating expenses. They came in at $242.4 million during the first quarter of 2026, a 61% reduction from the first quarter of fiscal 2022. As a result, the company actually turned a GAAP profit of $13.9 million during the quarter. Plus, after excluding one-off and noncash expenses, it also delivered adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $118.3 million.

Profitability not only secures Peloton's survival, but it also gives management the flexibility to redirect money into expenses like marketing to help reignite the company's growth.

Is Peloton stock a buy?

On Oct. 1, Peloton launched new variants of its exercise equipment called the Cross Training Series, which include additional features to accommodate a broader group of fitness enthusiasts who enjoy strength training, yoga, and Pilates along with their regular cardiovascular exercise. This equipment includes an artificial intelligence (AI)-powered computer vision system called Peloton IQ, which serves as a digital personal trainer capable of correcting the user's form, and even drafting custom exercise plans.

Peloton hopes these new products will help reignite sales, and they might have to. The company plans to slash another $100 million worth of costs during fiscal 2026, but it can't cut its way to growing profits forever. Eventually, there won't be any room left to reduce expenses, and shrinking revenue will result in significant losses once again.

In my opinion, this is a "show me" story, meaning Peloton needs to prove it can return to generating sustainable sales growth before its stock becomes a good investment.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Peloton Interactive. The Motley Fool has a disclosure policy.