Peloton Q1 FY2027 Earnings: A $96M Quarter Beats All of FY2026, With Help From Tariff Refunds

Peloton earned $96.2 million in the first quarter of fiscal 2027, more than the $63.2 million it made in all of fiscal 2026, its first profitable year. Revenue barely moved, up 1.5% to $559.2 million. What moved was the cost of the hardware: refunds of tariffs Peloton had paid in earlier periods were booked as a reduction of product costs, and gross margin jumped to 61.3% from 51.5%. The company does not say how large the refunds were. It does say the margin was "partially driven by nonrecurring benefits", and it left its full-year margin guide at about 54%. That guide implies the remaining three quarters run at about 51.7% gross margin, by our computation, which is roughly fiscal 2026 again.

The hardware line did most of the work​

Total revenue was $559.2 million against $550.8 million a year earlier (earnings release). Subscription revenue rose 3.1% to $410.7 million and Connected Fitness Products revenue fell 2.6% to $148.5 million. Gross profit rose $58.9 million to $342.6 million, and $39.1 million of that came from the products line, whose revenue shrank.

The 10-Q explains why. Products cost of revenue fell $43.0 million to $98.9 million, driven by refunds received in the quarter for tariffs imposed under the International Emergency Economic Powers Act, which the Supreme Court invalidated in February, by the absence of last year's Bike+ seat-post recall expense, and by lower sales of some Peloton-branded equipment. Peloton received refunds for "substantially all" of those tariffs and recognized them in product costs, with any interest on them in interest income. Products gross margin went to 33.4% from 6.9%. Subscription gross margin, which has no tariff in it, rose a more ordinary 2.7 points to 71.3%.

The treemap shows the quarter's $216.6 million cost of revenue beside $169.0 million of sales, marketing and administration and $56.9 million of research and development. Operating expenses fell 6.7% to $226.2 million: general and administrative expense fell $8.4 million and research and development $5.2 million, while sales and marketing rose $9.9 million on acquisition and brand spend, and impairment and restructuring charges nearly disappeared. Operating income was $116.4 million against $41.3 million. Interest, $30.4 million of expense against $10.7 million of income, sits on Expenses:OtherNet with the other non-operating lines.

The guide says the rest of the year looks like last year​

Peloton had guided first-quarter gross margin to about 57% and delivered 61.3%. It kept every full-year number: revenue of $2.30 billion to $2.40 billion, gross margin of about 54.0%, adjusted EBITDA of $475 million to $525 million and free cash flow of at least $350 million. For the December quarter it guides gross margin to about 50.0%, 50 basis points below a year earlier.

The arithmetic is our computation. At the revenue midpoint of $2.35 billion, a 54% gross margin is about $1,269 million of gross profit for the year. Take out the first quarter's $342.6 million and $926 million is left for about $1,791 million of revenue, a 51.7% margin for the other three quarters. Fiscal 2026's full-year margin was 52.6%. Read that way, the guide treats most of the first quarter's margin gain as a one-off.

Each row is one reported period: revenue as a negative credit, cost of revenue as a debit and Equity:Adjustments as net income, negative for a loss. Gross margin, by our computation from those rows, went from 19.5% in fiscal 2022 to 33.0%, 44.7%, 50.9% and 52.6% in the four years after; the first quarter of fiscal 2027 is 61.3%. Net income went from a $2,827.7 million loss in fiscal 2022 to losses of $1,261.7 million, $551.9 million and $118.9 million, then a $63.2 million profit. Revenue fell from $3,582.1 million to $2,446.0 million over the same five years, so the climb in margin, not growth, is what turned the losses into a profit.

For a small business the lesson is about how a refund is booked: money returned for a cost paid in earlier years lands in the period it is received, so one quarter's margin carries several years of tariffs. Look at the margin with and without it before deciding what a "normal" quarter is.

Cash and debt are the cleaner signal​

Operating cash flow was $145.7 million against $71.9 million, and free cash flow $143.4 million after $2.3 million of capital spending. The tariff refunds are cash too, so this quarter's cash flow is flattered the same way, but the balance sheet shows where it went. Cash rose to $1,342.2 million from $1,206.6 million at the end of June, and on October 9, after the quarter closed, Peloton prepaid $280.0 million of its term loan. Gross principal debt is now $1.048 billion, down from $1.534 billion at the end of December 2025, according to the release.

Cash was $697.6 million at the end of fiscal 2024 and has nearly doubled since. Long-term debt on September 30 was still $1,289.0 million, the convertible notes plus the term loan, because the prepayment came after the quarter. The stockholders' deficit narrowed to $5.3 million from $139.7 million in June, as net income and $39.9 million of stock-based compensation both added to equity. The period file carries every balance-sheet line with its filing caption.

Subscribers are still shrinking​

Ending paid Connected Fitness subscriptions were 2.475 million, 9% fewer than a year earlier and 78,000 fewer than in June. Average net monthly churn was 1.7%, better than the 2.2% of the June quarter but 10 basis points worse than a year ago. Paid app subscriptions fell 10% to 487,000. The December quarter guide is 2.425 million to 2.445 million subscriptions, another decline, so subscription revenue growth still depends on each member paying more.

What to watch for the rest of fiscal 2027​

• The December quarter margin. At about 50.0% it would show the gross margin without tariff refunds and with the holiday hardware mix; a figure well above that would mean some of the first quarter's gain is lasting.
• Remaining refunds. Peloton says it will recognize further IEEPA tariff refunds when they are realized or realizable, while new Section 301 tariffs of 10% to 12.5% on goods from economies including Taiwan and China took effect on July 24, 2026.
• The new treadmills. Peloton announced the Tread Flex, its first folding treadmill, in September and began taking orders for its Commercial Series Tread and Bike for gyms; products revenue is the line that shows whether they sell.
• Debt after the prepayment. With $1.048 billion of gross principal left and at least $350 million of free cash flow guided for the year, further paydowns are the company's choice.