Peloton Interactive's journey from pandemic darling to struggling business is a stark reminder that even the most hyped stocks can face serious challenges. But here’s where it gets controversial: can Peloton’s new dive into artificial intelligence (AI) revive its fortunes, or is this just a last-ditch effort doomed to fail?
During the COVID-19 pandemic, Peloton experienced explosive growth as millions sought at-home workout solutions amidst lockdowns and social distancing measures. The company’s sales skyrocketed, and its stock price soared from an initial public offering (IPO) price of $29 in 2019 to a peak of about $163 by December 2020—a remarkable 462% gain. However, this surge was short-lived. As vaccination rates climbed and public life began to normalize in 2022, Peloton’s momentum faltered, and sales plummeted, leaving the company struggling to regain ground.
Peloton’s core revenue streams revolve around two major areas: selling exercise machines like stationary bikes, treadmills, and rowing machines, and offering subscription services that include access to digital workouts and training programs. While revenue reached its highest point of $4 billion in fiscal 2021, it has since declined steadily over four fiscal years, hitting $2.5 billion by the end of fiscal 2025 (June 30). Worse still, forecasts indicate a further drop to around $2.4 billion for fiscal 2026.
The sharp decline in revenue has been driven primarily by drastic drops in equipment sales—from $3.1 billion in fiscal 2021 down to just $817 million in fiscal 2025. Despite attempts to boost sales through flexible payment plans and partnerships with major retailers like Amazon and Dick’s Sporting Goods, these measures failed to turn the tide.
Then comes Peloton’s intriguing pivot: the company unveiled the Cross Training Series on October 1, featuring a lineup of new bikes, treadmills, and rowing machines equipped with an advanced AI-powered system called Peloton IQ. This technology acts almost like a personal trainer, using computer vision to track users' reps during strength workouts, correct their form, and suggest appropriate weights. It even generates tailored workout plans based on individual fitness goals. This concept sounds promising, especially given how many customers also enjoy activities beyond cycling, such as yoga, Pilates, and strength training.
But—and this is the part that most people miss—the new devices carry a significantly higher price tag. The Cross Training Bike+, for example, costs $2,695, a steep price that might deter potential new buyers and not help Peloton expand its market reach.
Peloton’s financial health took a massive hit when its anticipated post-pandemic growth stalled, resulting in a staggering $2.8 billion loss in fiscal 2022 and forcing management to slash costs drastically. By fiscal 2025, operating expenses were cut by 62% compared to 2022, narrowing the net loss to $118 million. Impressively, when excluding one-time and non-cash expenses, Peloton actually turned a profit in fiscal 2025 with an adjusted EBITDA of $403 million, signaling better operational efficiency.
However, achieving profitability through cost-cutting is not a sustainable long-term strategy if revenue keeps shrinking. Eventually, there will be fewer expenses to trim, and reducing spending on marketing or innovation could cripple Peloton’s ability to attract new customers and drive sales growth.
Here’s a critical question for investors: Is it wise to put money into a company shrinking for years running? Peloton’s stock remains down 94% from its pandemic-era highs, and history shows that businesses with declining sales rarely create shareholder value over the long term. The risk of further declines remains high unless revenue can rebound convincingly.
In my view, investors should remain cautious and adopt a wait-and-see approach. Peloton needs to prove that its AI-enhanced Cross Training Series can sustainably grow its business before the stock can be considered a solid investment. Committing funds now exposes investors to considerable downside if this strategy fails.
Before deciding, it’s worth noting that The Motley Fool’s Stock Advisor team recently released their current list of top 10 stock picks—and Peloton was not included. These picks historically deliver impressive returns: for context, a $1,000 investment recommended by Stock Advisor in Netflix back in 2004 would now be worth over $627,000, and one in Nvidia since 2005 would exceed $1.1 million. Stock Advisor's average return is more than five times better than the S&P 500's, highlighting the value of carefully chosen stocks.
Would you bet on Peloton’s AI revolution turning the tide, or do you think it’s too little, too late? Share your thoughts—are you optimistic about their new direction, or skeptical about the risks looming ahead?
