Peloton: Outside Forces Behind a Fitness Boom and Bust

Bringing the Workout Home

Peloton was founded in New York City in 2012. Its business combines exercise machines, software, and a library of live and on-demand workouts led by Peloton instructors, all tied together by a subscription. Customers buy equipment such as the Peloton Bike or the Tread treadmill and then pay for a membership that unlocks the classes. Co-founder John Foley served as chairman and CEO during the company’s fastest growth. By its own description, Peloton competed with fitness studios and gyms, other at-home equipment and workout content, and health and wellness apps.

The Pandemic Boom

When COVID-19 arrived in 2020, governments ordered people to stay at home, and many consumers bought exercise equipment to use there. Peloton’s sales took off. In fiscal 2020, which ended June 30, 2020, revenue reached $1.83 billion, and Connected Fitness subscriptions — memberships tied to Peloton machines — reached about 1.09 million. In fiscal 2021, revenue jumped to $4.02 billion, and subscriptions more than doubled to about 2.33 million (Exhibit 1).

Keeping up was expensive. Peloton said meeting the surge forced it to spend heavily on factory capacity, logistics, and faster shipping. In April 2021, it completed its purchase of the fitness company Precor, adding Precor’s facilities in North Carolina and Washington state to its manufacturing base. On May 24, 2021, it announced plans for its own factory, Peloton Output Park, on more than 200 acres in Troy Township, Ohio, where it expected to start making Bikes and treadmills in 2023.

A Recall and an Apology

In May 2021, Peloton ran into a serious safety and legal problem. On May 5, working with the U.S. Consumer Product Safety Commission (CPSC), it announced voluntary recalls of both of its treadmills. Peloton later reported that it had received reports of a number of injuries linked to the larger Tread+. Its fixes included a passcode so that children who should not be on the machine could not start it, plus a planned hardware change to keep objects from getting underneath. On the smaller Tread, screws holding the tablet-style console could loosen and let the console come off. Peloton stopped selling both treadmills, told owners to stop using them, and offered full refunds.

On a call with investors the next day, Foley apologized. He said Peloton had made a mistake in its first response to a request from the CPSC and should have been more open to working with the agency from the start. The recalls cut about $100 million from Peloton’s results for the April–June quarter through returns, inventory write-downs, repairs, and other costs. After the CPSC approved a repair, Peloton planned to restart U.S. sales of the smaller Tread on August 30, 2021. Two years later, in May 2023, Peloton announced another recall, this time of Bike seat posts, affecting about 2.2 million members.

The Bust

As the pandemic eased, the boom faded. Peloton later said demand dropped once the pandemic’s peak had passed and people could once again spend their time on activities away from home. Even the weather played a role: by the spring of 2021, Peloton reported that the usual seasonal pattern of warmer weather and people getting out more had returned, and average monthly workouts per subscription dropped to 19.9 in the April–June quarter, below the year before. In 2023, the company said consumer spending was shifting toward travel and experiences.

Peloton had built for a boom that did not last. Its inventory grew from $937.1 million at the end of June 2021 to $1.54 billion at the end of December 2021. In August 2021, it cut the price of its original Bike to $1,495. In February 2022, Foley said he would step down as CEO and become executive chair, and Barry McCarthy, who had held senior leadership roles at Spotify and Netflix, became CEO. The company announced a workforce reduction affecting nearly all of its operations, targeted at least $800 million in yearly cost savings, and wound down development of the Ohio factory. By August 2022, it had decided to outsource all manufacturing of its connected fitness equipment, had shut down its own manufacturing in Taiwan, and planned to cut about 760 more jobs. It also began selling some products on Amazon. For fiscal 2022, Peloton lost $2.8 billion.

Where Things Stand

The cutbacks continued, with another restructuring in May 2024 and a 2025 plan that included shrinking Peloton’s global team. Peter Stern became CEO and president, and in August 2025 he laid out a strategy that included using AI to give members more personal insights, plans, and recommendations. Trade policy added new pressure. Many of Peloton’s contract manufacturers have their main factories in Taiwan and China, and the company expected tariffs to reduce its free cash flow by about $65 million in fiscal 2026. It said it would adjust prices to reflect costs such as shipping and tariffs.

In fiscal 2026, which ended June 30, 2026, Peloton reported net income of $63.2 million on revenue of $2.45 billion — its first full year of net profit. But paid Connected Fitness subscriptions fell 8.8% to about 2.55 million, and the company expected revenue to slip again in fiscal 2027. In September 2026, Peloton introduced the Tread Flex, a folding treadmill starting at $2,195 that it called its most affordable treadmill ever, along with AI-powered coaching features that analyze running form and set personalized pace targets. The Tread Flex went on sale in the U.S. and Canada on October 1, 2026. Whether new technology can restart growth in a market that cooled after the pandemic is the question Peloton now faces.