Peloton Appoints Apple Fitness Plus Co-Founder Peter Stern as New CEO Amid Stronger-Than-Expected Earnings

Peloton's New Era: Peter Stern Takes the Helm as CEO Amid Promising Financial Results

In a significant move signaling a potential new direction, connected fitness company Peloton has announced that Peter Stern, a seasoned executive with a background spanning Apple Fitness Plus, Ford, and Time Warner Cable, will assume the roles of CEO and President. The appointment is set to take effect on January 1, 2025. This leadership transition coincides with Peloton reporting financial results for the first quarter of its fiscal year 2025 that surpassed analyst expectations, providing a backdrop of cautious optimism for the company's future.

The news was formally announced by Peloton, detailing Stern's extensive experience, particularly in the realm of subscription services. Karen Boone, who has served as Peloton's interim CEO, highlighted Stern's qualifications during the Q1 2025 earnings call. "As a cofounder and driving force behind Apple Fitness Plus, Peter led his growth to millions of members, and is responsible for successfully scaling over a dozen other subscription services ranging from Ford BlueCruise to Apple iCloud to Time Warner Cable Home Security," Boone stated. She also noted Stern's personal connection to the brand, having been a Peloton member since 2016.

A Leader Known for Execution

Boone further elaborated on the qualities that made Stern the chosen candidate during a Q&A session with investors. She emphasized that Stern is "known for execution" and possesses the critical ability to balance the often-competing priorities of achieving profitability and driving growth. This focus on execution and balanced growth is particularly relevant for Peloton, a company that experienced rapid expansion during the pandemic but subsequently faced significant challenges related to managing that growth, supply chain issues, and adapting to shifting consumer demand as global health conditions changed and vaccines became widely available.

Peloton's recent history has been marked by periods of intense growth followed by retrenchment. The company invested hundreds of millions in expanding its manufacturing and logistics capabilities to meet surging demand for its bikes and treadmills during lockdowns. However, the post-pandemic environment saw a sharp decline in hardware sales, leading to excess inventory, significant financial losses, and multiple rounds of layoffs. The search for a leader who can navigate this complex landscape, prioritizing sustainable growth and a clear path to profitability, underscores the strategic importance of Stern's appointment.

The Pivot Towards Services

Stern's background strongly suggests that Peloton is increasingly viewing its future through the lens of services and subscriptions, rather than solely as a hardware company. His more than six years at Apple, where he served as VP of services, provided him with deep expertise in building and scaling digital subscription offerings. Beyond his role in co-founding Apple Fitness Plus, a direct competitor in the digital fitness space, Stern oversaw a portfolio of major Apple services, including iCloud, Apple TV Plus, Apple News, Apple Books, Apple Arcade, and the bundled offering, Apple One. This breadth of experience across diverse digital content and utility services positions him uniquely to lead Peloton's strategic evolution.

Peloton's business model has always included a significant subscription component, with members paying a monthly fee for access to live and on-demand classes. However, the company's historical focus and valuation were heavily tied to its connected fitness hardware sales (Bikes, Treads, Rowers). The challenges of the past few years have underscored the volatility of relying heavily on hardware revenue. Shifting the emphasis towards growing and retaining its subscriber base, expanding service offerings beyond the core equipment, and potentially exploring new digital-only or lower-cost hardware strategies supported by robust service packages appears to be the path forward. Stern's track record in successfully managing and growing multiple large-scale subscription services aligns perfectly with this strategic imperative.

Expanding the Service Ecosystem: New Software Features

Supporting this service-centric strategy, Peloton also provided updates on several new software features currently in development or testing. These initiatives aim to broaden the appeal of the Peloton platform and provide value to a wider range of users, including those who may not own Peloton' hardware.

Strength Training App: A previously announced standalone strength training app for gym-goers is progressing well, with the company reporting 70,000 signups thus far. This app targets individuals who prefer working out in a traditional gym setting or using their own equipment, extending Peloton's reach beyond the home fitness market tied to its hardware.
New Game Beta: Recognizing the engagement potential of gamification, Peloton is testing a second game. The company noted that 10 percent of its active subscribers currently engage with its existing game, Lane Break, which is available on the Bike Plus. The new game is currently in a closed beta involving approximately 100 existing Bike Plus members, suggesting an effort to replicate or expand upon the success of gamified workouts.
Personalized Plan Beta: Another feature in beta testing is called Personalized Plan. This aims to provide users with a weekly workout plan tailored to their individual fitness goals. This feature leverages data and potentially AI to create customized training schedules, enhancing the user experience and potentially improving adherence and results, thereby increasing subscriber retention.

These software initiatives demonstrate a commitment to building a more comprehensive fitness platform that can cater to diverse workout preferences and environments, further solidifying the importance of the subscription service as the core of Peloton's business model.

Financial Performance: A Glimmer of Hope

The announcement of Peter Stern's appointment was made in conjunction with Peloton's report for the first quarter of fiscal year 2025. The financial results offered a positive counterpoint to the recent challenges the company has faced. Peloton reported total revenue of $586 million, slightly exceeding analyst estimates. This revenue was split between hardware sales ($160 million) and subscriptions ($426 million), highlighting the significant and growing contribution of the service segment to the company's top line.

Perhaps more importantly for investor confidence, Peloton also raised its full-year 2025 revenue guidance by $40 million. Furthermore, the company stated its expectation to achieve positive free cash flow in all four quarters of the fiscal year. Achieving consistent positive free cash flow would be a crucial milestone for Peloton, indicating that the company is generating more cash than it is spending, a sign of increasing financial health and sustainability after a period of significant cash burn.

The market reaction to the combined news of Stern's appointment and the stronger-than-expected financials was notably positive. Peloton's stock price surged by 22 percent following the announcements, reflecting renewed investor optimism about the company's leadership and its potential path towards recovery and profitability.

Challenges and Opportunities Ahead

While the recent news provides a boost, Peter Stern faces significant challenges as he takes the helm. The connected fitness market remains competitive, with established players and new entrants vying for consumer attention and subscription dollars. Maintaining growth in a post-pandemic world where gyms are fully open and consumers have more diverse fitness options is a key hurdle. Peloton must also continue to manage its cost structure effectively, optimize its supply chain, and potentially innovate on its hardware offerings while simultaneously expanding its digital services.

However, opportunities also abound. Peloton has a strong brand identity and a loyal community of users. Expanding its service offerings, as indicated by the new software features, can tap into new market segments and increase the value proposition for existing subscribers. Partnerships, such as the recent collaboration with Costco mentioned in related reports, could open new distribution channels for hardware and potentially introduce the brand to a wider audience. Leveraging data to personalize the fitness experience and improve engagement is another area for potential growth and differentiation. Stern's experience in scaling diverse subscription businesses could be instrumental in identifying and capitalizing on these opportunities.

The Road Ahead

Peter Stern's appointment marks a pivotal moment for Peloton. His background in successfully building and scaling subscription services, particularly within the competitive digital fitness landscape at Apple, aligns strongly with Peloton's strategic direction. Coupled with a financial report that exceeded expectations and offered a positive outlook for profitability, the company appears to be entering a new phase. The narrative for Peloton is shifting from one dominated by pandemic-era boom-and-bust cycles and operational challenges to one focused on disciplined execution, service innovation, and sustainable financial health under new leadership. The coming quarters will reveal how effectively Stern can leverage his experience to navigate the complexities of the connected fitness market and steer Peloton towards long-term success.