Peloton's expensive gamble on AI-powered fitness equipment just cratered. The company's Q2 2026 earnings reveal its Cross Training hardware refresh - complete with swivel screens and real-time AI form correction - failed to convince existing users to upgrade, triggering a 20% stock plunge this morning. CEO Peter Stern admitted on the earnings call that loyal customers are sticking with their old bikes longer than expected, dealing a blow to the turnaround strategy during what's normally Peloton's strongest quarter.
Peloton just learned a hard lesson about asking loyal customers to pay premium prices for incremental upgrades. The fitness tech company's Q2 2026 earnings call laid bare the reality that its flashy new AI-powered hardware refresh hasn't moved the needle with the people who matter most - the installed base of devoted riders who already own Peloton equipment.
The numbers tell a brutal story. Peloton stock tumbled roughly 20% in morning trading after the company revealed that total revenue dropped 3% year-over-year to $657 million, according to earnings disclosed today. Both hardware and subscription sales missed internal targets during what's typically the company's most lucrative period - the holiday quarter when New Year's resolution shoppers flood the market.
CEO Peter Stern, who took the helm last fall and immediately bet big on a complete hardware overhaul, tried to frame the disappointment as a miscalculation rather than a rejection. "Our installed base of equipment is quite durable and member satisfaction is extremely high," Stern said on the call. "We believe these factors contribute to a longer upgrade cycle than we had anticipated."
But the backstory reveals deeper tensions. Peloton launched its Cross Training series in October with significant fanfare - new versions of the Bike, Bike Plus, Tread, Tread Plus, and Row Plus featuring swivel screens, built-in cameras for AI-powered strength training feedback, fans, and upgraded seats. The centerpiece was Peloton IQ, an AI system promising real-time form correction, movement analysis, and personalized workout generation.
