Raphael Stevens

Ford Motor believes prioritizing smaller vehicles will help the company on its path to EV profitability.
The automaker wants to expand its growingly popular hybrid models and create more affordable electric vehicles that it believes will better compete against Chinese competitors.
But its shift in focus — which involves canceling a large, three-row electric SUV and other changes — will cost the Detroit automaker up to $1.9 billion in expenses and write-downs.

A banner advertises the Ford Mustang Mach-E electric vehicle at a Ford dealership on August 21, 2024 in Glendale, California. 
Mario Tama | Getty Images

DETROIT – Ford Motor’s profit engine for decades has been large trucks and SUVs in the U.S. So it might surprise investors that the automaker believes its new path to profitability for electric vehicles will first be led by smaller, more affordable vehicles.
The new plan is an “insurance policy” for the automaker to be able to expand its growingly popular hybrid models and create more affordable EVs that it believes will deliver a more capital-efficient, profitable electric vehicle business for the company and investors, according to Marin Gjaja, Ford’s chief operating officer for its Model e EV unit.

“We’re quite convinced that the highest adoption rates for electric vehicles will be in the affordable segment on the lower size-end of the range,” he told CNBC on Thursday. “We have to play there in order to compete with the entrants that are coming.”
Those expected newcomers are largely Chinese automakers, such as Warren Buffett-backed BYD, that have been rapidly growing from their home market to Europe and other countries.
Gjaja’s comments come a day after the automaker announced updates to its EV strategy that will cost up to $1.9 billion. That includes about $400 million for the write-down of manufacturing assets, as well as additional expenses and cash expenditures of up to $1.5 billion.

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Ford, Tesla and GM stocks

Ford’s new plans for North America include canceling a large, electric three-row SUV that was already far in development, delaying production of its next-generation “T3” electric full-size pickup truck by about 18 months until late 2027, and refocusing battery production and sourcing to the U.S.
Instead of the three-row SUV or large pickup, the company’s first new EV is expected to be a commercial van in 2026, followed the next year by a midsized pickup and then the T3 full-size pickup.

Gjaja said the decision wasn’t taken lightly, especially the cancellation of the upcoming three-row vehicle, which Ford CEO Jim Farley and other executives had been touting as a game-changer for several years.
The commercial van comes as Ford’s “Pro” commercial vehicle and fleet business, which includes vans and large Super Duty trucks, has been a standout for the company and offset billions of dollars in EV losses.
And the midsize pickup is scheduled to be the first vehicle from a specialized “skunkworks” team in California, The company had tasked the team two years ago with developing a new small EV platform.
“We believe smaller, more affordable vehicles are the way to go for EV in volume. Why? Because the math is completely different than [internal combustion engine (ICE) vehicles],” Farley told investors last month. “In ICE, a business we’ve been in for 120 years, the bigger the vehicle, the higher the margin. But it’s exactly the opposite for EVs.”
Farley has said the weight and cost of battery packs needed for large vehicles such as a three-row SUV, which many families buy for road trips, towing and hauling, are a limitation for EVs due to current ranges and charging networks.

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Ford’s current EVs — the Mustang Mach-E crossover, F-150 Lightning and a commercial van in the U.S. – are not profitable overall. The Model e operations have lost nearly $2.5 billion during the first half of this year and lost $4.7 billion in 2023.
The losses, as well as changing market conditions and business plans, caused Ford earlier this year to withdraw an ambitious 8% profit margin for its EV unit by 2026.
Investors and Wall Street analysts have largely supported the EV changes, most recently sending shares up about 2.3% since the announcement earlier this week, despite the expected costs.
“Overall, these changes will position Ford to benefit from growing demand for EVs, while also focusing on areas in which it has a Core competitive advantage,” BofA’s John Murphy wrote Wednesday in an investor note. “Given the size of the charge, this is clearly a tough decision in the short-term, but we think makes sense in the medium to long-term given what will likely be subpar economics in the three-row CUV/SUV segment.”

More hybrids, less EVs

The updates are the latest for Ford’s electrification plans, which now include a heavy focus on hybrid and plug-in hybrid electric vehicles, or PHEVs, to assist in meeting tightening fuel economy regulations in addition to all-electric vehicles.
Ford CFO John Lawler said Wednesday the company’s future capital expenditure plans will shift from spending about 40% on all-electric vehicles to spending 30%. He did not give a timeline for the change, but it’s a massive swing from when the company announced plans in 2021 to spend more than $30 billion on EVs through 2025.
The hybrid plans include offering such options across its entire North American lineup by 2030, including three-row SUVs, to assist in meeting tightening emissions and fuel economy requirements. Lawler said that to improve profitability, Ford is also accelerating the mix of battery production in the U.S. that will qualify for tax incentives and credits.

A Ford F-150 Lariat PowerBoost hybrid pickup truck is displayed for sale at a Ford dealership on August 21, 2024 in Glendale, California. 
Mario Tama | Getty Images

The shift in Ford’s plans is consistent with the overall auto industry, which is facing growing, but slower-than-expected adoption of EVs, as well as automakers not being able to achieve expected profitability on the vehicles.
“What we saw in ’21 and ’22 was a temporary market spike where the demand for EVs really took off,” Gjaja told CNBC during an interview earlier this year. “It’s still growing but not nearly at the rate we thought it might have in ’21, ’22.”
There’s also an industry-wide fear that Chinese automakers could be able to flood markets with cheaper, more profitable EVs. Chinese automakers such as Warren Buffett-backed BYD are quickly growing exports of vehicles to Europe and other countries.
Lawler pushed back Wednesday on the idea that the Chinese have out-gunned American automakers. He said the Ford, in part, developed the “skunkworks” team to prove that Ford can compete against the Chinese automakers.
“As we’ve watched in the last 18 to 24 months, the emergence of incredible products and formidable competitors in China has really been, I think, the story for us,” Gjaja said. “And so now, when we look at the competitive landscape, we have to chin ourselves against the most competitive companies in China.”

Ford vs. GM

Ford’s new plans are polar opposite of its closest rival, General Motors.
America’s largest automaker has pulled back spending and delayed many of its EVs, but it has several large all-electric vehicles on sale on coming soon.
GM was among the first to go “all-in” on EVs, including by creating a vertically integrated, dedicated electric vehicle platform and supporting technologies such as batteries and motors.

2025 Cadillac Escalade IQ
Michael Wayland / CNBC

Aside from Tesla, GM was the first automaker to begin U.S. battery cell manufacturing through a joint venture at scale, which the company has continued to tout as a cost advantage
GM’s current lineup includes three all-electric large pickup trucks, a Hummer SUV, two recently launched Chevrolet crossovers and a luxury Cadillac crossover and $300,000 Celestiq car. Several more crossover models and an all-electric Escalade SUV are expected to join the lineup this year as well.
As recently as last month, GM reconfirmed expectations for its EVs to be profitable on a production, or contribution-margin basis, once it reaches output of 200,000 units by the fourth quarter.
A GM spokesman Thursday said the automaker continues “to work to reach variable profit positive during the fourth quarter.”
Gjaja declined to comment on GM’s target or operations but said Ford is doing what’s best for the company.
“We’re focusing on what we think are the right technologies to serve our customers that can also be affordable for them and profitable for us,” he said. More

Of the 1,143 cars up for sale at Monterey Car Week, only 821 sold — marking a 72% sell-through rate, according to classic-car insurance company Hagerty.
The average sale price was $476,965, down slightly from last year’s average of $477,866.
That’s in part because a new generation of collectors is driving the market — mainly Gen Xers and millennials — who prefer cars from the 1980s, 1990s and 2000s.

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
Auction sales during Monterey Car Week fell 3% from last year, as a shift from older to newer cars left a pileup of unsold classics from the 1950s and 1960s.

Total sales at this year’s five car auctioneers in Monterey — RM Sotheby’s, Broad Arrow, Gooding & Company, Mecum and Bonhams — fell to $391.6 million this year from $403 million in 2023, according to Hagerty, the classic-car insurance company. That followed a decline of 14% last year compared with the peak of 2022.
Of the 1,143 cars up for sale, only 821 sold — marking a 72% sell-through rate, according to Hagerty. The average sale price was $476,965, down slightly from last year’s average of $477,866.

Experts say wealthy collectors still have plenty of money to spend and are feeling confident given the recent rise in the stock market, but the types of cars they want are changing. There were simply too many similar cars at too many auctions to generate strong prices and sales.
“It’s saturation,” said Simon Kidston, the founder of Kidston and a leading advisor to wealthy car collectors. “When I walked around the auctions and saw so much similar ‘product,’ I asked myself if any of them had thought about what they or their rivals already had consigned, and if the cars were vying for the same buyers. Add to that the fact that many entries had already been in dealer windows for months or years which always feels like sloppy seconds.”
At the same time, a new generation of collectors driving the market — mainly Gen Xers and millennials — prefer cars from the 1980s, 1990s and 2000s. The 1950s and 1960s classic cars that powered the market for decades and are popular with baby boomers are pouring onto the market and failing to find buyers.

The sell-through rate in Monterey (or the percentage of cars that actually sold on the auction block) was an anemic 52% for pre-1981 cars priced at $1 million or more, according to Hagerty. The sell-through rate for cars less than 4 years old was a much stronger 73% — proving that young collectors are now in the driver’s seat.
Hagerty’s Supercar Index of sports cars from the 1980s through the 2000s is up over 60% from 2019, while the Blue Chip Index of 1950s and 1960s Corvettes, Ferraris, Jaguars and other storied classics is down 3%.

The 1938 Alfa Romeo 8C 2900B Lungo Spider
Credit: Gooding & Company

Granted, a small number of rare, true masterpieces will still fetch high prices. The top car of the week was a 1960 Ferrari 250 GT SWB California Spider that sold at RM Sotheby’s for $17 million and the runner-up was a 1938 Alfa Romeo 8C 2900B Lungo Spider that’s one of only five in existence.
Yet the broader changing of the guard in classic cars, especially as many older collectors start selling off or downsizing their collections, is likely to weigh on prices for older cars for years.

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“From an auction perspective, the market continues to take a breath while we transition from what was hot, think Enzo-era Ferraris, the so-called full classics as well as ’50s and ’60s sports racers, to the ascendant modern supercar class,” said McKeel Hagerty, CEO of Hagerty. “The divergence between older and newer cars has accelerated.”
Some say high interest rates are also putting pressure on the classic-car market. At the lower end of the market, many buyers had been using financing to buy cars and build their collections. At the high end, rising rates raised the opportunity cost of buying a classic car.
“People think, ‘Instead of that million-dollar car, I could be earning 5% maybe 10%’ if you’ve got a great manager,” Kidston said. “That, more than anything else, makes people think twice. A collector car is partially investment. There’s no other single reason for the increase in the value of collector cars over the last 40 years than the investment angle.”

Here are the top 10 most expensive cars sold during Monterey Car Week

1960 Ferrari 250 GT SWB California Spider – $17,055,000 (RM Sotheby’s)
1938 Alfa Romeo 8C 2900B Lungo Spider – $14,030,000 (Gooding & Company)  
1955 Ferrari 410 Sport Spider – $12,985,000 (RM Sotheby’s)
1969 Ford GT40 Lightweight – $7,865,000 (Mecum)
1997 Porsche 911 GT1 Rennversion Coupe – $7,045,000 (Broad Arrow Auctions) 
1959 Ferrari 250 GT LWB California Spider – $5,615,000 (RM Sotheby’s) 
1995 Ferrari F50 Coupe – $5,505,000 (RM Sotheby’s) 
1955 Ferrari 857 S Spider – $5,350,000 (Gooding & Company)  
1967 Ferrari 275 GTB/4 Alloy Coupe – $5,285,000 (RM Sotheby’s)  
1958 Ferrari 250 GT TdF Coupe – $5,200,000 (Gooding & Company)  More

Cava beat Wall Street’s estimates for its quarterly earnings and revenue.
The Mediterranean restaurant chain said its fiscal second-quarter traffic climbed 9.5%, bucking industry trends.
The company also raised its full-year forecast.

Customers arrive at a Cava restaurant in New York City on June 22, 2023.
Brendan Mcdermid | Reuters

Cava on Thursday raised its full-year outlook as its restaurants reported strong traffic, fueling better-than-expected quarterly earnings and revenue.
Shares of the company rose 9% in extended trading. The stock has more than doubled its value this year, bringing Cava’s market cap up to about $11.6 billion, as of Thursday’s close.

Here is what the company reported for the quarter that ended July 14 compared to what Wall Street was expecting, based on a survey of analysts by LSEG:

Earnings per share: 17 cents vs. 13 cents expected
Revenue: $233 million vs. $220 million expected

The Mediterranean restaurant chain reported fiscal second-quarter net income of $19.7 million, or 17 cents per share, up from $6.5 million, or 21 cents per share, a year earlier.
Net sales climbed 35% to $233 million. The company’s same-store sales rose 14.4%, topping StreetAccount estimates of 7.9%.
While many other restaurant companies have reported declines in visits as consumers pull back their spending, Cava said its traffic grew 9.5% in the quarter. Cava CEO and co-founder Brett Schulman credited the chain’s new grilled steak option as one reason customers kept coming to its restaurants during the quarter.
Cava opened 18 net new locations during the quarter, bringing its total footprint up to 341 restaurants.

For fiscal 2024, Cava now expects same-store sales growth of 8.5% to 9.5%, up from its prior range of 4.5% to 6.5%. The company is also projecting that it will open 54 to 57 new locations this year, up from its previous forecast of 50 to 54 restaurants.
Cava also expects to report adjusted earnings before interest, taxes, depreciation and amortization of $109 million to $114 million. Previously, it was projecting adjusted EBITDA of $100 million to $105 million for the fiscal year.

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Walmart on Thursday announced a new partnership with fast-food chain Burger King that will offer members of its Walmart+ subscription program 25% off any Burger King order made through the BK app.
Walmart positioned the added benefits as cost savings for its members.
It comes at a time when cost-conscious diners increasingly hunt for value.
Walmart+ costs $12.95 per month, or $98 annually, and includes free shipping and delivery on Walmart orders.

A Burger King Whopper hamburger is displayed in San Anselmo, California, on April 5, 2022.
Justin Sullivan | Getty Images

Walmart members are in for a whopper of a deal.
The retailer on Thursday announced a new partnership with fast-food chain Burger King that will offer members of its Walmart+ subscription program 25% off any Burger King order made through the BK app. Members will also be eligible for a free flame-grilled Whopper every three months starting in September with a purchase, according to a news release.

Walmart positioned the added benefits as cost savings for its members. It comes at a time when cost-conscious diners increasingly hunt for value.
“We’re confident our members will welcome the additional savings, and we’re thrilled to collaborate with a trusted brand like Burger King to offer this benefit,” Venessa Yates, senior vice president and general manager, said in a statement.
Walmart+ costs $12.95 per month, or $98 annually, and includes free shipping and delivery on Walmart orders. In 2022, Walmart struck a streaming deal with Paramount Global to offer Walmart+ members free access to an ad-supported plan on Paramount+.
“We’re thrilled to join the Walmart+ program as its first ever dining partner and look forward to providing members of Walmart+ even more savings on their flame-grilled favorites at Burger King,” said Pat O’Toole, chief marketing officer for Burger King North America, in a statement.

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The Food and Drug Administration approved updated Covid vaccines from Pfizer and Moderna, putting the shots on track to reach most Americans in the coming days as the virus surges.
The jabs target a strain called KP.2, a descendant of the highly contagious omicron subvariant JN.1 that began circulating widely in the U.S. earlier this year.
The CDC recommended that everyone over 6 months old receive an updated Covid vaccine this year.

Pfizer COVID-19 vaccine.
Courtesy: Pfizer

The Food and Drug Administration on Thursday approved updated Covid vaccines from Pfizer and Moderna, putting the new shots on track to reach most Americans in the coming days amid a summer surge of the virus. 
The jabs target a strain called KP.2, a descendant of the highly contagious omicron subvariant JN.1 that began circulating widely in the U.S. earlier this year. KP.2 was the dominant Covid strain in May, but now only accounts for roughly 3% of all U.S. cases as of Saturday, according to the latest Centers for Disease Control and Prevention data.

Still, Pfizer and Moderna have said their KP.2 vaccines can produce stronger immune responses against other circulating subvariants of JN.1, such as KP.3 and LB.1, than last year’s round of shots targeting the omicron strain XBB.1.5 can.
“Given waning immunity of the population from previous exposure to the virus and from prior vaccination, we strongly encourage those who are eligible to consider receiving an updated COVID-19 vaccine to provide better protection against currently circulating variants,” Dr. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, said in a statement.
In June, the CDC recommended that everyone over 6 months old receive an updated Covid vaccine and flu jab this year. The new shots from Pfizer and Moderna are specifically approved for people ages 12 and older and are authorized under emergency use for children 6 months through 11 years old.  
Pfizer will begin shipping its new shot immediately and expects it to be available in pharmacies, hospitals and clinics across the U.S. “beginning in the coming days,” the company said in a statement. Moderna also expects its shot to be available in a similar time frame, according to a statement.
“Staying up to date with your COVID-19 vaccine remains one of the best ways for people to be protected and prevent severe illness,” Moderna CEO Stephane Bancel said in a statement. “We appreciate the U.S. FDA’s timely review and encourage individuals to speak to their healthcare providers about receiving their updated COVID-19 vaccine alongside their flu shot this fall.”

Moderna Covid-19 Vaccine mRNA 2024-2025 formula.
Courtesy: Moderna

The FDA’s approval comes a few weeks ahead of last year’s round of shots, which the agency cleared on Sept. 11.
The earlier arrival of updated vaccines could offer some reassurance to Americans as the nation sees a relatively large spike in the virus this summer. A “high” or “very high” level of Covid is being detected in wastewater in almost every state, according to CDC data. Wastewater monitoring provides a glimpse of how widespread the virus is in the U.S. as other forms of testing have fallen off.
Other measures of the virus are rising but remain far below where they were at the peak of the pandemic. Covid test positivity rates rose to 18.3% for the week ended Aug. 10, from 17.9% the week before, according to the CDC.
Meanwhile, the CDC said about four people are being hospitalized for Covid for every 100,000 people in a given area. That’s up from about one Covid hospitalization for every 100,000 people in May, which was the lowest level since the pandemic began. 
The summer Covid wave may decline by the time the shots reach patients’ arms and kick in an immune response against the virus, which typically takes two weeks after vaccination. 
Still, federal health officials have long told Americans to expect annual updates to Covid shots as the virus churns out new strains that can dodge the immunity people have from previous vaccinations or infections — protection that wanes over time. It’s similar to how the U.S. rolls out new flu vaccines every year. 
It’s unclear how many Americans will actually roll up their sleeves to get another shot in the coming months.
Only around 22.5% of U.S. adults received the latest round of shots that came out last fall, according to CDC data through early May. 

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Many Americans who got previous rounds of Covid shots cited a lack of worry about the virus as a reason they didn’t get the latest booster, according to a November survey from health policy research organization KFF. Others said they had been too busy to get their shot, the survey said.
In June, the FDA asked vaccine makers to manufacture shots against JN.1 before telling them to target KP.2 instead “if feasible.”
That shift appeared to put Novavax, which filed for authorization of a new JN.1 shot that same month, at a disadvantage. The FDA has not cleared the biotech company’s jab. 
In a statement, Novavax said it is working “productively” with the FDA as the agency completes its review. Novavax expects its shot to receive authorization in time for peak vaccination season in the U.S.
The company noted that its shot provides protection against descendants of JN.1, including KP.2.3, KP.3, KP.3.1.1 and LB.1.
Novavax manufactures protein-based vaccines, which cannot be quickly updated to target another strain of the virus. Protein-based technology is a decades-old method used in routine vaccinations against hepatitis B and shingles. 
Meanwhile, Pfizer’s and Moderna’s shots use messenger RNA technology, which teaches cells how to make proteins that trigger an immune response against Covid. The mRNA vaccines are much easier to develop and update than protein shots. 

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Peloton has returned to sales growth for the first time in nine quarters.
The connected fitness company posted quarterly results that came in well ahead of expectations and delivered a mixed outlook for the year ahead.
The Bike and Tread maker has been working to improve its balance sheet and looks to be more focused on profitability than growth.

Peloton said Thursday it is digging itself out of the red and eked out a slight sales increase for the first time in nine quarters as it slashed its overall losses. 
The company’s shares spiked 35% on Thursday.

The beleaguered connected fitness company, which two board members have run since former CEO Barry McCarthy resigned earlier this year, saw sales grow by 0.2% during its fiscal fourth quarter. While only a modest uptick, it’s the first time Peloton posted year-over-year revenue growth since its 2021 holiday quarter. 
The company also indicated it’s ready to focus on profitability over growth with significant cuts to its marketing and sales spending and meaningful increases to free cash flow and adjusted EBITDA. Those cuts helped Peloton narrow its quarterly losses to $30.5 million from $241.1 million in the year-ago period.
Here’s how the Bike and Tread maker performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Loss per share: 8 cents vs. 17 cents expected
Revenue: $644 million vs. $631 million expected

For the three-month period that ended June 30, Peloton significantly narrowed its losses. The company posted a loss of $30.5 million, or 8 cents per share, compared with a loss of $241.8 million, or 68 cents per share, a year earlier. 
Sales rose to $643.6 million, up about 0.2% from $642.1 million a year earlier. That’s only a $1.5 million increase, but Peloton did it at a time when sales are typically a bit slower for the company, because the quarter bleeds into the summer when people are more focused on going out and traveling than working out. The last time Peloton delivered year-over-year sales growth was during its holiday season in 2021, which is typically the company’s strongest quarter.

Secondary market gains

During the quarter, sales for Peloton’s pricy connected fitness hardware fell about 4%, continuing a trend for the company. But subscription revenue rose by 2.3%, and the segment’s gross margin increased by 1 percentage point.
Though hardware sales were down, Peloton is growing its subscription revenue through the secondary market where people can buy used stationary bikes for a fraction of the cost of a new one. During the quarter, subscription revenue from hardware purchased on the secondary market grew 16% year over year.
“We believe a meaningful share of these subscribers are incremental, and they exhibit lower net churn rates than rental subscribers,” the company said in a letter to shareholders.
While hardware sales have hurt Peloton’s overall performance, sales for its Tread are growing after it overcame a costly recall. During the quarter, sales from Peloton’s treadmill portfolio grew 42% year over year.
The company is also seeing some positive signs in its Bike rental program, which allowed it to clear through a glut of inventory. During the quarter, average net monthly paid subscription churn for rentals was down 1.1 percentage points. Demand has been so steady, it no longer has the refurbished inventory levels necessary to supply that side of the program. The company ceased offering its original Bike rental program on Aug. 1 and since then, has seen demand grow for its Bike+ rental, refurbished original Bike sales and financed new Bike sales.
“These alternative programs have stronger unit economics than original Bike rental, with more cash paid upfront and a stronger retention profile,” the company said in its shareholder letter.
Ever since Peloton’s pandemic heyday came to an end, the company has struggled to generate free cash flow and ensure it has enough assets on its balance sheet to cover its many liabilities. Earlier this year, it announced a sprawling restructuring plan that included cutting 15% of the company’s global workforce to achieve $200 million in annualized cost savings by the end of fiscal 2025.
Those efforts are starting to bear fruit.
During the quarter, Peloton delivered adjusted EBITDA and free cash flow for the second consecutive quarter – a feat it had not pulled off since the height of the Covid-19 pandemic. It posted $70 million of adjusted EBITDA, far more than the $53 million that analysts had expected, according to StreetAccount. 
That metric was up $105 million compared with the year-ago period and $64 million quarter over quarter.
Peloton also generated $26 million in free cash flow, compared with negative $74 million in the year-ago period and $8 million in the prior quarter.
Improvements to Peloton’s balance sheet come after the company completed massive refinancing of its debt that staved off a looming liquidity crunch and pushed out its debt maturities by several years.
As far as who will be Peloton’s next leader, interim co-CEO Karen Boone said the search is “well underway” and they’ve seen “no shortage of interest.”
“We are far along in the process. We’ve done a lot of vetting, a lot of conversations, and we’ve narrowed it down to some very highly qualified candidates,” Boone said. “We have some very specific folks in mind at this point.”
In her opening remarks, Boone said the company can’t speculate on when its next CEO will start. But just before ending the call, she said the new hire will be in place by the time the company next reports earnings, which is expected to be sometime in the fall.
“I should probably under-promise here, but I am excited to say that I do believe you will be speaking to and hearing from the new CEO of Peloton on this call next quarter,” said Boone.

Profit over growth

For the year ahead, Peloton is planning to invest in its hardware and software to deliver a better user experience, among other initiatives. However, its guidance assumes that investments in these new initiatives “will not deliver subscriber growth within the fiscal year,” indicating Peloton may finally be shifting its focus away from growth in favor of profitability and free cash flow generation.
“Chris, and I, in partnership with Peloton’s strong leadership team, are continuing to make progress on several key strategic priorities, which include aligning our cost structure to the current size of our business to improve profitability, and deliver meaningful free cash flow without requiring growth to get there,” Boone said on a call with analysts.
“We’re enthusiastic about our innovative roadmap, but we’ll be judicious about deploying marketing dollars until we demonstrate product market fit, and continue to be cautious about marketing spend given the uncertain consumer backdrop, and ongoing macro environment,” she said.
That shift shows in its reductions to sales and marketing spending — an expense that has long dragged down Peloton’s balance sheet and has been criticized as being too high for the company’s size.
During the quarter, Peloton cut sales and marketing spending by $25.5 million, or 19% year over year. It said it expects to continue to make reductions to its marketing budget throughout fiscal 2025.
For the current quarter, Peloton is projecting sales to be worse than Wall Street expected but is guiding to higher-than-forecast adjusted EBITDA. The company said it anticipates sales to be between $560 million and $580 million, compared with estimates of $609 million, according to LSEG. It’s expecting to post adjusted EBITDA of $50 million to $60 million, compared with estimates of $45 million, according to StreetAccount.
StreetAccount analysts had expected the number of connected fitness subscribers to be 2.96 million during the current quarter, but Peloton projects a range of 2.88 million to 2.89 million instead.
For the full year, Peloton expects sales to be between $2.4 billion and $2.5 billion, compared with estimates of $2.7 billion, according to LSEG.

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