PELOTON INTERACTIVE, INC.PTON
PELOTON INTERACTIVE, INC. Income Taxes Disclosure
Income Taxes
The components of Loss before income taxes are as follows:
| Fiscal Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| United States | $ | (91.7) | $ | (416.5) | $ | (1,101.9) | |||||||||||
| Foreign | (23.9) | (135.6) | (156.1) | ||||||||||||||
| Loss from operations before income taxes | $ | (115.6) | $ | (552.1) | $ | (1,258.0) | |||||||||||
The components of Income tax expense (benefit) are as follows:
| Fiscal Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | 0.8 | 0.8 | 0.6 | ||||||||||||||
| Foreign | 1.9 | — | 4.6 | ||||||||||||||
| 2.7 | 0.8 | 5.2 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | — | — | — | ||||||||||||||
| State | — | — | — | ||||||||||||||
| Foreign | 0.7 | (1.0) | (1.5) | ||||||||||||||
| 0.7 | (1.0) | (1.5) | |||||||||||||||
| Total | $ | 3.4 | $ | (0.2) | $ | 3.7 | |||||||||||
A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
| Fiscal Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Permanent differences | (4.6) | (1.2) | (0.1) | ||||||||||||||
| Share based compensation | (10.3) | (9.2) | (2.5) | ||||||||||||||
| Return to provision | (0.4) | (0.2) | 0.1 | ||||||||||||||
| Effects of rates different than statutory | 0.8 | 1.0 | 0.4 | ||||||||||||||
| State and local income taxes, net of federal benefit | 0.8 | 1.7 | 2.9 | ||||||||||||||
| Change in valuation allowance | (12.0) | (13.5) | (24.2) | ||||||||||||||
| Rate change | 0.4 | (0.2) | (0.5) | ||||||||||||||
| Federal credits | 4.2 | 0.5 | 2.4 | ||||||||||||||
| State credits | (1.1) | 0.1 | 0.2 | ||||||||||||||
| Other | (1.7) | — | — | ||||||||||||||
| Effective income tax rate | (2.9) | % | — | % | (0.3) | % | |||||||||||
The primary differences from the U.S. statutory rate and the Company’s effective tax rate for the fiscal year ended June 30, 2025 are due to the change in valuation allowance, stock-based compensation, permanent differences relating to excess officer compensation, and federal credits. The primary differences from the U.S. statutory rate and the Company’s effective tax rate for the fiscal year ended June 30, 2024 were due to the change in valuation allowance, stock-based compensation, and state and international taxes. The primary differences from the U.S. statutory rate and the Company’s effective tax rate for the fiscal year ended June 30, 2023 were due to the change in valuation allowance, stock-based compensation including excess tax benefits, and state and international taxes.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States, which made permanent or extended many of the provisions from the Tax Cuts and Jobs Act of 2017. The immediate expensing of domestic research and experimental expenditures for tax years beginning after December 31, 2024 is now permanent, as is 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. The bill permanently reinstates the more favorable EBITDA approach for calculating the business interest deduction limitation under Section 163(j). There are also changes to the effective rates and calculations on GILTI, FDII, and BEAT, among other provisions. The Company is currently assessing the provisions of the law but does not currently believe it will have material adverse impacts for the business moving forward.
On August 16, 2022, the Inflation Reduction Act was signed into law in the United States. Among other provisions, the Inflation Reduction Act includes a 15% minimum tax rate applied to corporations with profits in excess of $1 billion and also includes an excise tax on the repurchase of corporate stock. The Company has reviewed the provisions of the law and does not believe that any of the provisions will have a material impact on the business.
On March 11, 2021, the American Rescue Plan was enacted, which extends the period companies can claim an Employee Retention Credit, expands the IRC Section 162(m) limit on deductions for publicly traded companies, and repeals the election that allows US affiliate groups to allocate interest expense on a worldwide basis, among other provisions. The Company reviewed the provisions of the law and determined it had no material impact for the fiscal year ended June 30, 2025.
As of June 30, 2025 and June 30, 2024, the Company’s deferred tax assets were primarily the result of U.S. federal and state net operating losses (“NOLs”), Section 174 capitalized expenditures, lease liability, non-qualified stock options, and research and development tax credits. A valuation allowance was maintained and/or established in substantially all jurisdictions on the Company’s gross deferred tax asset balances as of June 30, 2025 and 2024. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. The realization of deferred tax assets was based on the evaluation of current and estimated future profitability of the operations, reversal of deferred tax liabilities and the likelihood of utilizing tax credit and/or loss carryforwards. As of June 30, 2025 and June 30, 2024, the Company continued to maintain that it is not at the more likely than not standard, wherein deferred taxes will be realized due to the recent history of losses and management’s expectation of continued tax losses.
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets (liabilities) are as follows:
| Fiscal Year Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss | $ | 1,039.5 | $ | 1,025.0 | |||||||
| Accruals and reserves | 65.1 | 62.4 | |||||||||
| R&D credit | 81.9 | 78.4 | |||||||||
| Accrued legal and professional fees | 2.9 | 4.5 | |||||||||
| Non-qualified stock options | 95.0 | 109.0 | |||||||||
| Restricted stock options | 11.8 | 7.4 | |||||||||
| Disallowed Interest Carryover | 68.8 | 46.5 | |||||||||
| Intangible Amortization | 51.1 | 49.2 | |||||||||
| Capitalized R&E | 119.4 | 93.4 | |||||||||
| Inventory capitalization | 52.0 | 61.4 | |||||||||
| Lease liability | 115.8 | 139.8 | |||||||||
| Deferred revenue | 7.9 | 7.9 | |||||||||
| Construction in Progress | 26.3 | 45.2 | |||||||||
| Other | 4.4 | 6.1 | |||||||||
| Total deferred tax assets: | 1,741.9 | 1,736.2 | |||||||||
| Valuation allowance | (1,647.4) | (1,603.3) | |||||||||
| Deferred tax liabilities: | |||||||||||
| Prepaid Expenses | (2.4) | (3.2) | |||||||||
| Property and equipment | (6.2) | (20.1) | |||||||||
| Right-of-use assets | (81.4) | (103.9) | |||||||||
| Convertible securities | (4.2) | (4.8) | |||||||||
| Other | (0.1) | (0.1) | |||||||||
| Total deferred tax liabilities: | (94.3) | (132.1) | |||||||||
| Deferred tax assets, net | $ | 0.2 | $ | 0.8 | |||||||
As of June 30, 2025 and 2024, the Company had federal NOLs of approximately $3,290.0 million and $3,313.8 million, respectively, of which $64.8 million will begin to expire in 2034 and the remainder will be carried forward indefinitely. The Company has undergone three ownership changes in the past which have historically subjected its NOLs to a Section 382 limitation. The resulting Section 382 limitations are large enough to avail the Section 382 limited NOLs by June 30, 2022, therefore no NOLs are currently limited. As of June 30, 2025 and 2024, the Company had state NOLs of approximately $2,657.9 million and $2,590.8 million, respectively, which began to expire at various dates beginning in 2024. As of June 30, 2025 and 2024, the Company had foreign NOLs of approximately $771.6 million and $711.3 million, respectively, generated primarily from its operations in the United Kingdom, which will be carried forward indefinitely. As of June 30, 2025 and 2024, the Company had $79.4 million and $74.6 million, respectively, of federal U.S. research and development credit carryovers that will begin to expire in 2036.
As of June 30, 2025, the Company did not have material undistributed foreign earnings. The Company has not recorded a deferred tax liability for foreign withholding or other foreign local tax on the undistributed earnings from the Company’s international subsidiaries as such earnings are considered to be indefinitely reinvested.
At both June 30, 2025 and 2024, the Company had no unrecognized tax benefits included as a component of income taxes payable within accrued expenses within the accompanying Consolidated Balance Sheets. The Company has the following activity relating to unrecognized tax benefits:
| Fiscal Year Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Beginning balance | $ | — | $ | — | |||||||
| Gross (decrease) increase in unrecognized tax positions | — | — | |||||||||
| Ending balance | $ | — | $ | — | |||||||
Although it is possible that unrecognized tax benefits may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months.
The Company is subject to taxation in the United States, various state and local jurisdictions, as well as foreign jurisdictions where the Company conducts business. Accordingly, on a continuing basis, the Company cooperates with taxing authorities for the various jurisdictions in which it conducts business to comply with audits and inquiries for tax periods that are open to examination. The tax years ended June 30, 2021 and later remain open to examination by tax authorities in the United States and United Kingdom.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 7, 2025 | Showing above |
| 2024 | Aug 22, 2024 | |
| 2023 | Aug 23, 2023 | |
| 2022 | Sep 7, 2022 | |
| 2021 | Aug 27, 2021 | |
| 2020 | Sep 11, 2020 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.