Peloton Interactive Inc. took a forceful step to reshape its business on Wednesday by raising prices across both its hardware line and membership tiers, a strategic pivot that sent the company’s shares lower as investors weighed the trade-off between higher near-term revenue per customer and the risk of slowed demand.

The price increases, announced as part of what Peloton described as a “comprehensive product and go-to-market refresh,” apply to its flagship connected bikes and treadmills as well as monthly and annual subscription plans. Company materials framing the changes emphasized a longer-term shift toward a premium hardware-plus-service model designed to raise lifetime value per customer and improve unit economics after several years of volatile performance.

Investors responded quickly. Shares fell in Wednesday trading, reflecting immediate concern that higher prices could deter new buyers and prompt existing members to reconsider or downgrade memberships. Market participants said the reaction underscored a broader skepticism about raising prices on durable consumer goods that were built into households during the pandemic-driven fitness boom.

“This is a clear margin-first strategy,” said one market strategist who follows consumer tech. “Peloton is trying to stop the bleeding on economics, but the key question is whether enough customers will pay more for connected hardware in a softer discretionary environment.”

Peloton’s move comes against a backdrop of notable shifts in consumer behavior and financial conditions. After surging demand during the pandemic, connected fitness sales and subscriber growth slowed as gyms reopened and consumers shifted spending. At the same time, inflation has remained elevated relative to pre-pandemic norms and the Federal Reserve’s tightening cycle has pushed borrowing costs higher, increasing the discount rate investors apply to growth companies that promise future recurring revenue.

For companies with subscription models, the calculus is acute: higher prices can boost average revenue per user and margins, but they can also accelerate churn, which erodes the lifetime value that underpins current valuations. Peloton executives argued in their announcement that updated pricing better reflects the integrated content, software improvements and new hardware features rolled out in recent quarters. Analysts welcomed the clarity on profitability priorities but warned the path to restoring growth would be uneven.

Competitors and market context also matter. Peloton faces pressure from lower-cost equipment makers and from lifestyle brands that bundle hardware with other consumer goods and services. The company’s decision to lift prices places it in a position that more closely resembles premium consumer electronics firms that rely on differentiated content and ecosystem lock-in to justify higher fees.

Policy and market trends amplify the stakes. With the Fed focused on cooling inflation and signaling a gradual approach to rate normalization, elevated rates can compress valuations and make any growth misstep costly. For Peloton, the current strategy is an attempt to adjust to a post-pandemic reality in which scale is harder to achieve and profitability is paramount.

Longer term, the episode underscores a broader industry rebalancing: the pandemic-era surge in subscription-based home fitness is giving way to consolidation and price segmentation. How Peloton’s customers respond to steeper costs — measured by new sales, churn rates and average revenue per user over coming quarters — will determine whether the company’s bet pays off.