Life Time's Strong 2025 Results and 2026 Guidance Validate Growth but Heighten Execution Risks

What happened

Life Time reported preliminary Q4 and full-year 2025 results with revenue up 12.2% and 14.2%, respectively, and net income soaring over 200%, driven by comparable-center sales growth and higher average revenue per member. However, the DeepValue report cautions that this performance relies heavily on ARPU expansion rather than membership volume gains, exposing the model to discretionary spending cuts. The company introduced select FY2026 guidance, which implicitly assumes continued double-digit comp growth and controlled leverage, yet the report highlights rising fixed rent obligations from its asset-light, lease-heavy strategy. Despite the optimistic headlines, underlying risks such as lease-adjusted debt and potential equity dilution persist, as outlined in the report's downside boundaries. This update reinforces the existing thesis that Life Time is a high-quality but execution-sensitive equity, with the new guidance offering near-term confidence but not mitigating long-term structural vulnerabilities.

Implication

The preliminary results underscore Life Time's ability to sustain premium pricing and in-center service monetization, supporting near-term earnings momentum. However, with membership growth stagnating, the company faces heightened exposure to economic downturns that could rapidly erode discretionary wellness spending. The FY2026 guidance sets a high bar for continued low-teens revenue growth and margin stability, which the stock already prices in, leaving little room for error. Fixed costs from long-term leases are increasing and could compress margins if revenue growth slows or rent outpaces sales, as warned in the DeepValue report. Given crowded long-side sentiment and elevated valuations, any deviation from guidance or macro headwinds could trigger significant downside, reinforcing the need for a margin of safety before investing.

Thesis delta

The new article does not shift the core thesis; it provides incremental evidence supporting the base case of sustained double-digit growth while affirming the critical risks of ARPU reliance and lease obligations. It confirms strong near-term execution but leaves unchanged the key watchpoints—comparable-center growth staying above 6%, rent not outpacing revenue, and leverage remaining below 2x—that define the investment call. Therefore, the recommendation to wait for a more attractive entry point around $22 persists, as the stock at current levels still embeds optimistic assumptions without sufficient margin of safety.