The outdoor industry is finally emerging from the pandemic-induced hangover. The stale inventory of yesteryear has largely been flushed through the system, and balance sheets are beginning to stabilize* (*for those still in business).
So, 2026 is off to the races with blue skies ahead? Not so fast.
Before diving into the predictions, let’s establish the ground rules. While my primary data points come from the cycling industry, the economic physics here extrapolate to the broader outdoor and powersports sectors.
Two critical assumptions underpin everything that follows:
- Demand is wildly elastic. Outside of a few “freaks” (myself included), the average consumer firmly prioritizes food, shelter, and heating their home over a new gravel bike.
- The competition isn’t just other brands; it’s other distractions. Outdoor hardgoods are fighting a war for attention against an endless supply of alternative, lower-friction entertainment. If this isn’t your religion, it’s just another line item on the chopping block.
Now, onto my predictions, in no particular order…
The Story of Demand (A Tale of Three Cohorts)
For the last three years, we’ve obsessed over supply. In 2026, the narrative shifts to demand. This requires a healthy consumer, but the data suggests a fracture in the market. We are looking at a tale of three distinct groups:
- The Bottom 50% (The Wile E. Coyote Effect): This demographic is currently running off a cliff, but gravity is just starting to kick in. Despite being the “majority,” they own virtually zero assets (2–3% of total wealth) but hold over half the credit card debt. They are tapped out.
- The Middle Class ( The Squeezed): This group is technically “okay,” but the demographic is narrowing. Unease is high, driven by AI anxiety, a stale job market, interest rates, and a cost of living that consistently outpaces wage growth.
- The Top 10% (The Bulletproof): The rich are feeling awesome. The top decile of the economy has never been stronger.
The Problem: While the wealthy participate in outdoor sports at higher rates, there simply aren’t enough of them to foster a healthy industry volume on their own.
The Prediction: This reinforces the “Barbell Model” I’ve written about before. Product positioning is now binary. The wealthy will happily pay for the ultra-high-end. Everyone else is hunting for absolute utility and value. If you are stuck in the middle, selling average products at premium prices, you are in the kill zone.
Side Point: There is an incredibly high probability we are in the midst of a very large “AI data center bubble”. If this is true, and there is some reset to the equity markets as a result of this, you can expect the top 10% to not be so bulletproof for a certain amount of time (at least XX months after COVID)
The End of the “Deal Era”
From Fox Factory to major OEMs to KTM (Bajaj), it seems every company has finally found religion regarding production discipline.
For those of us accustomed to buying great gear at liquidation pricing, 2026 will be a rude awakening. The inventory glut is largely gone. Combine that with potential tariffs and a weaker dollar, and the realized price of gear in 2026 will be significantly higher than the last three years.
The Caveat: If consumer health truly collapses (see point #1), brands may be forced back into discounting to generate cash flow. This creates a potential “death spiral”—attempting to hit volume targets with zero margin for error against a bloated expense structure.
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However, from my perspective, higher prices are actually a good thing. The industry must retrain the consumer to stop waiting for the 40% off sale. That only happens if forecasting improves and production discipline holds.
The “Touching Grass” Premium
We are reaching peak digital fatigue. Humans are craving real-world connection. As a result, demand for (run/bike/moto) clubs, gatherings, and grassroots events will continue to rise.
Full Disclosure: I believe in this thesis so strongly that I’m betting my own capital on it. My startup, Rali, is built specifically to facilitate this shift, enabling grassroots racing for enthusiasts using the hardware they already own.
The “Wrenching” Economy
Technological progress in outdoor hardgoods has plateaued. The marginal utility of upgrading a 2023 bike to a 2026 model is negligible. Consequently, consumers will hold onto their gear longer.
This is bad news for OEMs relying on the replacement cycle, but a boom for service providers. If you are willing to turn a wrench, expect a healthy backlog in 2026. Maintenance will be a crusher, as will “little” upgrades and customizations. (handlebar, grips, even bike wraps)
Private Equity: Dry Powder vs. Burned Hands
I can’t write this without addressing the PE elephant in the room. Will Private Equity return to the outdoor industry?
- The “Yes”: There is a massive amount of dry powder (unallocated capital) that needs to find a home (the AUM in PE right now is absolutely massive, and there are more PE firms in the US than McDonalds). Some GPs will inevitably see “value” in depressed outdoor valuations “ease” of optimizing these companies (we all know, its not easy!).
- The “No”: Outside of adjacent tech/media plays, the outdoor industry has been a capital incinerator for the last few years. It is difficult to invest, operationalize, and exit cleanly.
Prediction: We will see activity, but it won’t look like the 2012–2021 gold rush. The diligence will be harder and the checks smaller.
AI Moves from Hype to P&L
Unless you work in tech, your exposure to AI is likely limited to ChatGPT. I’m going on record: 2026 is the year applied AI hits paydirt, especially for smaller companies.
Ironically, the biggest gains won’t be at the massive conglomerates, but at smaller companies with less bureaucracy and middle management. Small teams will leverage AI agents to do the work of 10 people, effectively keeping the “L” (Labor) side of the P&L down while scaling marketing and product capabilities.
The industry will split into two camps: those who view AI as a gimmick, and those who weaponize it to build operating leverage. I know which horse I’m backing.
Quick aside here: we’ve been swimming in this “AI” tech for years, we just don’t know it. The recommender engines (and marketing engines) driving YouTube, TikTok, and Meta rely on the same fundamental linear algebra and pattern recognition that underpin your favorite GenAI tool. I mention this because the high-impact AI of 2026 won’t just be a chatty interface. It will be ‘sneaky’, invisible optimization driven by GPUs running in the background, rather than just a bot mimicking human conversation.
The Crystal Ball is Cracked
The graveyard of economic predictions is vast, crowded, and filled with people much smarter than me. As the old Danish proverb goes, “It is difficult to make predictions, especially about the future.”
If I actually had a working crystal ball, I wouldn’t be writing a Substack; I’d be on a yacht in the Med levered 100x long on the exact bottom of the next market cycle.
So, take all of this with a grain of salt (wait, that’s just electrolytes now, right?). The specifics of 2026 might zig where I think they’ll zag. Maybe the consumer miracle happens, or maybe AI turns out to be just a really expensive way to write emails.
But directionally, the signal is clear: There is no “easy mode”. The companies that win in 2026 won’t be the ones waiting for the tide to rise again; they’ll be the ones building smaller, more efficient vessels, catering to the specific needs of the barbell, and remembering that at the end of the day, we’re just selling toys that help people touch grass.
If I’m right, remember you heard it here first. If I’m wrong, I’ll quietly edit this post in 2027 and pretend it never happened. Upside to a small audience, I suppose.
See you out there.