Peloton Interactive and Lululemon Athletica said on Wednesday they had entered into a five-year global partnership, sending Peloton's shares up 16.7% in aftermarket trading.

Under the deal, Peloton would become the exclusive digital fitness content provider for the apparel maker, developing all content for Lululemon Studio beginning early 2024. In return, Lululemon would be the fitness bike maker's primary athletic-apparel partner.

The fitness platform provider, once a pandemic darling, has taken a series of measures to cut costs. It is also pivoting away from hardware to transform into a software-first company.

Shares of Peloton's rival Xponential Fitness pared some gains on the news of the company's deal with Lululemon and were last up 3.6% after the bell.

Lululemon also said it would discontinue selling its Studio Mirror - an interactive "smart fitness" device that features live, on-demand workouts - which has seen lackluster demand in recent months.

The company had said earlier this year it was looking to digitize its Mirror business further and focus more on offering content through applications.

(Reporting by Shivansh Tiwary in Bengaluru; Editing by Pooja Desai)