Numbers do not lie. At 8:00 AM Eastern Time today, On Holding AG (ONON) dismantled the bear case with a Q3 2025 earnings report that redefined the ceiling for premium sportswear. The Swiss brand reported record net sales of CHF 794.4 million, representing a 34.5 percent surge on a constant currency basis. This figure did not just beat the consensus estimate of CHF 777 million, it obliterated it. Investors responded with a violent revaluation of the stock, which closed the session at $41.51, up nearly 18 percent from the previous day.
The Anatomy of a Margin Breakout
Profitability was the primary driver of today’s market enthusiasm. On Holding achieved a gross profit margin of 65.7 percent, a staggering 510 basis point increase over the 60.6 percent reported in the same quarter last year. While approximately 200 basis points of this expansion were attributed to a one off release of freight cost accruals, the underlying organic margin remains significantly higher than legacy competitors. For comparison, per recent retail sector data, industry stalwarts like Nike ($NKE) have struggled to maintain margins above 45 percent amidst aggressive discounting and inventory glut.
The technical mechanism behind this margin expansion is the aggressive pivot toward Direct-to-Consumer (DTC) channels. DTC net sales grew 37.5 percent on a constant currency basis, now accounting for nearly 40 percent of total revenue. By bypassing traditional wholesale middle-men, On is capturing the full premium price point of its high end running and tennis lines. This strategy is insulated by a strict full price selling policy, avoiding the brand dilution currently plaguing the mass market footwear space.
Regional Dominance and the APAC Surge
Geographic diversification has transitioned from a goal to a reality. The Asia Pacific (APAC) region delivered its fourth consecutive quarter of triple digit constant currency growth, posting a 109.2 percent increase. Sales in APAC reached CHF 144.9 million, driven largely by high demand in China and Japan where the brand has successfully positioned itself as a status symbol for a younger, affluent demographic. In the Americas, growth remained resilient at 21 percent, supported by new retail hubs in Palo Alto and the expansion of the apparel category.
Apparel is no longer a peripheral business for the Swiss firm. Category sales jumped 86.9 percent in Q3, crossing the 1 million unit threshold in a single quarter for the first time. The success of the LightSpray technology and high profile marketing collaborations, including the partnership with Zendaya, have effectively bridged the gap between performance athletics and high fashion. This expansion into apparel is critical because it increases the average basket value and deepens brand loyalty beyond the replacement cycle of a running shoe.
Competitive Pressure and the 2026 Road Map
The updated guidance issued today signals that management sees no immediate slowdown. On Holding raised its full year 2025 net sales growth forecast to 34 percent on a constant currency basis, up from the previous floor of 31 percent. This implies reported net sales of approximately CHF 2.98 billion for the fiscal year. Adjusted EBITDA margins are now expected to land above 18 percent, providing the company with significant capital to reinvest in its global network of premium brand hubs.
This performance stands in stark contrast to the broader industry. According to SEC filings from major athletic competitors, the footwear sector has been characterized by high inventory levels and a reliance on promotional activity to move stock. While Nike is reportedly planning a sub $100 price point pivot to regain mass market share, On is moving in the opposite direction. By maintaining a high entry price, On is protecting its brand equity and avoiding the commodity trap that has historically eroded the margins of apparel giants.
Risk factors do remain on the horizon. Management noted during the earnings call that foreign exchange volatility and shifting trade policies could impact the cost of goods sold in 2026. However, the current balance sheet is fortress like, with cash and cash equivalents increasing 4.1 percent to CHF 961.8 million. This liquidity provides a buffer against macroeconomic headwinds and allows for continued aggressive investment in R&D, such as the circular economy initiatives that have become a hallmark of the Swiss Alps based brand.
Operational Efficiencies and Strategic Execution
The logistical turnaround in late 2025 has been a quiet hero in this earnings beat. The company successfully navigated global supply chain disruptions by diversifying its manufacturing footprint beyond traditional hubs. This agility allowed for the record apparel sales and the rapid rollout of the CloudTec footwear lines. Furthermore, the adjusted EBITDA of CHF 179.9 million (up 49.8 percent year over year) confirms that the company is scaling efficiently. It is no longer just a growth story, it is a profitability story.
Investors should look toward the next specific milestone in early 2026. The company is currently pacing ahead of its three year plan to double net sales from 2023 levels. The critical data point to watch will be the Q4 2025 holiday sales performance, specifically whether the apparel category can maintain its 80 percent plus growth rate without the help of the Zendaya campaign’s initial launch momentum. If these growth levels persist, the 2026 revenue target of CHF 4.44 billion may be revised upward as early as the next fiscal update.
