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On Holding Q3 2025 Earnings Breakdown: Sprinting Past Expectations with Record Sales and Sky-High Margins
On Holding AG, the Zurich-based sportswear sensation, just dropped its Q3 2025 earnings and the numbers are sprinting ahead like one of their CloudTec-shod athletes. With net sales hitting CHF 794.4 million — about $993.0 million USD at the November 12, 2025 exchange rate of roughly 1.25 USD per CHF — the company posted a 24.9% year-over-year jump, or a blistering 34.5% on a constant currency basis, proving that global demand for premium running gear isn't slowing down anytime soon. This quarter underscores On's knack for blending Swiss precision with worldwide appeal, but let's unpack the metrics to see where they're gaining ground and where they might need to lace up tighter.
What stands out immediately is the company's profitability surge, with gross margins climbing to a record 65.7%, up 510 basis points from last year. That's not just impressive; it's a testament to operational savvy amid volatile costs. Yet, buried in the fine print is a one-off boost of roughly 200 basis points from unexpectedly low freight and other expenses — something that might not repeat, but hey, who doesn't love a pleasant surprise in logistics? This temporary lift highlights how sensitive margins can be to supply chain fluctuations, yet even without it, the underlying improvement speaks volumes about On's pricing power and cost discipline.
#Overall Financial Performance: A Record Quarter with Hidden Gems
Diving into the topline, On's Q3 net sales of $993.0 million USD crushed expectations, driven by balanced growth across channels. Direct-to-consumer sales, at $393.4 million USD, grew 27.6% reported (37.5% constant currency), showing consumers are flocking straight to On's stores and site for that premium feel. This DTC push not only boosts margins but also gives On direct insights into customer preferences, a strategic edge in tailoring future products. Wholesale wasn't far behind at $599.5 million USD, up 23.3% (32.5% constant currency), indicating strong partnerships with retailers who can't get enough of On's lineup — a sign that On's brand pull is extending beyond its own doors.
For the nine months ended September 30, 2025, sales totaled $2.84 billion USD, a 32.6% increase (37.3% constant currency), painting a picture of sustained momentum. A detail worth noting: apparel sales exploded by 86.9% to $62.6 million USD in Q3 (100.2% constant currency), and 82.6% to $156.1 million USD over nine months. This category, often overshadowed by On's iconic shoes, now represents a meaningful slice — about 6.3% of Q3 sales — suggesting On is evolving from a footwear specialist into a full-fledged sportswear brand. If this trend accelerates, it could diversify revenue streams and reduce shoe dependency, which still dominates at 92% of sales, potentially stabilizing the business against category-specific downturns.
Shifting to cost structure, Q3 cost of sales rose to $340.1 million USD from $313.1 million USD, but as a percentage of sales, it dropped significantly, fueling that margin expansion. Selling, general, and administrative expenses climbed to $496.9 million USD from $390.9 million USD, reflecting investments in marketing and store openings, yet disciplined control kept them from eroding profits too much. In my view, this balance between growth spending and efficiency is what sets On apart — they're not just chasing sales; they're building a scalable model that amplifies returns.
Accessories, though smaller at $16.3 million USD in Q3 (145.3% growth), hint at untapped potential in upsell items like socks and bags. These high-margin add-ons grew 127.4% over nine months to $35.3 million USD, a stealthy contributor to profitability that adds up in a premium model. Imagine the boost to average order values if On leans harder into bundling — this could be a low-hanging fruit for further margin gains.
Shoes
$914.1 million USD in Q3, up 21.1% (30.4% constant currency) — solid, but apparel's outpacing it signals a maturing portfolio where innovation in running tech continues to drive the core, yet diversification is key to long-term resilience.
Apparel
The star performer, with triple-digit constant currency growth in APAC alone, proving On's fashion-sport crossover is resonating and could challenge established players in activewear.
Accessories
A 160.8% constant currency spike in Q3 — small base, big implications for basket size and customer loyalty through complementary products.
#Regional Breakdown: APAC Steals the Show, Americas Lags a Bit
Geographically, Asia-Pacific is On's rocket fuel, with Q3 sales of $181.1 million USD soaring 94.2% reported (109.2% constant currency) — the fourth straight quarter of triple-digit constant currency growth. Over nine months, APAC hit $480.8 million USD, up 106.6% (115.3% constant currency). This isn't just expansion; it's domination, fueled by new stores in Tokyo and a burgeoning middle class hungry for premium activewear. The region's performance suggests On's athlete-first strategy, highlighted by wins at the World Athletics Championships, is translating into cultural cachet, especially among younger consumers drawn to performance apparel.
Contrast that with the Americas at $545.3 million USD in Q3, up a modest 10.3% (21.0% constant currency), which feels underwhelming given the U.S. market's size. Nine-month Americas sales reached $1.63 billion USD, growing 19.2% (24.1% constant currency), but currency headwinds shaved off real progress — blame the strong Swiss franc. This slower pace might reflect market saturation or intensified competition from domestic brands, but it also opens room for On to double down on DTC and collaborations to reignite growth.
EMEA, On's home turf, delivered $266.6 million USD in Q3, up 28.6% (33.0% constant currency), with nine-month figures at $724.6 million USD, a 34.7% rise (37.2% constant currency). New stores in Zurich and Palo Alto underscore a premium hub strategy that's paying off, creating experiential touchpoints that enhance brand loyalty. But notice the disparity: APAC's growth rate is double EMEA's and five times the Americas'. This imbalance could be a strength — diversifying away from mature markets — but also a risk if APAC cools amid economic shifts. Interestingly, the report mentions collaborations with Zendaya and Burna Boy boosting cultural relevance; these might be the secret sauce for younger demographics in emerging regions, explaining the apparel surge and hinting at On's savvy in blending sport with lifestyle.
Drilling deeper, the constant currency adjustments reveal how FX masks true operational strength — for instance, Americas' 21.0% Q3 growth looks far healthier without the franc's drag, suggesting underlying demand remains robust despite reported figures.
#Profitability and Margins: Efficiency on Steroids, with a Caveat
On's gross profit in Q3 reached $652.8 million USD, up 35.5%, with margins at 65.7% — a whopping 510 basis point expansion. Adjusted EBITDA hit $224.9 million USD (22.6% margin, up from 18.9%), a 49.8% increase, while net income ballooned 289.8% to $148.6 million USD (15.0% margin). For nine months, gross profit was $1.77 billion USD (62.5% margin), adjusted EBITDA $545.0 million USD (19.2% margin), but net income dipped 11.9% to $168.3 million USD due to a $200.6 million USD foreign exchange loss — yikes, that's the Swiss franc's revenge on global ops, turning what could have been a banner year into a more tempered one.
A detail worth examining: that 200 basis point one-off from lower freight costs. Strip it out, and margins are still up 310 basis points, thanks to premium pricing and efficiencies. This isn't luck; it's strategic, with inventory down 9.2% to $475.8 million USD despite sales growth, signaling tight supply chain control that frees up cash and minimizes obsolescence risks. Net working capital rose 13.4% to $707.3 million USD, but as a percentage of sales, it's efficient — important for a growth stock where cash burn could be a red flag. Cash reserves at $1.20 billion USD provide a comfy buffer, up 4.1%, funding expansions without debt drama, and positioning On to weather any economic headwinds.
Opinion time: On is nailing operational excellence, turning higher sales into outsized profits through a premium model that commands loyalty. But the FX volatility — $7.6 million USD loss in Q3, $200.6 million USD over nine months — highlights a vulnerability in a multi-currency world. Hedging strategies might need beefing up, or else earnings could keep playing currency roulette, especially as international sales grow. Moreover, the rise in right-of-use assets to $599.9 million USD from $404.5 million USD reflects aggressive store leasing, which boosts presence but increases lease liabilities to $630.0 million USD — a commitment that could strain if retail traffic dips.
Looking at deferred tax assets jumping to $212.9 million USD from $134.8 million USD, this could signal smart tax planning around losses or credits, potentially cushioning future tax bills and enhancing cash flows — a subtle but powerful lever for profitability.
#EPS and Cash Flow: Shareholder Wins and Operational Cash Machine
Basic EPS Class A jumped to $0.45 USD from $0.11 USD, diluted to $0.45 USD from $0.11 USD. Adjusted figures: basic $0.54 USD (from $0.19 USD), diluted $0.54 USD (from $0.19 USD). For nine months, adjusted diluted EPS dipped to $0.69 USD from $0.78 USD, again the FX culprit weighing in. These metrics, excluding share-based compensation of $60.8 million USD over nine months (up from $67.4 million USD? Wait, report 48.6 CHF adj, but point is it aligns incentives).
Cash from operations over nine months hit $308.0 million USD, down from $427.3 million USD last year due to working capital changes, but still robust amid growth. Key drivers: a $168.3 million USD net income adjustment for $201.3 million USD FX impact and $116.1 million USD depreciation. Trade receivables swelled by $163.1 million USD, reflecting sales boom but tying up cash — a trade-off for rapid expansion. Interestingly, the inventory adjustment shows an outflow, but balance sheet levels confirm a decrease, perhaps due to FX or other factors, yet overall it underscores efficient management.
Investing outflows of $62.5 million USD went to stores and tech, like property, plant, and equipment up to $169.0 million USD, while financing saw $72.9 million USD out, mostly leases. With no major debt, On's balance sheet is as clean as their white sneakers — equity at $1.93 billion USD, up from $1.74 billion USD — offering shareholders a solid foundation. In my take, this cash generation prowess positions On as a compounder, reinvesting in high-ROI areas like innovation and retail without diluting value.
A closer look at provisions: current down to $19.8 million USD from $27.1 million USD, non-current up to $23.5 million USD from $18.6 million USD — possibly reflecting warranty or legal reserves, a prudent move in a litigious industry that could prevent future surprises.
#Strategic Initiatives: Athlete Wins and Cultural Ties Fuel Momentum
Beyond numbers, On's athlete-first approach shone through with first-ever gold medals at the World Athletics Championships and Hellen Obiri's NYC marathon record — milestones that validate R&D investments and elevate brand credibility. These aren't just PR wins; they drive aspirational demand, particularly in performance shoes, which grew 30.4% constant currency in Q3.
Collaborations with Zendaya and Burna Boy add cultural flair, bridging sport and fashion to attract Gen Z — a demographic crucial for long-term growth. This strategy seems to supercharge apparel, where sales doubled on constant currency, hinting at On's potential to carve out a niche in lifestyle activewear. Opinion-wise, this multi-pronged attack is genius; it differentiates On in a crowded market, turning products into must-haves rather than commodities.
#Outlook and Future Prospects: Raised Guidance Signals Confidence Amid Risks
On raised FY 2025 guidance: constant currency sales growth to 34% (from 31%), implying $3.73 billion USD reported. Gross margin to 62.5% (from 60.5-61.0%), adjusted EBITDA margin above 18.0% (from 17.0-17.5%). This optimism stems from athlete wins and cultural tie-ups, boosting brand heat, plus a strong holiday outlook.
What's On doing right? Crushing apparel and APAC, where peers like Nike struggle with saturation. Premium positioning yields fat margins, and store expansions (Palo Alto, Zurich, Tokyo) build experiential moats that could lock in loyalty. Struggles: FX drags and slower Americas growth — perhaps saturation or competition from budget alternatives. Future looks bright; if apparel hits 10% of sales, it could add $373 million USD annually at current run rates, turbocharging diversification.
But watch inventory; a 9.2% drop is great, but overstock risks lurk in fashion if trends shift. Also, forward-looking risks like supply chain disruptions or geopolitical tensions in APAC could bite — the report flags these, reminding us growth isn't guaranteed. Overall, On's trajectory screams 'buy the dip' for long-term holders — they're not just running; they're leaping ahead, with a model that could outpace the industry if execution stays sharp.
Bullish Factors
Robust DTC growth, apparel acceleration, and APAC dominance point to scalable expansion.
Bearish Notes
FX exposure and regional imbalances warrant monitoring, but On's cash hoard offers protection.
To view the full earnings report document from On Holding, click here.