On Holding AG Delivers Record Results, Tempers Growth

On Holding Ag Class A ((ONON)) has held its Q4 earnings call. Read on for the main highlights of the call.

On Holding AG’s latest earnings call struck an upbeat tone, as management highlighted record revenue above CHF 3.0 billion, industry‑leading margins and strong cash generation. Executives acknowledged some near‑term headwinds from tariffs, FX and higher costs, but framed them as manageable within a strategy focused on premium pricing, innovation and disciplined, profitable scaling.

Record Revenue Momentum From a Higher Base

On passed the CHF 3.0 billion net sales mark for the first time in 2025, delivering about 30% reported growth and roughly 35.6% at constant currency. Management stressed that this performance effectively raises the implied 2023–2026 constant‑currency CAGR to at least 30.5%, underscoring sustained demand even as the company grows from a much larger base.

Q4 Delivers Strong Finish to the Year

Fourth‑quarter net sales reached CHF 743.8 million, up 22.6% year on year reported and 30.6% at constant currency, capping a strong year. Direct‑to‑consumer net sales in Q4 were CHF 360.6 million, growing 21.7% reported and 30% at constant currency, reinforcing the brand’s traction with consumers and higher‑margin channels.

Margins Hit Record Levels as Profitability Scales

Full‑year gross margin climbed to a record 62.8%, while Q4 gross margin reached 63.9%, up 180 basis points versus last year. Adjusted EBITDA margin for 2025 landed at 18.8%, and management is already signaling confidence with a 2026 adjusted EBITDA target range of 18.5% to 19% despite heavier growth investments.

Cash Engine Powers a Fortified Balance Sheet

Operating cash flow in 2025 was CHF 359.5 million, reflecting healthy underlying unit economics and tight working‑capital control. Year‑end cash exceeded CHF 1.0 billion, marking the strongest cash position in the company’s history and giving On ample firepower to invest in innovation, retail expansion and supply chain.

LightSpray and Foam Innovations Redefine Performance

On expanded its R&D team to more than 400 experts and showcased the Cloudsurfer 3, which is projected to be 15% lighter, 20% softer and deliver 15% more energy in push‑offs. Its LightSpray process cuts around 200 assembly steps to one, reduces CO2 by roughly 75%, enables a 170‑gram elite shoe and has already scaled about 30 times at the Busan facility while winning major races.

Apparel and Accessories Gain Traction Beyond Footwear

Apparel net sales surged about 75.5% at constant currency in 2025, with management also referencing a 76% growth figure, while accessories grew 135.1% at constant currency. Together, apparel and accessories now account for roughly 7% of total net sales and 15% of retail net sales, adding new growth legs even if the business remains footwear‑centric.

D2C and Retail Expansion Deepen Brand Control

The global direct‑to‑consumer mix rose to 41.8%, up 110 basis points, highlighting a steady shift toward higher‑margin, brand‑owned channels. On opened 18 net new retail stores to end the year with 67 locations worldwide, with store formats about 40% larger and delivering roughly 20% higher productivity than the previous estate.

Asia Pacific Emerges as a Growth Powerhouse

Asia Pacific net sales in Q4 reached CHF 126.5 million, up 70.8% reported and 85.1% at constant currency, making the region a standout performer. For the full year, APAC crossed CHF 1.0 billion in sales, fueled by strong momentum in China, including a top‑five ranking on a major online platform for premium footwear and more than double typical in‑store traffic during key holidays.

Disciplined Unit Economics and Investment Spending

Year‑end inventory stood at CHF 419.8 million, with net working capital improved to 18.9% of net sales, indicating leaner operations and reduced balance‑sheet risk. Capital expenditures in Q4 were CHF 28.6 million, or 3.8% of net sales, reflecting focused spending on retail build‑outs, innovation capabilities and supply‑chain infrastructure.

Upgraded 2026 Ambitions Signal Confidence

For 2026, On now expects at least 23% net sales growth at constant currency, implying reported sales of at least CHF 3.44 billion at current FX rates. The company is targeting a gross margin of at least 63% and an adjusted EBITDA margin between 18.5% and 19%, supported by faster D2C growth, an accelerating apparel business and continued premium pricing.

Growth to Slow, but Strategy Turns More Selective

Management acknowledged that 2026 growth will decelerate meaningfully from 2025’s roughly 35.6% constant‑currency pace, with a slowdown of about 12 to 13 percentage points. They framed this as a deliberate shift toward more selective growth from a higher base, prioritizing full‑price execution, brand equity and balanced profitability over chasing volume.

Tariffs and FX Cast a Shadow on Otherwise Bright Outlook

Executives flagged higher U.S. import tariffs as a notable external pressure, with guidance based on prior assumptions and potential outcomes still uncertain. Persistent FX headwinds also weigh on reported figures and can distort comparisons, highlighting that On’s underlying operational strength is not fully reflected in headline reported numbers.

Higher SG&A Reflects Investment, But Adds Pressure

Selling, general and administrative expenses excluding share‑based compensation rose to 50.9% of net sales in Q4, about 40 basis points higher year on year. Management attributed this to strategic investments in retail expansion and brand building, which should support future growth but represent a near‑term drag on profitability.

Apparel’s Small Base Limits Near‑Term Diversification

Despite rapid growth, apparel and accessories together still contribute only about 7% of total net sales, leaving On heavily dependent on footwear. That concentration keeps the company tied to the performance running and lifestyle shoe cycle, even as management positions apparel to grow meaningfully faster than the core business.

Currency Effects Blur the Inventory Picture

Management noted that the reported value of inventory is dampened by negative currency translation, even though underlying product volumes grew faster. This disconnect could complicate near‑term comparisons of inventory levels and margins, as reported data may understate the true scale of stock held to support growth.

Premium Pricing Strategy Remains Central Risk and Edge

On’s ability to maintain full‑price, premium positioning is a cornerstone of its record margins and strong brand perception, especially in D2C. However, the model is vulnerable if consumer demand softens or promotional intensity rises, making disciplined assortment management and demand forecasting critical to sustaining current profitability.

Guidance Underscores Confidence Despite Macro Headwinds

The company’s 2026 guidance calls for at least 23% constant‑currency net sales growth, gross margin of at least 63% and adjusted EBITDA margin of 18.5% to 19%, all framed against today’s tariff and FX backdrop. Management expects D2C to outgrow wholesale, apparel to outpace the overall business and growth to skew slightly stronger in the first half of the year.

On’s earnings call painted the picture of a high‑growth brand maturing into a scaled, cash‑generative player without sacrificing innovation or pricing power. While growth is set to normalize and external risks from tariffs, FX and consumer sentiment remain, the combination of record margins, robust cash, expanding categories and geographic breadth suggests the story still has meaningful runway for investors.