On Becoming a Juggernaut: Why Q3 Earnings Show a Brand Lapping the Competition

On Running: Brand Lapping the Competition

In the cutthroat world of sportswear, you’re either running or you’re being run over. For the past few years, On Holding AG(ONON) has been the one setting a blistering pace. Its Q3 2025 earnings call didn’t just show a company in good shape; it revealed a brand hitting a new gear, leaving struggling giants like Nike and even higher-growth brands like Deckers’ Hoka in its dust.

With blockbuster sales, exploding profitability, and a premium strategy that is working to perfection, On is proving it’s not just a pandemic-era fad. It’s a global juggernaut that’s just getting started.

The question becomes, can they keep this pace of growth up or will they start to trail off much like Deckers has in recent quarters.

🚀 Firing on All Cylinders: What’s Going Right

To say Q3 was good for On is an understatement. It was a victory lap. The company posted record net sales approaching CHF 800 million, a staggering 34.5% jump in constant currency(24.9% net sales growth post currency adjustments). But the real story is that this growth wasn’t just big; it showed improving profitability as well.

On delivered a record gross profit margin of 65.7% and a record adjusted EBITDA margin of 22.6%. In an environment where rivals are using discounts to clear inventory, On is selling more products at full price, and its margins are expanding.

Here’s a breakdown of the brand’s biggest wins:

• Asia is Exploding: The Asia-Pacific (APAC) region is on fire. On reported its fourth consecutive quarter of triple-digit constant currency growth in the region. APAC now accounts for nearly 20% of all sales, with Greater China, South Korea, and Southeast Asia all growing over 100%. New flagship stores in Tokyo’s Ginza and Bangkok are smashing opening-day sales records, proving On’s Swiss-engineered aesthetic has massive global appeal. I get why, the shoes look nice, are comfortable and last a decent amount of time; at least that’s been my experience with them and because of that, I’ve been an On wearer for the last few years.
• Apparel is the Next Frontier: On is proving it’s far more than a shoe company. Its apparel business grew an astonishing 100.2% in constant currency. The company sold over 1 million apparel units in a single quarter for the first time, and executives noted it’s on a clear path to becoming a double-digit portion of the business. During the Q&A, leadership described apparel as a company within the company, a high-margin, D2C-heavy business that attracts new, younger customers.
• Innovation and Hype: On is winning in both culture and competition. Ten days before the call, Hellen Obiri won the New York City Marathon, shattering a 22-year-old course record while wearing On’s Cloudboom Strike LightSpray shoes. This elite validation of its new LightSpray technology provides a credibility halo that trickles down to its entire running line. Simultaneously, the brand is leveraging cultural icons like Zendaya and music artist Burna Boy to connect with young, fashion-conscious consumers.
• The Premium Strategy is Working: On is disciplined. While competitors are stuck in a promotional cycle, On is raising prices. The company noted that U.S. price increases implemented in July were met with continued strong demand. Its unwavering commitment to full price selling will continue into the holiday season, a move that protects the brand’s premium position and its juicy margins. That’s a good way to do business but it does only work while demand is huge. While not a shoe company, Lululemon was considered a premium brand selling at full price for a long while until demand started to fall off due to competition and other factors and sales became a bit more common.

📉 The Problems as Small as They May be

It was genuinely difficult to find anything super bad in this report. The data and call was overwhelmingly positive. But if you look hard enough, you can find the headwinds the company is navigating.

First, foreign exchange (FX) is a major headache. The company’s reported net sales growth was only 24.9%, a good deal below the constant currency number. The strong Swiss Franc is essentially eating into the reported revenue and profits. This isn’t a demand problem or a business execution problem, but it is a financial one that can obscure just how fast the company could be growing in a more normal currency market and may be an issue going forward as well if the Franc remains strong against other currencies.

Second, that high 65.7% gross margin isn’t the new normal. CEO and CFO Martin Hoffmann was careful to point out that this number included temporary and one-off factors. These included a 200 basis point onetime adjustment from releasing prior cost accruals(lower than expected freight costs and more), a temporary benefit from the lag between U.S. price hikes and new tariffs, and a 100 basis point benefit from FX. The underlying margin is still incredibly strong and ahead of targets, but 65.7% isn’t sustainable. Still, the company raised their full-year 2025 guidance on gross margin from 60.5%-61% up to 62.5%.

Finally, like all global brands, On is facing U.S. tariffs. The good news? Management seems completely unfazed, stating they can fully digest these costs and will still fly past their long-term profit targets. After all, they just raised prices and demand seems unaffected.

👟 Stealing Everyone’s Lunch: On vs. The World

On’s explosive growth isn’t happening in a vacuum. It’s coming at the direct expense of its rivals.

Nike, the undisputed king, is suddenly looking vulnerable. The giant is struggling with slowing innovation and a muddled DTC strategy. On is doing exactly what Nike built its empire on: creating pinnacle performance products that athletes actually win in (like the NYC Marathon ) and then seamlessly crossing over into high-fashion collaborations (like with LOEWE) and celebrity partnerships (like with Zendaya). There’s a reason Nike’s sales were down 10% in fiscal year 25 and are expected to be in the low single digits this fiscal year and it’s not just because of NKE’s muddled strategy but also because of various competitors eating into their market share. 

Perhaps a closer comparison is Deckers, the parent company of Hoka. For years, Hoka was the growth story in footwear. But, that growth is slowing and normalizing. Just as Deckers’ growth is starting to mature, On is seemingly accelerating. They raised their expected revenue guidance for full-year 2025 by 34% on a constant-currency basis, up from 31%. With that, they expect their growth rate between 2023-2026 to be 30% up from a prior guidance of 26%, all on a constant currency basis. That currency problem does come up quite often in their earnings release as their net sales growth will be a bit lower than that.

One thing to note is that Decker’s was in a similar position just a few years ago although it grew at a slightly slower clip. Between 2021 and 2025, the company doubled sales to $5B growing in the 15-24% range every year. The stock was rewarded rising from $40 to a high of $210. However, the recent results showed a big de-acceleration with an estimate of 7.7% growth this fiscal year. The stock was punished and fell from $210 to $80 in a matter of months and now sits at a $12.3B market cap which is lower than On’s $13.5 after today’s post-earnings bump.

This just shows that sportswear can be a fickle beast.

Right now, however, On is taking market share with a clear, multi-pronged attack:

1. Broadening its reach from just running to tennis, outdoor, and movement.
2. Expanding apparel as a serious, stand-alone business.
3. Aggressively growing in Asia, a market where its rivals are more mature.

🔮 What’s Next and What’s the Cost?

So, what’s next for On? More of everything.

The company’s 2026 product pipeline is locked, with updates to key franchises like the Cloudrunner and Cloudmonster coming in Q1. Its game-changing LightSpray foam, currently only in elite race shoes, will come to everyday runners with the LightSpray Cloudmonster Hyper in 2026. The company will also continue its disciplined retail expansion, adding 20 to 25 new stores per year globally.

This brings us to the final question: valuation.

On’s stock trades at a growth multiple that was previously given to other companies like Deckers or Lululemon(which also fell quickly after growth slowed).  This has been a point of contention for investors. As I mentioned above, On is currently trading at a higher market cap than Deckers.

The Revenue and cash flows? Deckers’ 26 estimates(fiscal year ending 3/31/26) are $5.3B in Revenue and $860M in free cash flow. On which is definitely growing faster sits at $3.6B in revenue and $360M in free cash flow(and that’s for a fiscal year ending 12/31/26).

Yes, the growth is faster but it will still take On a few years to catch up to where Deckers is today. That certainly worries me especially as these trends can sometimes be extinguished pretty quickly. See Deckers, Lulu, UAA, VFC, etc. When the growth is there, these stocks get rewarded with high multiples(Deckers was trading at a 35x forward multiple less than 12 months ago, now it’s 13x) but when it shows any sign of slowing, the drop is massive.

So what makes this worth an investment?

This earnings call was On’s answer. The company’s argument is that you aren’t paying for today; you’re paying for a 30%+ growth trajectory that Deckers no longer has. You’re paying for the 100% growth in apparel and the triple-digit growth in Asia. You’re paying for a brand that is just getting started, one that is still in the early innings of taking global market share. You’re paying for something you believe can grow at 20%+ for multiple years and bypass Deckers in revenue and free cash flow pretty quickly in order for the investment to make sense.

Analysts on the call tried to poke holes in this, asking if the new 2026 guidance was too aggressive, if the U.S. market was slowing, and if the Q4 guidance was too conservative. Management confidently parried every question.

On’s executive team isn’t just building a company; they’re building a premium global sportswear brand. After a quarter like this, they’re one giant leap closer to that goal, and their rich valuation(32x 26 earnings estimates) might just be the price of entry for a brand that is, quite literally, running away from the pack. Given these earnings, they might have a long runway ahead. I’m not an investor but if it drops again into the 30s, I may just become one.

Disclosure: This not investment advice. Please talk to a qualified financial professional before making any investment decisions.