Premium shoes, premium expectations
- On grew 2025 net sales 30.0% to CHF 3.014 billion, helped by demand across regions, products, and channels.
- Management now expects 2026 gross margin to approach 65% and adjusted EBITDA margin of 19.5% to 20%.
- Direct-to-consumer sales reached 41.8% of 2025 net sales, which gives On more control and usually better margins.
- Apparel is small but growing fast, with 2025 net sales up 68.2% to CHF 169.9 million.
- The main worry is that currency swings, U.S. tariffs, and a rich stock price can dull a strong brand story.
A hot brand with a high bar
The bull case is simple: On has rare brand heat. Customers are accepting higher prices, and management said average selling price rose from about USD 145 at IPO to more than USD 170. That gives the company more room to protect margins while still growing fast.
Management has raised its 2023 to 2026 revenue CAGR target to at least 30.5%. It also lifted 2026 adjusted EBITDA margin guidance to 19.5% to 20% and said gross margin should approach 65%. Those are high targets for a sportswear company, and they show how much the mix shift toward direct sales and premium products matters.
The bear case is not about weak products. It is about the gap between brand strength and reported profit. In 2025, gross profit margin rose to 62.8%, but net income still fell 15.9% to CHF 203.7 million because the Swiss franc was strong. U.S. tariffs may also hit harder as inventory flows through the income statement.
The next big tests are clear. Investors will watch whether LightSpray can scale 30-fold, whether the September 2026 Investor Day gives believable 2030 targets, and whether new products like Cloudsurfer 3 with Surreal foam keep the brand fresh.
Premium price, tighter control
On makes money by selling premium shoes, apparel, and accessories. It sells through wholesale partners like sporting goods and running stores, and through its own websites and stores. In 2025, wholesale was 58.2% of net sales and direct-to-consumer was 41.8%.
Direct sales matter because On owns more of the customer relationship. It can show the full brand, gather more data, and keep more of the selling price. That is one reason management expects gross margin to approach 65% in 2026.
The company is also changing how some shoes are made. LightSpray uses automated robotic spray technology to make shoe uppers with fewer parts, faster production near demand, and 75% fewer CO2 emissions. The business model shift is from more operating cost to more capital spending, which can help margins if factories run well.
The model breaks if demand cools, if marketing spend has to rise too much to keep the brand popular, or if tariffs and currency swings eat the benefit from higher prices.
Shoes lead, apparel recruits
Performance footwear
Shoes are the core business, with 2025 net sales of CHF 2.804 billion. Key franchises include Cloud, Cloudmonster, Cloudsurfer, and all-day styles such as Cloudtilt.
Apparel
Apparel is becoming a real growth pillar. In 2025, apparel net sales rose 68.2% to CHF 169.9 million, and management said apparel drove 10% of new customer acquisition.
Accessories
Accessories are still small but growing quickly. 2025 net sales rose 124.1% to CHF 39.6 million.
Tennis and Roger franchise
The Roger franchise gives On a bridge from running into tennis and premium lifestyle wear. It helps the brand reach shoppers beyond core runners.
LightSpray shoes
LightSpray is On's advanced manufacturing bet. Products like Cloudmonster 3 LightSpray could improve speed, waste, and margin if On can scale production without quality issues.
Cloudsurfer 3 and Surreal foam
Cloudsurfer 3 is expected in the second half of 2026 with Surreal foam and CloudTec. The launch will show whether On can keep turning innovation into full-price demand.
Americas funds the push
The mix below uses fiscal 2025 geographic net sales from the 2025 Form 20-F. APAC was 17.0% of full-year 2025 sales, but management said it exceeded 20% of the overall business for the first time in Q1 2026.
What could trip On
Currency hides the real profit trend
High impact · High oddsOn reports in Swiss francs, but sells around the world. In 2025, gross margin improved to 62.8%, yet net income fell 15.9% to CHF 203.7 million. A strong Swiss franc can make good operating progress look weaker at the bottom line.
U.S. tariffs outpace price increases
High impact · Medium oddsManagement said 2026 gross margin guidance of at least 63% already includes a 20% U.S. tariff rate. If tariffs rise beyond that, On may need more price increases or may accept lower margins. If final tariff levels settle near 10% to 15%, guidance could have upside.
Premium demand cools
High impact · Medium oddsThe brand depends on shoppers paying premium prices. Recent U.S. price increases met no clear consumer resistance, which is a good sign. But if sell-through slows or discounts rise, the high-growth story changes fast.
LightSpray scaling misses
Medium impact · Medium oddsLightSpray could lower waste, speed up production, and support margin expansion. It also changes the cost base toward more capital spending. If the 30-fold capacity ramp has quality, yield, or demand issues, the benefit may take longer than investors expect.
Marketing heat gets expensive
Medium impact · Medium oddsOn still needs to build awareness against much larger sportswear rivals. If the company has to spend much more on athletes, stores, campaigns, and events to keep growth high, profit leverage could fade. This matters more because the stock already carries high expectations.
In one breath
What does On Holding sell?
On sells premium performance footwear, apparel, and accessories. Running shoes are the core, but the company is growing in apparel, tennis, training, outdoor, and lifestyle products.
Why do investors care about On's direct-to-consumer sales?
Direct-to-consumer sales include On's websites and owned stores. They reached 41.8% of 2025 net sales, giving On more control over pricing, brand experience, and customer data.
What is LightSpray?
LightSpray is On's automated robotic spray technology for making shoe uppers. Management says it can use fewer parts, cut CO2 emissions by 75%, and help produce closer to demand.
What is the biggest risk for ONON stock?
The biggest risk is that the business stays strong but the stock price already expects too much. Currency swings, U.S. tariffs, or slower premium demand could make earnings fall short of those expectations.