Revenue Misses Expectations: On Holding AG Faces Trade-off Between Growth Speed and High Gross Profit

On the evening of August 11, Swiss sports brand On Holding AG released its financial results for the second quarter of 2026, ended June 30.

The company reported net sales of CHF 850 million, a year-on-year increase of 13.5%; excluding exchange rate effects, growth was 21.6%. This figure fell short of the average analyst expectation of CHF 878 million. Adjusted earnings per share were CHF 0.35, slightly higher than the market expectation of CHF 0.34.

Following the earnings release, On Holding AG's US-listed shares dropped by as much as 22% during intraday trading.

The revenue miss was primarily driven by pressure from the wholesale channel. In the second quarter, On Holding AG's wholesale revenue amounted to CHF 462 million, a year-on-year increase of 4.8%, or 12.7% on a constant currency basis, marking a significant slowdown from the 25.1% constant currency growth rate in the first quarter.

During the earnings call, On Holding AG stated that terminal sales for certain everyday running shoe series were weak, while promotions increased in some markets. Consequently, the company reduced shipments to distributors to control channel inventory and maintain full-price sales.

For On Holding AG, this approach helps mitigate the risk of subsequent discounting but also directly suppressed wholesale revenue in the short term. Wholesale currently accounts for 54.3% of the company's revenue, so changes in this channel's growth rate have a significant impact on overall performance.

In contrast, the direct-to-consumer (DTC) channel continued to grow.

In the second quarter, DTC revenue reached CHF 388 million, a year-on-year increase of 26%, or 34.3% on a constant currency basis, raising its share of total revenue to 45.7%.

Both online business and company-owned stores saw growth. The increased proportion of DTC sales not only enhanced the company's control over product pricing and inventory but also became a key driver for gross profit margin improvement.

On Holding AG's gross profit margin reached 65.4% in the second quarter, an increase of 3.9 percentage points year-on-year. Adjusted EBITDA was CHF 168 million, a year-on-year increase of 23.5%, with the corresponding margin rising from 18.2% to 19.8%.

In addition to the rise in DTC share, improved freight efficiency and exchange rate fluctuations also positively impacted the gross profit margin. The company stated that these results already incorporate the costs associated with rising US import tariffs, but do not yet include any potential tariff refunds.

The Asia-Pacific region, which includes the Chinese market, remains On Holding AG's fastest-growing region. Second-quarter revenue in the Asia-Pacific region was CHF 171 million, a year-on-year increase of 43.1%, or 54.7% on a constant currency basis, accounting for approximately 20% of global revenue.

During the same period, revenue in the Americas was CHF 452 million, representing a 13% growth on a constant currency basis; revenue in Europe, the Middle East, and Africa was CHF 228 million, representing a 20.5% growth on a constant currency basis.

During the earnings call, the company stated that Japan, South Korea, and Greater China jointly drove growth in the Asia-Pacific region. Performance across all channels in Greater China exceeded company expectations, with particularly strong growth in Tmall operations. The company also opened its first store in Macau in the second quarter. Relevant information indicates that the Chinese market continues to provide incremental growth, but current disclosure metrics are insufficient to determine its specific scale or the extent to which growth relies on new stores.

Product mix is also shifting. Footwear revenue was CHF 782 million, a year-on-year increase of 10.9%, still accounting for approximately 92% of total revenue. Apparel revenue grew by 47.7% to CHF 54.2 million, and accessories revenue grew by 88.3% to CHF 14.5 million. While apparel and accessories posted high growth rates, their base remains small, and On Holding AG remains highly dependent on footwear at this stage.

Following the earnings release, the company adjusted its 2026 constant currency revenue growth guidance from "at least 23%" to the "low 20s percent range."

Based on current exchange rates, full-year revenue is expected to be between CHF 3.47 billion and CHF 3.56 billion; the previous revenue expectation was at least CHF 3.51 billion. Meanwhile, the full-year gross profit margin expectation was raised from at least 64.5% to at least 65%, while the adjusted EBITDA margin expectation remained at 19.5% to 20%.

On Holding AG is not facing a comprehensive contraction in demand, but rather a divergence across different markets and channels.

The Asia-Pacific region, DTC channel, and apparel business continue to maintain rapid growth, and the Chinese market is continuing to expand. However, the slowing growth in the Americas and the wholesale channel, which account for a larger proportion of revenue, has weakened overall performance. Increasing the DTC share and reducing promotions can support profit margins, but after lowering sales expectations, On Holding AG still needs to prove that its high gross profit model can coexist with scale growth in the long term.