On Holding did almost everything the market says it wants. The Swiss running brand grew constant-currency net sales 21.6%, expanded gross margin by 390 basis points to an industry-leading 65.4%, swung from a loss to a net profit of CHF 105.0 million, and raised its full-year margin guidance. The stock then fell about 20% to a two-year low, its steepest single-day drop since the 2021 IPO.
That gap between the results and the reaction is the whole story, and it is not really about a revenue miss. It is about what a premium growth multiple actually prices.
The Numbers, Since They Were Mostly Good
On’s second-quarter results came in at CHF 850.3 million of net sales, up 13.5% as reported and 21.6% on a constant-currency basis. Gross profit rose 20.6% to CHF 555.7 million. Adjusted EBITDA margin improved to 19.8% from 18.2%.
The margin number deserves emphasis because of what sits underneath it. On expanded gross margin to 65.4% from 61.5% while fully absorbing higher US import tariffs and while excluding any tariff refunds from the figure. Very few consumer brands in 2026 can say they ate a tariff increase and still added nearly four points of gross margin.
The Line That Cost Them
The damage came from guidance. On now expects full-year constant-currency net sales growth in the “low-20% range,” which replaces a prior framing of at least 23%.
That looks like a small revision. For a stock valued as a compounding premium-growth story, it is not. A multiple built on twenty-plus percent growth compounding for years reprices violently on any signal that the top line is decelerating, because the terminal value in the model moves far more than the current-year number does. The company simultaneously raised gross margin guidance to at least 65.0% and held adjusted EBITDA margin at 19.5% to 20.0%, and none of that mattered. Margin is not what this multiple was buying.
Management’s own framing made the mismatch plain.
“Delivering 21.6% constant currency growth alongside an industry-leading 65.4% gross margin shows the structural benefits of leading with innovation.” Frank Sluis, chief financial officer
Both halves of that sentence are true. Only one of them was in the price.
The Americas Problem Is Not a Brand Problem
Look at the regional split and the picture sharpens considerably. On constant currency, Asia-Pacific grew 54.7% and EMEA grew 20.5%. The Americas, On’s largest and most established market, grew 13.0%.
The weakness was concentrated in wholesale sell-out of the everyday running franchises, in what management described as a highly promotional US market. That phrasing matters. It is not a story about consumers rejecting the brand. It is a story about American retail shelves being flooded with discounted athletic product, which is the same pressure that has been showing up across the sector, including in Nike’s direct-sales decline and tariff dynamics and in American Eagle’s comparable-sales trouble.
Direct-to-consumer tells the other half. DTC net sales rose 34.3% on a constant-currency basis to CHF 388.4 million, a record 45.7% of total revenue. Wholesale grew 12.7%. Consumers who go straight to On are still showing up in force and paying full price. The channel that is struggling is the one On controls least.
Choosing Price Over Volume
Here is the structural why, and it is a deliberate decision rather than an accident.
On told investors the full-year outlook reflects deliberate management of wholesale to protect pricing. Translated out of investor-relations language: the company is choosing to sell less product through discount-heavy wholesale channels rather than let its price architecture get dragged down by a promotional US market. That is why margin went up while Americas growth went sideways. The two facts are the same decision viewed from opposite ends.
It is a defensible choice, arguably the right one. Premium positioning is the entire asset. Once a brand teaches American consumers to wait for 30% off, winning them back costs years and a lot of gross margin, which is roughly the lesson the last decade taught everyone watching the sector. Co-chief executive David Allemann framed it as proving that a brand can reach global scale without compromising its premium positioning.
But it has a cost, and Wednesday was the invoice. Deliberately throttling your largest market’s volume to defend price means printing exactly the kind of deceleration that a growth multiple cannot absorb. On is not the same story we covered when the founders returned and the Nike and Lululemon comparisons were doing the work. It is becoming a margin story wearing a growth valuation, and those two things have to reconcile eventually. This week they started to.
What to Watch
The question for the next two quarters is whether Americas wholesale stabilizes or keeps sliding while DTC carries the company.
If DTC keeps compounding above 30% and pushes past half of revenue, On becomes a genuinely different business: higher margin, more control, less dependent on the wholesale shelf, and worth a re-rating on its own terms rather than the one it just lost. If Americas wholesale keeps deteriorating and DTC growth cools with it, then the low-20s guidance was the optimistic version.
Either way, the brand is fine. On sold more shoes at better prices in a promotional market and made real money doing it. What broke on Wednesday was a valuation, not a company, and it is worth keeping those two things separate when the next quarter lands.