In the ever-competitive athletic
footwear and apparel market, investors are constantly on the lookout for
companies that combine strong growth with reasonable value. On Holding (NYSE:
ONON) is one such name that has recently commanded more attention. Its Q2 2025
earnings displayed both accelerating top-line momentum and some pressure on
profitability metrics, making it an intriguing case study. In this post, we
dive into On Holding’s business, analyze its Q2 2025 performance using recently
released data, evaluate its stock valuation, explore future growth potentials,
and assess the key risks to consider.
About On Holding
Founded in 2010 and headquartered in Zurich, Switzerland, On Holding AG (commonly referred to as “On”) is a Swiss-based performance footwear, apparel, and accessories brand. Its mission centers on combining cutting-edge engineering, design, and lifestyle appeal to serve runners, outdoor enthusiasts, and all-day active consumers. On sells through multiple channels: direct-to-consumer (DTC, e-commerce and owned stores), wholesale partners (retailers, distributors), and branded retail footprint.
On Holding went public on the
NYSE in September 2021. Since IPO, it has positioned itself as a premium brand
bridging performance and design, often emphasizing innovation (e.g. its “Cloud”
cushioning technology), sustainability, and marketing partnerships (notably with
Roger Federer).
On Holding Financial
Performance
In Q2 2025, On Holding reported revenue
of $944.3 million, marking a substantial 49.44% increase from $632 million in
the same quarter last year. However, profitability came under pressure as earnings
per share (EPS) declined to –$0.16, compared to $0.10 in Q2 2024, a sharp 260%
decrease. On a trailing twelve-month (TTM) basis, revenue reached $3.42 billion,
up an impressive 53.64% from $2.23 billion a year earlier, while EPS stood at $0.52,
slightly lower than last year’s $0.53, reflecting a modest 1.89% decline.
Encouragingly, free cash flow per share improved to $1.34, a 7.2% increase from
$1.25 in the prior year, underscoring the company’s ability to generate strong
cash returns. On’s profitability ratios remain healthy, with a gross profit
margin of 61%, net profit margin of 5%, and a robust free cash flow margin of
15.61%. Efficiency metrics also reflect solid performance, as return on assets
(ROA) stands at 5.34% and return on equity (ROE) at 10.34%, supported by a
conservative debt-to-equity ratio of 0.36.
Over the past five years, On
Holding has grown its revenue at a 51% CAGR. Net income and free cash flow
turned positive in 2023 and have continued to grow rapidly.
On Holding Fiscal 2025
Financial Forecast
Looking ahead, analysts forecast
2025 revenue of $3.72 billion, a 42.65% increase from $2.61 billion in 2024,
alongside a projected non-GAAP EPS of $0.81, which would represent a 25.39% decline from $1.09 in 2024. Reflecting optimism in On’s growth trajectory,
analysts maintain a Buy rating, with a consensus price target of
$66.36—offering 56.69% potential upside and the highest of $79.86, suggesting
as much as 88.53% upside from current levels.
ONON Stock Price Performance
and Valuation
At the current price of $42.35 per share, On Holding’s stock has delivered a 16.1% gain over the past year, notably outperforming the S&P 500, which declined –15.5% during the same period. However, since its IPO in September 2021, the stock has underperformed the broader index, which has risen 50.9% in that timeframe.
From a valuation
perspective, On trades at a price-to-sales (P/S) ratio of 4.15 on a trailing
twelve-month basis, with a forward P/S of 3.82, a non-GAAP forward
price-to-earnings (P/E) of 53.52, and a price-to-free-cash-flow (P/FCF) ratio
of 31.27.
Based on Fiscal.ai data, if we
look at the valuation since 2024, the forward P/S, forward P/E and P/FCF are
below the average. This show potential undervaluation in On Holding’s stock as
the business still projected to grow fast in the upcoming years.
On Holding Growth Potential
On Holding growth prospect remain
robust, driven by several factors.
- Direct-to-Consumer Channel
Dominance and Market Expansion
On Holding's most significant growth driver in Q2 2025 was its exceptional direct-to-consumer (DTC) performance, with DTC sales surging 47.2% year-over-year to CHF 308.3 million, representing 41.1% of total quarterly sales which is the highest Q2 share in its history. This channel expansion is crucial as it delivers higher margins than wholesale, helping improve the gross profit margin from 59.9% to 61.5%. On's sophisticated multi-channel strategy integrates e-commerce with premium retail store growth, including flagship locations in Paris, London, Milan, Hong Kong, New York, and Los Angeles.
Management plans to increase physical stores from 53 to 100, showing strong confidence in retail expansion, complemented by digital engagement via brand partnerships and celebrity endorsements like Zendaya. This diversification enhances control over customer experience, pricing, and brand narrative, reducing reliance on wholesale partners. - Asia-Pacific Regional Momentum
and Global Market Penetration
On Holding's Asia-Pacific growth in Q2 2025 was remarkable, with sales more than doubling year-over-year, marking a 101.3% increase and reaching CHF 119.2 million, or 110.9% on a constant currency basis. This region is now On's fastest-growing segment, fueled primarily by Greater China’s sales climbing roughly 50% year-over-year. Strategic retail expansions in China, combined with strong e-commerce growth, have enabled On to capture key market share in the largest consumer market globally.
Worldwide, sales in EMEA rose 42.9% to CHF 197.8 million, while Americas sales grew 16.8% to CHF 432.3 million, reflecting broad global demand. CEO Martin Hoffmann highlighted robust Chinese consumer activity with approximately 50% same-store retail growth, plus stronger e-commerce results. This geographic diversification lowers concentration risk and positions On to benefit from Asia’s expanding middle class and growing interest in athletic lifestyles. - Product Innovation and Premium
Brand Positioning
On Holding’s commitment to innovation and premium positioning drives its competitive edge in the athletic footwear market. The company offers nine footwear franchises, each generating over 5% of revenue, showcasing diversification beyond its signature CloudTec technology. Recent launches such as Cloud 6, Cloudsurfer 2, and the Cloudtilt collaboration with luxury brand LOEWE highlight On's blend of performance and style.
Its groundbreaking LightSpray technology revolutionizes manufacturing: a robotic arm creates ultralight one-piece uppers in a single three-minute step, reducing components from 40 to seven and cutting CO2 emissions by 75%. Supported by partnerships with 165+ elite athletes, including Roger Federer, On reinforces performance credibility. This premium pricing strategy sustains gross margins over 60%, outpacing industry averages, while On steadily gains market share from Nike and Adidas, which hold 58% of global share compared to On’s growing 3%.
Risks to Consider
While On Holding growth prospect is
strong, we should be mindful of potential risks.
- Tariff and Trade Risk
A potential tariff increase of 20-25% on products made in Vietnam poses a significant margin risk for On Holding AG. This tariff hike could reduce profitability by 150-200 basis points if the company is unable to fully pass these costs on to customers. However, raising prices to offset tariffs may negatively affect consumer demand, putting pressure on revenue growth and earnings stability in key markets reliant on Vietnamese-made goods. - Foreign Exchange (FX)
Volatility
As a global company with sizable international sales, On Holding AG is exposed to foreign exchange fluctuations that could adversely affect its revenues and profit margins. Changes in currency exchange rates create unpredictability in financial outcomes, impacting both the value of sales booked in different currencies and the cost structure. This exchange rate volatility adds a layer of financial uncertainty, challenging the company's ability to maintain stable earnings growth and profitability. - Intense Competition and Market
Expectations
The athletic footwear and apparel industry is highly competitive, with On Holding AG under pressure to sustain rapid growth, continuous product innovation, and expand its retail presence. Any failure to meet earnings expectations or slower growth than anticipated could negatively impact the company’s stock price and weaken investor confidence, given the intense market rivalry and high expectations for performance in this premium segment.
Conclusion
On Holding’s Q2 2025 results highlight a company with impressive revenue growth, solid cash generation, and strong brand momentum, despite temporary earnings pressures. With expanding direct-to-consumer sales, global market penetration, and product diversification, On is well-positioned for long-term growth. Valuation remains elevated, but analysts see meaningful upside supported by robust fundamentals and favorable forecasts. While risks such as competition and profitability volatility exist, On Holding offers an attractive growth story, making it a compelling buy-and-hold opportunity for investors.
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