The Gap 2026 Q2 Earnings Net Income Grows 4.9%

The Gap reported fiscal 2026 Q2 earnings on Aug 28, 2025, with revenue remaining largely flat and EPS beating expectations. The company reaffirmed its sales guidance for 2025 and provided updated operating margin expectations, reflecting anticipated tariff impacts.

Revenue
The company's total revenue stood at $3.73 billion, slightly higher than the prior year’s $3.72 billion. Old Navy continued to be the largest contributor, generating $2.15 billion in revenue. The Gap brand reported $772 million in sales, while Banana Republic and Athleta brought in $475 million and $300 million, respectively. Smaller segments accounted for the remaining $28 million. Despite modest top-line growth, the performance was driven by strong contributions from its core brands.

Earnings/Net Income
The Gap’s earnings per share increased 5.5% to $0.58, with net income rising 4.9% to $216 million. The results surpassed market expectations, demonstrating the company’s improved profitability.

Price Action
In the wake of the earnings report, the stock experienced mixed short-term movements. While it dropped 3.30% in the latest trading day, the stock saw a 2.26% gain over the prior week and a strong 9.16% rise month-to-date.

Post-Earnings Price Action Review
A strategy of buying GAP following a positive earnings beat and holding for 30 days yielded a 135.80% return, far outpacing the 79.85% benchmark return. The approach delivered a Sharpe ratio of 0.94 and showed no maximum drawdown, indicating strong risk-adjusted performance and positive momentum for investors.

CEO Commentary
CEO Richard Dickson highlighted the company’s Q2 outperformance, with comp sales up 1% and EPS growth of 6%. He noted the continued success of Old Navy, Gap, and Banana Republic, while acknowledging challenges at Athleta, which is undergoing a strategic reset under new leadership. Dickson emphasized the company’s commitment to brand reinvigoration and long-term value creation.

Guidance
The company reiterated full-year 2025 net sales growth of 1% to 2% and updated its operating margin guidance to a range of 6.7% to 7%, reflecting the impact of tariffs. Q3 net sales are expected to increase by 1.5% to 2.5%, with capital expenditures projected between $500 million and $550 million.

Additional News
On Aug 29, 2025, the stock fell approximately 1.3% in after-hours trading to $21.40 per share. While the company’s second-quarter revenue of $3.73 billion was slightly below the $3.74 billion expected by the market, its net income of $220 million exceeded forecasts, with EPS of $0.57. Management noted ongoing pressure on the Gap brand but highlighted stable performance from Banana Republic and Athleta. They also emphasized the anticipated impact of tariffs on the company’s full-year gross margin and operating margin, with plans to mitigate these challenges over time.