The Gap 2026 Q3 Earnings Net Income Falls 13.9% Despite Revenue Growth

The Gap (GAP) reported fiscal 2026 Q3 earnings on Nov 20, 2025, with revenue rising 3.0% year-over-year to $3.94 billion, surpassing expectations. The company raised full-year guidance for net sales growth and operating margins, signaling confidence in its strategic initiatives.

Revenue

The Gap’s revenue growth was driven by strong performances across its core brands. Old Navy Global led the charge with $2.25 billion in revenue, while the Gap Global segment contributed $951 million. Banana Republic Global added $464 million, and Athleta Global generated $257 million. Smaller segments, including other initiatives, accounted for $17 million, rounding out the total of $3.94 billion.

Earnings/Net Income

The company’s net income declined to $236 million in 2026 Q3, a 13.9% drop from $274 million in 2025 Q3. Earnings per share (EPS) fell 13.7% to $0.63, reflecting higher operating expenses and margin pressures. The earnings decline underscores challenges in maintaining profitability despite revenue growth.

Price Action

The stock price of The Gap has shown mixed performance post-earnings. During the latest trading day, it edged down 2.62%, while the full trading week saw a 5.06% decline. Month-to-date, the stock has rebounded slightly, climbing 3.92%.

Post-Earnings Price Action Review

Investor sentiment remained cautious following the earnings release, with the stock’s performance reflecting broader market uncertainties. The 5.06% weekly drop aligned with sector-wide declines in consumer discretionary and technology stocks amid skepticism about tech monetization and interest rate expectations. However, the 3.92% month-to-date gain suggests some resilience, particularly as the company’s guidance adjustments and strategic priorities—such as brand repositioning and supply chain optimization—garnered positive attention.

CEO Commentary

Richard Dickson highlighted Q3’s 5% comp sales growth, driven by Old Navy, Gap, and Banana Republic. Strategic priorities included maintaining an 8.5% operating margin and a $2.5 billion cash balance. Athleta’s 11% sales decline remains a focus area, with plans to reposition the brand. Leadership emphasized optimism about holiday sales and collaborations with Disney and Anna Sui to enhance cultural relevance.

Guidance

The company raised full-year 2025 net sales growth to the high end of its previous 1.7–2% range and expects an operating margin of 7.2%. Tariff impacts are estimated at 100–110 bps annually, with mitigation strategies including sourcing and pricing adjustments. Gross margin is projected to see 50–60 bps of underlying expansion, while SG&A will leverage slightly, with $150 million in cost savings reinvested in growth areas like beauty.

Additional News

Recent non-earnings developments include The Gap’s expansion into affordable beauty and personal care, set for a fall 2025 launch. Collaborations with Disney, Netflix’s Stranger Things, and Universal’s Wicked have bolstered brand relevance, particularly among Gen Z. The company also launched campaigns like “Feels Like Gap” and “Get Loose with Troye Sivan” to drive engagement. CEO Richard Dickson reiterated plans to reduce reliance on China, with sourcing from the country expected to fall below 3% by 2025.