The Gap 2026 Q3 Earnings Revenue Growth but Net Income Declines 13.9%

The Gap (GAP) reported fiscal 2026 Q3 earnings on Nov 20, 2025, with revenue growth outpacing expectations but net income contraction. The company raised full-year guidance, signaling confidence in its strategic initiatives despite athleisure brand Athleta’s ongoing challenges.

Revenue

The Gap’s total revenue rose 3.0% year-over-year to $3.94 billion in 2026 Q3. Old Navy Global contributed the largest share at $2.25 billion, followed by Gap Global at $951 million and Banana Republic Global at $464 million. Athleta Global revenue declined to $257 million, while other segments accounted for $17 million. The performance reflects strong comp growth in Old Navy and Gap, offset by Athleta’s ongoing reset.

Earnings/Net Income

Earnings per share (EPS) fell 13.7% to $0.63, and net income dropped 13.9% to $236 million compared to 2025 Q3. The decline underscores margin pressures despite revenue gains, as cost management and tariff impacts weigh on profitability.

Price Action

Gap’s stock price edged down 2.62% on the latest trading day and 5.06% for the week, though it gained 3.92% month-to-date.

Post-Earnings Price Action Review

The strategy of buying Gap shares on its earnings announcement and holding for 30 days yielded moderate returns but underperformed the market. A 3-year annualized return of 12.5% lagged behind the S&P 500’s 15.8%, highlighting volatility and missed broader market gains.

CEO Commentary

CEO Richard Dickson emphasized progress in brand revitalization and operational discipline, citing Old Navy’s 6% comp growth and Gap’s 8th consecutive quarter of 7 comp growth. Strategic investments in beauty, designer collaborations, and digital innovation were highlighted, alongside optimism for holiday performance and long-term transformation.

Guidance

Gap Inc. raised full-year net sales growth to the high end of its 1.7%–2% range, with operating margin guidance lifted to 7.2% from 6.7%–7%. The company expects 50 bps of gross margin expansion despite 100–110 bps of tariff impact, plans to reinvest $150 million in cost savings into beauty/accessories, and maintains $2.5 billion in cash balances.

Additional News

The Gap leveraged marketing-driven demand to exceed Wall Street expectations for Q3 comparable sales, driven by Old Navy and Banana Republic collaborations with Disney, Netflix’s Stranger Things, and Universal’s Wicked. Initiatives like “Better in Denim” with K-pop group Katseye and campaigns targeting Gen Z bolstered brand relevance. The company also announced plans to launch an affordable beauty line this fall, diversifying beyond apparel. Despite these efforts, Athleta’s 11% sales decline continued, prompting a focus on high-demand activewear.