Is On Holding AG (ONON) Poised for a 2026 Earnings-Driven Breakout?

The question of whether On Holding AG (ONON) can deliver a 2026 earnings-driven breakout hinges on a delicate balance of surging revenue growth, evolving earnings estimates, and a valuation that straddles premium pricing and sector norms. As the Swiss athletic-wear brand navigates a maturing market, its financial trajectory offers both compelling optimism and cautionary signals for investors.

Revenue Growth: A Engine of Momentum

On's financial performance in 2025 has been nothing short of extraordinary. For Q4 2024, the company reported net sales of CHF 606.6 million, reflecting a 35.7% year-over-year increase on a reported basis and 40.6% on a constant currency basis. This momentum carried into Q2 2025, where net sales surged to CHF 749.2 million, with gross profit margins expanding to 61.5%. The direct-to-consumer (DTC) channel, now accounting for 48.8% of total sales, has been a critical driver, underscoring the company's ability to leverage digital and retail strategies to capture premium pricing.

Full-year 2025 guidance, raised following a strong Q3 performance, now anticipates constant currency growth of 34%, with net sales projected at CHF 2.98 billion. This trajectory, supported by structural efficiencies and a favorable cost environment, positions On to outpace broader sector trends. For context, the footwear and apparel sector is expected to grow at a more modest 6% annual rate through 2029, highlighting On's exceptional growth relative to peers.

Earnings Estimates: Revisions and Realities

While revenue growth is robust, earnings estimates for 2026 reveal a more nuanced picture. Analysts project an earnings per share (EPS) of $1.72 for 2026, representing a 79.3% year-over-year increase. However, this figure has seen a 3.9% downward revision in the past month, signaling potential challenges in translating top-line growth into bottom-line profitability.

The Q3 2025 earnings report, which showed an EPS of $0.54 (exceeding estimates by 169%) and net income of CHF 118.9 million (up 289.8% YoY), provides a glimpse of On's profitability potential. Yet, Q2 2025 results-a loss per share of $0.11-reveal operational volatility. This mixed performance underscores the risks of scaling rapidly while maintaining margin discipline in a competitive market.

Valuation Dynamics: Premium Pricing vs. Sector Benchmarks

On's valuation metrics tell a story of high expectations. As of October 2025, the stock trades at a P/E ratio of 48.30, significantly above the US luxury industry average of 18.9x and the peer average of 25.8x. Its PEG ratio of 0.75, however, aligns with the sector average according to Investing.com, suggesting the stock is fairly valued relative to its growth prospects. This contrasts with peers like Skechers (P/E: 29.8, PEG: 1.32) according to KoalaGains and Wolverine World Wide (forward P/E: 12.86) according to Yahoo Finance, which trade at discounts despite lower growth forecasts.

The company's gross profit margin of 65.7%-well above Nike's 41.9% and Adidas' 51.4% according to DCF Modeling-justifies some of this premium, reflecting On's pricing power and brand equity. Yet, the Zacks "F" Value Style Score and a forward P/E of 28.61 indicate skepticism about whether the valuation is fully supported by fundamentals. This tension between growth and valuation is a key risk for investors.

Sector Positioning and Strategic Tailwinds

On's breakout potential is further influenced by its strategic positioning. The company's expansion into the apparel segment-driven by a 86.9% year-over-year sales increase in Q3 2025-and geographic diversification, particularly in the Asia-Pacific region, provide new revenue streams. Meanwhile, its DTC model, which now accounts for nearly half of sales, enhances margin stability and customer data insights.

However, sector headwinds loom. The footwear and apparel industry faces softening demand, with competition intensifying in running shoes and sportswear. On's ability to sustain its 34% constant currency growth rate in 2025 according to press releases while navigating these challenges will be critical.

Conclusion: A Calculated Bet on Growth

On Holding AG's 2026 earnings-driven breakout is plausible but contingent on executing its strategic priorities without compromising margins. The company's revenue growth and operational efficiencies are compelling, but the valuation premium demands consistent profitability and innovation. For investors, the key question is whether On can maintain its outperformance against a backdrop of sector-wide moderation. If the company can deliver on its full-year 2025 guidance and translate that into sustained earnings growth, the stock's current valuation may prove justified. However, any missteps in cost management or market share retention could amplify risks in an already volatile sector.