On Holding: Underestimated Brand with Explosive Growth Potential in a Fragmenting Athletic Wear Market

The athletic wear industry is undergoing a seismic shift. While global giants like Nike grapple with margin pressures and a prolonged recovery, niche players such as On Holding AG are defying trends with explosive revenue growth, premium pricing power, and a laser-focused strategy to capture the premium performance segment. For contrarian investors, On represents a compelling case study in how innovation, operational discipline, and strategic agility can outperform legacy brands in a fragmented market.

Market Fragmentation and Contrarian Opportunities

The global athletic wear market is projected to reach $677.26 billion by 2030, growing at a 9.0% CAGR from 2025, driven by athleisure demand, sustainability trends, and technological advancements in performance materials. However, this growth is unevenly distributed. While North America remains a growth engine (projected to hit $48.63 billion by 2033), regions like Asia-Pacific and Western Europe face slowing momentum due to inflation and supply chain disruptions according to UBS analysis. Meanwhile, the rise of fast-fashion sportswear and counterfeit products has intensified competition, forcing brands to innovate or risk obsolescence.

In this environment, On Holding AG has emerged as a standout. Unlike traditional sportswear giants, On's focus on premium running shoes and lifestyle apparel, combined with a direct-to-consumer (DTC) strategy, has allowed it to capture a loyal customer base willing to pay a premium for innovation.

On's Financial and Strategic Strengths

On's Q3 2025 results underscore its momentum. The company reported CHF 794.4 million in net sales, a 24.9% year-over-year increase, with constant currency growth hitting 34.5% . This outpaces Nike's recent performance, which saw a 10% revenue decline in fiscal 2025, including a 12% drop in Q4 according to S&P Global data.

. On's gross profit margin also improved to 65.7% in Q3 2025, up from 60.6% in 2024, reflecting its premium pricing strategy and operational efficiencies .

The company's geographic expansion is equally impressive. In the Asia-Pacific region, On's sales surged 94.2% year-over-year, driven by strong DTC performance and a growing appetite for high-quality running gear in markets like China and Japan . This contrasts sharply with Nike's struggles in Greater China, where revenue fell 17% in late 2025 amid shifting consumer preferences and trade policy headwinds .

Strategically, On has leveraged product innovation to differentiate itself. Launches like the Cloud 6 and Cloudsurfer 2 have reinforced its reputation for cutting-edge cushioning technology, while its DTC model ensures tight control over brand messaging and customer experience. The company has also signaled plans to establish local production in China, a move that could further reduce costs and accelerate market penetration .

Nike's Prolonged Recovery and Neutral Outlook

Nike's challenges are well-documented. Despite a short-term rebound in late 2025-spurred by a high-profile insider purchase and improved wholesale sales-the company's long-term outlook remains uncertain. Analysts have downgraded Nike's revenue projections, with S&P Global forecasting a 3% decline in fiscal 2026 . The "Win Now" restructuring initiative, while aimed at streamlining operations, has led to short-term pain, including a 86% drop in Q4 net income and a 14% decline in DTC revenues according to S&P Global data.

Brand awareness, once Nike's greatest asset, is no longer a shield. UBS data reveals that while Nike holds 91% global aided awareness, its recent financial struggles highlight the gap between brand recognition and profitability . Meanwhile, On's 15% aided awareness-though lower-has been growing rapidly, supported by high-profile sponsorships in global sporting events and a focus on niche markets .

Analyst sentiment on Nike is mixed. While 26 analysts have assigned a "Buy" rating in the past month, with an average target price of $77.18, concerns persist about margin recovery and China's performance . In contrast, On's raised full-year guidance and consistent margin expansion have positioned it as a high-conviction play for investors seeking growth in a fragmented sector.

Contrarian Investment Case: Why On?

For investors, On's appeal lies in its ability to combine premium pricing, operational efficiency, and strategic agility. Unlike Nike, which is burdened by legacy infrastructure and a sprawling product portfolio, On has maintained a laser focus on its core running and lifestyle categories. This has allowed it to allocate resources to R&D and DTC expansion, areas where Nike has lagged .

Moreover, On's brand-building efforts are paying off. While Nike relies on its historical dominance, On is winning through innovation and a direct connection to consumers. Its 34% constant currency sales growth in 2025 -versus Nike's 10% decline-demonstrates the power of a niche, premium strategy in a market increasingly fragmented by fast-fashion competitors.

Conclusion

The athletic wear industry is at a crossroads. Legacy brands like Nike are struggling to adapt to a landscape defined by sustainability demands, digital disruption, and shifting consumer priorities. In this environment, On Holding AG stands out as a contrarian gem: a company that has mastered the art of premium innovation, DTC execution, and geographic expansion. While Nike's brand equity remains formidable, its recent financial and strategic missteps create an opening for agile players like On to redefine market dynamics. For investors with a long-term horizon, On's explosive growth trajectory and disciplined approach make it a compelling bet in a sector ripe for disruption.