On Holding (ONON) Q4 2025: D2C Share Climbs to 41.8% as Premium Strategy Drives Global Expansion
On Holding’s Q4 capped a year of outperformance, with premium positioning and direct-to-consumer (D2C, direct sales to customers via own stores and site) expansion fueling both top-line and margin gains. The company’s relentless innovation, multi-category growth, and global retail rollout are compounding brand heat, with operational discipline and a robust cash position setting the stage for further acceleration in 2026. Management’s guidance signals confidence in sustainable premium growth and margin upside, as On transitions from breakout challenger to global sportswear contender.
Summary
- Premium Brand Momentum: Direct-to-consumer and apparel growth are reshaping the business mix and deepening consumer engagement.
- Innovation-Led Expansion: Proprietary technology and product launches are driving both category and regional outperformance.
- 2026 Outlook Raised: Management targets higher growth and margin, signaling conviction in the durability of demand and strategic execution.
Performance Analysis
On Holding delivered record results in Q4 2025, with net sales growth materially ahead of guidance and gross margin reaching a new quarterly high. The company’s global net sales acceleration was broad-based, with the Americas, EMEA (Europe, Middle East, Africa), and Asia-Pacific all posting double-digit growth at constant currency. D2C net sales rose sharply, now accounting for 41.8% of global revenue, up 110 basis points year-over-year, reflecting the brand’s growing direct connection with consumers and higher-margin channel mix.
Apparel and accessories continued to outpace footwear, with apparel sales up 38.3% reported and 46% constant currency in Q4, and now representing a growing share of both new customer acquisition and overall sales. Retail productivity increased by approximately 20% as new flagship stores outperformed expectations, and the company ended the year with a global footprint of 67 company-operated stores. Operational discipline was evident, as SG&A growth remained controlled and capital expenditure focused on retail and innovation infrastructure. Operating cash flow reached a record high, propelling the cash position above 1 billion Swiss francs.
- Channel Shift Drives Margin: D2C and retail expansion are structurally improving profitability and reducing reliance on wholesale partners.
- Category Diversification: Apparel and accessories now contribute 7% of total net sales, up 190 basis points year-over-year, with over 60% flowing through high-margin D2C channels.
- Regional Balance: Growth is no longer concentrated in the Americas, as EMEA and Asia-Pacific both deliver outperformance and broaden the global base.
On’s premium strategy is translating into both revenue acceleration and margin expansion, with growth self-funded by operational efficiency and disciplined capital allocation. The company’s strong inventory position and robust order book further support confidence in continued momentum into 2026.
Executive Commentary
"Our premium growth strategy is working and our global momentum is accelerating. And our foundation for the future is broader and stronger than ever."
David Allerman, Executive Co-Chairman & Co-Founder
"Our premium positioning generates high gross margins, which we partially reinvest into product innovation, brand experience, and our culture and our team, which in turn fuels future growth and even greater profitability."
Martin Hoffman, Chief Executive Officer
Strategic Positioning
1. Relentless Innovation as Brand Anchor
On’s R&D investments are translating into proprietary technologies and manufacturing breakthroughs, such as the LightSpray process and advanced foam engineering. The upcoming CloudSurface 3 and CloudMonster 3 Hyper are positioned to reset performance benchmarks, while the scaling of LightSpray capacity in South Korea (30-fold increase) enables democratization of elite innovations. This innovation engine is now a core differentiator, driving both consumer demand and channel partner enthusiasm.
2. Premiumization and Cultural Relevance
The brand’s cultural cachet is expanding through high-profile collaborations (e.g., Loewe, Zendaya) and sustained pricing power at the top end, with drops like the $750 Cloud Solo validating premium positioning. Physical retail stores are becoming experiential brand hubs, with new flagships rapidly joining the top-performing cohort and apparel-forward concepts driving conversion and basket size, especially among younger consumers.
3. Multi-Category Expansion Fuels Growth
Apparel growth (up 76% constant currency for the year) is transforming On into a multi-category sportswear house, with performance tennis and women’s studio/training lines gaining traction. Apparel is now a key entry point for new customers, growing its share of new customer acquisition from 6% to 10% year-over-year, and driving repeat engagement in D2C channels.
4. Global Reach and Channel Discipline
On’s expansion is balanced across geographies, with EMEA and Asia-Pacific now meaningful contributors alongside the Americas. The disciplined approach to wholesale expansion, with 40-50% penetration in key accounts and a focus on premium presentation, is designed to sustain brand equity while D2C outpaces wholesale growth. Retail network productivity and selective store openings are compounding overall profitability.
5. Digital and Operational Excellence
Investments in AI-driven customer service and supply chain automation are enhancing both the consumer experience and operational efficiency, freeing up resources for brand and product reinvestment. Capital allocation remains targeted, with a focus on scalable infrastructure and innovation, and a strong cash position enabling flexibility for future growth bets.
Key Considerations
On Holding’s Q4 results mark a transition from breakout growth to sustained premium leadership in global sportswear. The company’s strategic focus on innovation, premium experience, and direct consumer connection is reshaping both its business model and its competitive positioning. Investors should track the following:
Key Considerations:
- Channel Mix Evolution: D2C and retail expansion are lifting margins and reducing reliance on wholesale, but require continued investment in brand and operational infrastructure.
- Apparel and Multi-Category Growth: Apparel’s share of revenue and customer acquisition is rising, but success will hinge on maintaining performance credibility and cultural relevance as the category scales.
- Innovation Commercialization: The ability to scale LightSpray and other proprietary technologies beyond elite athletes to mass-market runners is a critical lever for future differentiation and margin improvement.
- Global Awareness and Penetration: With brand awareness at 30%, On still has significant untapped opportunity, but must balance rapid expansion with premium positioning and disciplined channel management.
Risks
Currency volatility, especially with a Swiss franc-heavy cost base, remains a persistent headwind, though management has demonstrated ability to offset this via pricing and operational levers. Execution risk around rapid retail and category expansion, as well as potential dilution of premium brand equity if growth outpaces consumer experience, are key watchpoints. Tariff regime changes and evolving global trade dynamics could impact margin guidance, though management notes potential upside if recent tariff reductions hold.
Forward Outlook
For Q1 2026, On expects:
- Continued double-digit growth across all regions, with D2C outpacing wholesale
- Strong gross margin, benefiting from premium mix and operational efficiencies
For full-year 2026, management raised guidance:
- Net sales growth of at least 23% at constant currency, on a higher base
- Gross margin of at least 63%, despite tariff headwinds
- Adjusted EBITDA margin of 18.5% to 19%, above prior targets
Management highlighted several factors that support guidance:
- Robust product pipeline and innovation launches (CloudSurface 3, CloudMonster 3 Hyper)
- Strong order book and partner confidence across channels and regions
Takeaways
On Holding’s Q4 demonstrates the compounding effect of premium positioning, innovation, and D2C expansion as the company scales globally.
- Channel and Category Mix Shift: D2C and apparel are lifting both margins and customer engagement, validating the premium strategy and setting a higher base for future growth.
- Operational Discipline and Cash Generation: Controlled SG&A and targeted capital allocation are enabling self-funded growth, with a record cash position providing flexibility for continued investment.
- Future Watchpoints: Investors should monitor scaling of LightSpray technology, apparel’s ability to drive repeat engagement, and the balance between rapid expansion and brand equity preservation as On pursues global leadership.
Conclusion
On Holding exits 2025 with accelerating momentum, a proven premium model, and a robust innovation pipeline. The company’s discipline in channel, category, and operational execution positions it to capture outsized share in the evolving global sportswear market, with 2026 guidance reflecting management’s conviction in sustainable, profitable growth.
Industry Read-Through
On’s performance signals a clear shift in the sportswear sector toward premiumization, direct consumer connection, and multi-category expansion. The success of proprietary manufacturing (LightSpray) and high-profile cultural collaborations underscores the importance of innovation and brand relevance in driving both growth and margin. Legacy players reliant on wholesale or undifferentiated product lines face mounting pressure, while brands able to marry technology, cultural cachet, and operational excellence are best positioned for share gains in the next cycle. Investors should watch for similar D2C and apparel-driven strategies across the sector, as well as the scaling of new manufacturing technologies as a margin lever.