On Reports Results for the Second Quarter and Six-Month Period Ended June 30, 2025

On Holding AG (NYSE: ONON) reported strong Q2 2025 financial results, with net sales surging 32.0% year-over-year to CHF 749.2 million (38.2% constant currency), propelled by a 47.2% increase in its Direct-to-Consumer channel. The company achieved significant profitability improvements, including a gross profit margin of 61.5% and an adjusted EBITDA margin of 18.2%. Despite these operational gains, reported net income declined to a loss of CHF 40.9 million, primarily due to a substantial foreign exchange loss. Consequently, On raised its full-year 2025 guidance, now expecting at least 31% constant currency net sales growth and improved profitability margins, reflecting confidence in its strategic execution and momentum.

Analysis

On Holding AG (NYSE: ONON) reported a quarter of exceptional operational performance, underscored by a 32.0% year-over-year increase in net sales to CHF 749.2 million, or 38.2% on a constant currency basis. This top-line momentum was driven by the strategically important Direct-to-Consumer (DTC) channel, which grew 47.2% and now constitutes a record 41.1% of total sales. Geographically, growth was explosive in the Asia-Pacific region at 101.3%, while EMEA also posted a strong 42.9% increase. Profitability at the operational level showed significant leverage, with gross margin expanding to 61.5% from 59.9% a year prior and adjusted EBITDA margin increasing 220 basis points to 18.2%. However, this strong operational picture was completely overshadowed on an IFRS basis by a substantial foreign exchange loss of CHF 139.9 million, which drove a net loss of CHF 40.9 million, a stark reversal from the CHF 30.8 million net income in the prior-year period. Despite this bottom-line volatility, management expressed strong confidence by raising its full-year 2025 guidance, now forecasting at least 31% constant currency net sales growth and improved gross and adjusted EBITDA margins.

Key Decisions for Investors

• Investors should focus on core operational metrics like constant currency revenue growth and adjusted EBITDA, which demonstrate significant underlying business strength and momentum, rather than being solely deterred by the IFRS net loss.
• The severe impact of foreign exchange volatility, which turned a strong operating result into a significant net loss, highlights a key risk factor; therefore, scrutinizing the company's currency hedging strategies and tolerance for bottom-line volatility is critical.
• Given the raised full-year guidance and hyper-growth in the DTC channel and Asia-Pacific, investors might consider the current results as validation of the long-term growth story, but should weigh this against the financial risks exposed by currency fluctuations and a significant year-over-year decline in cash flow from operations.