On Holding AG delivered a large earnings beat that was driven mainly by margins rather than sales. The company reported $0.66 per share against a $0.50 consensus and a $0.52 Earnings Whisper, a 26.9% surprise, with earnings up 17.9% year over year. Revenue of $1.147 billion rose 15.5% and topped the $1.14 billion consensus by just 0.6%. That is the central tension. On is extracting more profit from every franc of sales, but sales growth has now slowed for a third straight quarter, and the full-year revenue guide was only reaffirmed.

The beat needs to be read with the U.S. tariff refunds in mind. Reported gross margin hit a record 72.6%, but that includes CHF 52.6 million of U.S. tariff refunds. Excluding them, gross margin was 66.9%, still a record and up from 65.4% in Q2 and 64.2% in Q1. Management says that after also adjusting for a one-time freight benefit in the prior-year quarter, gross margin rose about 320 basis points. That improvement is real, and it supports On's argument that holding full price works even in a promotional market.

Further down the income statement, the gains are thinner. Adjusted EBITDA margin was 27.6% as reported but 21.9% excluding refunds. Management called 21.9% a record and up 130 basis points on an underlying basis. However, it sits below last year's reported 22.6%, because SG&A deleveraged by 270 basis points. That spending went to football, golf, technology, AI and stores. GAAP net income rose 36.9% to CHF 162.8 million even though the tax line swung from a small benefit to a CHF 48.9 million expense, helped by a CHF 14.3 million foreign-exchange gain.

The call made the deceleration hard to ignore:

• **Overall growth:** constant-currency growth slowed from 26.4% in Q1 to 21.6% in Q2 to 17.8% in Q3.
• **DTC:** growth eased to 24.8% from 34.3%. Management acknowledged DTC landed below plan, citing softer online traffic and store-opening delays. DTC's share of sales fell to 42.2% from 45.7% in Q2.
• **Wholesale:** growth of 13.2% was flattered by Americas holiday deliveries pulled forward from Q4, which creates a built-in headwind for Q4 wholesale.
• **APAC:** growth cooled to 31.9% from 54.7%, and management is steering it toward a mid-to-high-20s range.
• **Apparel:** growth eased to 38%, down from roughly 56% in each of the first two quarters.

Management still expects Q4 growth to accelerate, led by DTC. Investors will want proof, given that DTC just missed internal plans and wholesale borrowed from Q4.

The product pipeline is where the call kept a credible growth story intact:

• **Cloudsurfer 3:** the first shoe in what On calls its biggest innovation cycle sold through at more than four times the Cloudsurfer 2's launch-week rate in run specialty. Broad rollout begins in January 2027.
• **Americas wholesale:** sell-out improved versus Q2, and partner inventory is described as healthy.
• **New sports:** the football announcement was the brand's most-seen moment to date, and golf launches in the first half of 2027.
• **LightSpray capacity:** a third LightSpray factory in Vietnam more than doubles capacity for a product that is still capacity-constrained.

The timing works against near-term growth, though. Management does not expect further acceleration in Q1 2027 and says the full superfoam effect is weighted to the back half of 2027. The Investor Day plan calls for high-teens annual growth from 2027 to 2029, front-loaded and tapering. Two other details warrant monitoring. Inventory rose about 30% in CHF terms on 16% volume growth. Trade receivables are up 41.7% since December.

Guidance followed the same split between margins and sales. Gross margin guidance excluding refunds was raised for the third straight time, to about 66% from at least 65%. The comparable adjusted EBITDA guide stayed at 19.5% to 20.0%, unchanged since Q1, because reinvestment is absorbing the gross-margin upside. The low-20s constant-currency sales outlook was reaffirmed after being cut from at least 23% in Q2.

The market setup is more complicated than the surprise implies. Investor sentiment remained negative and weakened modestly, from -0.21 to -0.29, so expectations were cautious going in. Price action told a more constructive story. Shares fell to a 52-week low of $26.37 in mid-September, then rallied 42% to $37.53 heading into the report. That left the stock up 18.8% since the open after the August report, 3.1% above its 200-day moving average, and about 4% below the inter-earnings high set just days earlier. With AVWAP readings positive and other trend signals largely neutral, the stock entered the print having already recovered substantially rather than sitting at depressed levels.

The bottom line is that On proved its premium pricing model can produce record margins, and the Cloudsurfer 3 launch gives the product story fresh credibility. But the earnings beat was flattered by tariff refunds, revenue barely topped estimates, and growth has slowed every quarter this year. Upside from the innovation cycle is mostly a second-half 2027 story. Until DTC delivers the promised Q4 reacceleration despite the wholesale pull-forward, bears have legitimate ammunition on the top line.