Shares in On Holding fell 7.5% on Tuesday to close at $34.70, despite the Swiss running-shoe maker reporting record third-quarter sales. The stock fell as much as 8.1% during the day, its worst single-day drop since August, as investors looked past the headline numbers to a profit figure flattered by a one-time tariff refund.

On reported net sales of 931.4 million Swiss francs for the three months to September, up 17.2% on a year earlier and broadly in line with Wall Street estimates. Adjusted earnings of 0.54 francs a share beat the 0.39 francs analysts had expected, and net income rose 36.9% to 162.8 million francs.

Record margin came with a refund

The headline gross margin reached a record 72.6%, up from 65.7% a year earlier, but the quarter included 52.6 million francs of US tariff refunds. Excluding those refunds, the margin was 66.9%, still an improvement on last year, but the gap between the reported and underlying figures unsettled investors. Adjusted operating profit excluding the refunds was about 204.2 million francs, a margin of 21.9%, against a reported 27.6%.

Direct-to-consumer sales grew 25% to 393.3 million francs, but that was below the 33% growth analysts had expected, while wholesale sales rose 12%. Apparel sales climbed 38.7% to 69.5 million francs. Sales in the Americas, which account for more than half of total revenue, grew 12.4%, continuing a slowdown from growth of more than 30% in the first quarter of 2025.

Outlook kept, not raised

On kept its full-year sales growth outlook in the low-20% range on a constant-currency basis, implying revenue of 3.47 billion to 3.56 billion francs, rather than raising it after the strong quarter. It did lift its underlying full-year gross margin outlook to about 66% from at least 65%, and raised its adjusted operating margin target including refunds to 21.0% to 21.5%.

Analysts remained divided on the outlook. Truist Securities kept a Buy rating with a $40 price target, saying the underlying margin showed pricing power, while William Blair kept a Market Perform rating. Cantor Fitzgerald initiated coverage with an Overweight rating and a $46 target, pointing to apparel as a growth driver. Read the full reports at Barron's and Finimize.

Frequently asked questions

Why did On shares fall after strong results? Investors focused on the quality of the profit beat: the record 72.6% gross margin included 52.6 million Swiss francs of one-time US tariff refunds, and sales guidance was left unchanged.

How much did On sell in the third quarter? Net sales were 931.4 million Swiss francs, up 17.2% year on year, with direct-to-consumer sales up 25% and apparel up 38.7%.

What is On guiding for 2026? Sales growth in the low-20% range on a constant-currency basis, with an underlying gross margin of about 66%.