Nike Beats Earnings Expectations but Shares Drop
Nike (NYSE: NKE) reported better-than-expected quarterly results on Tuesday, surpassing both revenue and profit forecasts. However, despite the strong headline numbers, the company’s stock fell sharply, with shares dropping more than 14% in intraday trading on Wednesday.
Weak China Performance Weighs on Results
A major concern for investors remains Nike’s continued weakness in the Greater China region. Sales in this key market, which accounts for roughly 15% of total revenue, declined 7% year-over-year to $1.62 billion. This marks the seventh consecutive quarter of declining sales in China.
The company is also facing increasing competition from brands such as Anta, Li Ning, On, and Deckers’ Hoka, further impacting its market share in the region.
Revenue and Profit Beat Expectations
For its fiscal third quarter of 2026, Nike reported earnings of 35 cents per share on revenue of $11.28 billion. This exceeded analyst expectations of 30 cents per share and $11.23 billion in revenue.
Despite the earnings beat, underlying challenges in key markets and profitability continue to pressure investor sentiment.
Gross Margin Declines on Tariff Pressures
Nike’s gross margin fell by 130 basis points to 40.2%, primarily due to tariff-related costs in North America. These pressures continue to impact profitability and remain a key risk factor for the company moving forward.
Turnaround Plan Underway but Progress Is Gradual
Investors are closely watching CEO Elliott Hill’s turnaround strategy, introduced after his return at the end of 2024. The plan focuses on strengthening wholesale partnerships and accelerating product innovation, moving away from a heavy direct-to-consumer approach.
According to management, progress is being made, but at varying speeds across different segments of the business.
Analysts Highlight Long-Term Opportunity
Barclays analyst Adrienne Yih noted that the reset in China is progressing slowly and could take up to four quarters before returning to growth.
Despite short-term volatility, some analysts see long-term value. Jefferies highlighted improving fundamentals, including stronger inventory management and growing momentum in North America, where revenue increased 3% year-over-year to $5.03 billion.
They argue that current stock levels present an attractive entry point for investors willing to wait for a longer-term recovery.
Mixed Analyst Outlook on Nike Stock
While some analysts remain optimistic, others are more cautious. Raymond James described the results as disappointing and expects revenue to continue declining at a low-single-digit pace through 2026 due to ongoing headwinds in China.
So far, Nike stock has struggled, falling 15.8% in 2025 and declining 17.1% year-to-date, reflecting market concerns over the pace of its turnaround.
