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Nike Beats Q2 Views, But These Factors Drag Shares Lower
HARRISON MILLER Updated 07:20 AM ET 12/19/2025
https://www.investors.com/news/nike-earnings-q2-2026-turnaround-efforts-nke-stock-dow-jones/?src=A00220

Nike (NKE) topped estimates for Q2 2026 results late Thursday, but lower sales from China continue to dent performance. The Dow Jones sports giant has posted a multiyear decline amid rising competition, supply chain concerns and tariff uncertainties. NKE stock tumbled early Friday.

Nike reported a 32% decline in earnings to 53 cents per share, but well above FactSet views for 37 cents per share adjusted.

Revenue rose 1% to $12.43 billion, while analysts expected a 1% decline.

Earnings for the Dow Jones retailer have fallen by double digits over the past five quarters, averaging about a 42% decline over that time frame.

Nike Brand revenues climbed 1% to $12.1 billion, compared to Wall Street expectations for flat sales at $11.9 billion.

Footwear sales were flat at $7.66 billion, slightly ahead of views for $7.57 billion. Apparel sales climbed 4% to $3.9 billion. Analysts polled by FactSet expected $3.82 billion.

Nike Direct revenues fell 8% to $4.6 billion, driven by a 14% decrease in Nike Brand Digital and a 3% decline in Nike-owned stores. Wholesale revenues increased 8% to $7.5 billion.

Converse revenue tumbled 30%.

China Sales Fall, Promotional Activity Rises
North America revenues increased 9%, while sales in Europe, Middle East & Africa climbed 3%. Sales in Greater China continue to weaken, falling 17% from last year and accelerating from a 10% decline in Q1.

Gross margin shrank by 300 basis points to 40.6%, due to higher tariffs in North America, Nike said. Selling and administrative expenses rose 1% to $4 billion, driven by higher promotional spending.

Nike reported that demand creation expenses increased 13% to $1.3 billion, due to higher brand marketing and sports marketing expenses.

"Nike is in the middle innings of our comeback," CEO Elliott Hill said in the release. "We are making progress in the areas we prioritized first and remain confident in the actions we're taking to drive the long-term growth and profitability of our brands.

Matthew Friend, chief financial officer, said the quarter demonstrated portfolio resilience as the company managed headwinds from repositioning its business in a dynamic operating environment.

"We are making the shifts required to position our portfolio for a full recovery and driving real-time decisions in service of the long-term health of our brands."

Outlook
Nike expects Q3 revenues to decline in the low-single-digits, with modest growth in North America. However, the retailer expects that performance in Greater China and Converse will be similar to Q2.

Friend during the earnings call said that gross margins are expected to be down 157 to 225 basis points. Gross margins would be positive in Q3, excluding the 315-basis point impact of higher gross product costs related to new tariffs.

Selling, general and administrative spending is expected to rise in the low single-digits due to higher demand creation and investments in sports offense.

"We are making the investments required to position our full portfolio for a recovery and making decisions in service of the long-term health of our brands.

Turnaround Efforts, Positive Signs
Nike in 2024 brought on company veteran Hill to return the brand to growth and help reverse a four-year downtrend. The footwear giant faces growing competition from the likes of Hoka, which is owned by Deckers Outdoor (DECK), and On Holding (ONON). Nike's revenue fell for five straight quarters leading up to its Q1 beat in September.

Meanwhile, tariffs are biting into results. The company also wants to reduce its reliance on China, which makes up about 15% of its supply chain. Nike aims to cut that down to the high single digits by next summer.

But amid all the challenges, analysts see positive signs.

Wells Fargo in November upgraded Nike to Overweight from Equal Weight, noting that visibility into Nike's sales and margins is "finally improving," The Fly reported.

The firm noted that Nike has been in a negative estimate revision cycle for three years, but that should reverse over the next 6 to 9 months. Wells said it sees "material green shoots" in Nikes innovation and believes that current business headwinds are set to dissipate. The firm said Nike has the potential to exit fiscal 2026 with around 3% to 4% revenue growth while gross margins expand by 200 basis points.

Wells Fargo lifted its price target on Nike to 75 from 60.

Nike Stock Performance

NKE stock fell more than 10% early Friday on results. The stock ticked higher on Thursday.

Shares have climbed off November lows, but are caught between their 50-day and 200-day moving averages after briefly rebounding above those levels last week.

Nike stock has retreated almost 12% in 2025, continuing a downtrend that stretches back to December 2021.

NKE is the fourth worst-performer in the Dow Jones Industrial Average so far this year.