December 19, 2025 — NIKE, Inc. (NYSE: NKE) is at the center of market attention today after its fiscal second-quarter results beat headline estimates but still triggered a sharp selloff in extended trading. The reason is a familiar (and stubborn) mix: China is still sliding, margins are still compressing, and the turnaround is still expensive. [1]
Investors got a quarter that looked like this: “better than feared” on revenue and EPS, “worse than hoped” on profitability and visibility—especially heading into the holiday quarter. [2]
What’s moving Nike stock today
Nike shares fell about 10% after the earnings release, even though the company topped consensus expectations on revenue and earnings per share. Reuters reported the move as investors focused on another gross margin decline, ongoing turnaround discounting, and a sixth straight quarterly drop in China sales. [3]
That reaction matters beyond Nike. In Europe, Nike’s margin update rippled into the sector: Adidas and Puma shares slipped as investors digested what Nike’s margin pressure could imply for the broader sportswear landscape. [4]
Nike earnings recap: the key numbers from fiscal Q2 2026
Nike reported fiscal Q2 2026 results for the quarter ended November 30, 2025:
- Revenue:$12.4 billion (up 1% reported; flat currency-neutral) [5]
- Diluted EPS:$0.53 [6]
- Net income:$0.8 billion, down 32% year over year [7]
- Gross margin:40.6%, down 300 basis points [8]
Under the hood, the channel mix continues to shift:
- Wholesale revenue:$7.5 billion, up 8% [9]
- NIKE Direct revenue:$4.6 billion, down 8% (down 9% currency-neutral) [10]
- Nike attributed the NIKE Direct decline to a 14% drop in NIKE Brand Digital and a 3% decline in NIKE-owned stores. [11]
One more flashing yellow light: Converse revenue fell to $300 million (down 30%), reflecting broad declines across territories. [12]
Nike also highlighted increased brand investment. “Demand creation expense” (which includes marketing) was $1.3 billion, up 13% year over year. [13]
Regional performance: North America up, China down hard
Nike’s geographic split makes the story easier to read: strength in North America and continued weakness in Greater China.
From Nike’s divisional revenue table (three months ended November 30, 2025):
- North America:$5.633B, up 9% [14]
- Europe, Middle East & Africa (EMEA):$3.392B, up 3% (with currency-neutral decline shown in the table) [15]
- Greater China:$1.423B, down 17% [16]
- Asia Pacific & Latin America (APLA):$1.667B, down 4% [17]
The takeaway isn’t subtle: Nike is currently leaning on North America and wholesale to keep the top line steady while China and digital drag on profit quality. [18]
Why investors sold Nike stock despite an earnings beat
Nike beat estimates—Reuters cited $12.43B revenue vs. $12.22B expected, and $0.53 EPS vs. $0.38 expected—but the market reaction was dominated by profitability and forward outlook. [19]
Three forces are doing most of the damage:
1) Gross margin is falling, and Nike says it will fall again
Nike’s gross margin dropped 300 basis points in the quarter, and management expects another 175–225 basis points of margin decline in the current quarter. [20]
That guidance is a big deal because it implies the company is still in the costly phase of its reset—clearing older inventory, adjusting the product mix, and selling more through channels that can pressure price realization. [21]
2) Tariffs are a direct hit to costs
Reuters reported Nike CFO Matthew Friend reiterated that U.S. tariffs on Southeast Asian nations where Nike manufactures much of its product are expected to cost about $1.5 billion this year. [22]
Nike’s own release points to the same mechanism, saying gross margin pressure was primarily due to higher tariffs in North America. [23]
3) China is still not stabilizing
Nike’s Greater China revenue fell 17%, and Reuters emphasized this was the sixth straight quarterly decline—the kind of streak that makes even patient investors start tapping their foot loudly. [24]
Morningstar analyst David Swartz described the continued poor China results as a concern, while Zacks’ David Bartosiak characterized the turnaround as “costing real money,” per Reuters. [25]
China: the pivotal market Nike now admits needs a reset
Reuters’ separate analysis published today framed China as Nike’s most pressing challenge: CEO Elliott Hill said it’s “clear” Nike needs to reset its approach in China, which Reuters notes represents roughly 15% of Nike revenue. [26]
The problems are both macro and brand-specific:
- Nike’s China footwear sales were cited as down about 20% in the quarter. [27]
- Digital—often treated as the long-term lever—was reported by Reuters as down 36% in China. [28]
- Competition is intense from domestic players like Anta and Li-Ning, and Reuters described a pricing environment pressured by “shopper fatigue.” [29]
Nike also acknowledged execution issues. Reuters reported Hill said Nike had not invested enough in refreshing its retail locations to boost traffic, while pointing out that China’s “monobrand” retail structure makes it harder to replicate the multi-channel dominance Nike has in the U.S. [30]
That’s why the market is treating “China” less like a regional segment and more like a turnaround referendum.
The turnaround plan: what Nike says it’s doing (and where it’s pinching margins)
On the call, Reuters reported Hill is building the recovery strategy around:
- Core sports focus (including running and football)
- Rebuilding ties with retail partners such as Dick’s Sporting Goods
- Shifting away from older “classic” lines toward newer product franchises [31]
The catch: those moves can weigh on margin in the near term. Selling more through third-party retail can reduce price realization versus direct channels, and clearing inventory often involves discounts. Reuters explicitly connected Nike’s strategy to a short-term hit on margins. [32]
Nike also pointed to early promise in new initiatives. Reuters noted management highlighted newer product lines such as NikeSKIMS (its partnership with Kim Kardashian’s SKIMS brand). [33]
But Nike also flagged brand work still needed: Reuters said Hill cited room for improvement with the Jordan brand and described Converse as facing a reset after a leadership change earlier in 2025. [34]
Nike’s guidance and near-term forecast: holiday quarter looks soft
Nike’s outlook for the current quarter (fiscal Q3 2026) is one reason the stock market response turned negative quickly.
Reuters reported Nike expects:
- Q3 revenue down in the low-single digits, compared with analyst estimates of about a 1.5% decline [35]
- Further gross margin decline of 175–225 basis points in the current quarter [36]
Translation: even if demand is holding up better than feared, profitability is still under pressure heading into the key holiday shopping period. [37]
Wall Street forecasts and analyst positioning as of Dec. 19, 2025
“Forecasts” around Nike right now cluster into three buckets: near-term earnings power, turnaround timing, and China visibility.
Consensus expectations: upside surprise, but not a clean one
Nike’s results beat consensus on revenue and EPS (per Reuters), but the market is reacting as if the beat was partly “bought” through mix and transitional moves, while the core debate—how quickly margins and China recover—remains unresolved. [38]
Analyst commentary: patience… with conditions
Reuters highlighted two key analyst reactions:
- Morningstar’s David Swartz: concern about how poor China results remain [39]
- Zacks’ David Bartosiak: the turnaround pressure is real; earnings power is under stress [40]
Price target landscape: “moderate upside” on paper
Aggregated analyst price targets vary widely. MarketBeat lists an average 12-month price target around $81.24 (with a wide high/low range), implying upside versus recent levels—but the dispersion underscores uncertainty about the recovery path. [41]
Separately, an Investors.com summary circulating today noted a more constructive angle from parts of Wall Street, referencing a prior Wells Fargo “Overweight” stance and projecting 3–4% revenue growth and better margins by FY2026—a view that effectively bets Nike’s current pain is the precondition for the next cycle of healthier growth. [42]
The “three-signal” checklist investors are watching next
Nike’s story is no longer about whether people recognize the swoosh. It’s about whether the machine that turns brand heat into profit is re-aligning. Heading into 2026, three signals are likely to dominate every Nike stock debate:
1) Digital stabilization (especially in China)
Nike Direct fell, and Nike cited a sharp decline in NIKE Brand Digital. If digital keeps shrinking, Nike may struggle to expand margins—even if wholesale is growing. [43]
2) Gross margin trajectory versus tariffs and discounting
Nike has now guided to another quarter of margin pressure. Investors will be looking for evidence that promotional intensity can cool and that tariff costs can be offset—either via sourcing, pricing, or mix. [44]
3) China: clarity, not just commentary
Nike has acknowledged it needs to reset China. Markets will want to see what “reset” means operationally: store upgrades, digital strategy changes, product localization, and inventory discipline—plus a timeline that management has so far resisted giving. [45]
One underappreciated detail: Nike is still spending into the reset
Nike’s earnings release shows demand creation expense rising—brand investment is not being starved. [46]
Earlier this week, Reuters also previewed that Nike has been pushing marketing spend as it tries to reposition and prepare for major sports moments ahead, even as near-term profit is squeezed. [47]
That’s the strategic bet in one sentence: take margin pain now, rebuild momentum, then harvest later. Whether that “later” arrives in quarters or years is what will keep Nike stock volatile.
Bottom line for Nike stock on Dec. 19, 2025
Nike’s fiscal Q2 results delivered a paradox the market is increasingly unwilling to tolerate: a beat on revenue and EPS paired with deteriorating profitability and limited visibility on the turnaround timeline, especially in China. [48]
For long-term investors, the bull case still exists—Nike’s scale, brand power, and willingness to reinvest are real. For short-term traders, the bear case also exists—margin pressure is persistent, China is unresolved, and management’s own guidance implies the next quarter is still messy. [49]
References
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