Nike’s Comeback Car Cruises Past Earnings Before a China-Sized Pothole Ends the Ride (-10%)

Nike: beats earnings

China + tariffs: “And I took that personally.”

You ever take a test in high school where you studied everything, felt locked in, breezed through the questions… and then flipped to the very last page and saw the essay section?

The one you absolutely did not prepare for. The one that somehow takes what should’ve been a clean 95% and turns it into a “how did this become a 65?” situation.

That was Nike’s earnings report.

On paper, this was supposed to be a win. Nike beat earnings. Nike beat revenue. North America showed up, clocked in, and did exactly what it was supposed to do. And yet the stock still hopped on the elevator and rode it straight to the basement, dropping more than 10% in premarket.

Because investors turned the page… and saw China.

And then they saw tariffs. Everything else immediately stopped mattering.

On paper, Nike’s fiscal Q2 looked… fine. Earnings came in at 53 cents vs. 38 cents expected. Revenue hit $12.43B, clearing estimates. North America sales climbed 9% to $5.63B, which is supposed to be the good part of the story.

Unfortunately, the market only cared about the other part.

Nike’s China revenue cratered 17%, dropping to $1.42B, and that weakness is doing what China weakness always does… casting a long, ominous shadow over the entire global consumer discretionary space. Case in point: Adidas and Puma both caught stray bullets in early trading, just for standing nearby.

(Source: CNBC)

Add tariffs into the mix and things get uglier. Nike said gross margins fell 3 percentage points, with 3.15 points of that directly tied to tariffs. That’s not “temporary headwind” territory. That’s “this is actively eating profits” territory. And the blow would be easier to take if management came out and said it will get better next quarter… but that’s not the case. Nike expects Q3 revenue to decline low-single digits and margins to take another hit.

CEO Elliott Hill tried to speak a comeback into existence. He called fiscal ’26 the “middle inning” of Nike’s turnaround, talked about cleaning up inventory, rebuilding wholesale relationships, and restoring Nike Digital to a “premium experience.” Translation: undoing a lot of the direct-to-consumer stuff that sounded brilliant three years ago and very much did not age well.

Wholesale sales actually rose 8% to $7.5B, which is a quiet win. Direct sales fell 8%, which is the price of reversing course. Inventories fell 3%, which would be helpful if tariffs weren’t immediately canceling it out.

And then there’s Converse. The brand continues to get absolutely smoked like a Texas brisket, with revenues down 30% this quarter after a 27% drop last quarter. What used to be a legacy brand is now the slide everyone skips over.

And even though the swoosh is in the emergency room… it’s still got a pulse. For instance, Nike.com just had its best Black Friday ever, thanks mostly to the Air Jordan “Black Cat” launch. They’ve also got a new platform called Nike Mind launching in January. 

(Source: Yahoo Sports)

Elliot Hill is also purging leadership layers. So I guess you could say the offense is supposedly back.

But Wall Street isn’t buying the rally speech yet.

Nike shares were already down 13% YTD, and China weakness plus tariff math just shoved the recovery timeline further out. As Citi put it, this is a “complicated turnaround” and I couldn’t say it any better myself.

At the time of publishing this article, Stocks.News doesn’t hold positions in companies mentioned in the article.