Nike Q2 FY2026 Earnings: What They Actually Said

Published: December 19, 2025

The 30-Second Version

Nike beat expectations but the stock dropped 10%. Why? China is a mess. Revenue came in at $12.4 billion (slightly up from last year), and they made $0.53 per share versus the $0.37 Wall Street expected. Sounds great, right? But Greater China revenue crashed 17%, and tariffs ate into margins. CEO Elliott Hill says they're in the "middle innings" of a turnaround. Translation: this is going to take a while.

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Beat or Miss?

Metric	What Nike Reported	What Wall Street Expected	Verdict
Revenue	$12.43 billion	$12.14 billion	✅ Beat by 2%
Earnings Per Share	$0.53	$0.37	✅ Beat by 43%

Real Talk: On paper, this looks like a solid win. Nike crushed the earnings estimate by 43%. But here's the thing: Wall Street had set the bar incredibly low. Nike's earnings are still down 32% compared to last year. Beating low expectations isn't the same as doing well.

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The Trends That Matter

North America: The Bright Spot

Revenue up 9%. Wholesale (selling to retailers like Foot Locker) grew 24%.

Real Talk: This is where Nike focused first, and it's working. They've been rebuilding relationships with retailers after years of trying to go direct-to-consumer. The team landed their "best Black Friday ever" with the Jordan Black Cat launch. Running shoes are flying off shelves, up over 20% for the second quarter in a row.

Greater China: The Problem

Revenue down 17%. Profits down 49%.

Real Talk: This is why the stock dropped despite the earnings beat. China is Nike's most profitable market per dollar of sales, and it's in freefall. What's happening? Fewer people visiting stores. Too much discounting killing the premium brand image. Local competitors gaining ground. CEO Elliott Hill admitted their improvements are "not happening at the level or the pace we need." He's seen turnarounds before, but this one is going to take time.

Europe (EMEA): Treading Water

Revenue down 1%. Flat wholesale growth.

Real Talk: Not great, not terrible. Running is growing double digits, but promotional activity is higher than Nike wants. The brand is healthy here, just not growing.

Direct-to-Consumer vs Wholesale: A Strategic U-Turn

Nike Direct (their own stores and website) was down 9%. Digital specifically was down 14%. Meanwhile, wholesale grew 8%.

Real Talk: For years, Nike tried to cut out the middleman and sell directly to you. That strategy hit a wall. Now they're crawling back to retailers, which is actually working. The trade-off: wholesale has lower margins, but at least it's growing. Nike.com was less promotional this quarter, with fewer sale days. That's intentional. They're trying to stop being "always on sale" and rebuild the premium image.

The Franchise Problem

Classic sneaker franchises (think Air Force 1, Dunks) declined over 20%.

Real Talk: Nike let their iconic shoes get stale. Too many colours, too easy to find, too often on sale. They've now cut $4 billion worth of these "classics" from peak levels. Painful in the short term, but necessary to make these shoes desirable again.

The Money Question

Margins Are Hurting

Gross margin: 40.6%, down 3 percentage points from last year.

Real Talk: For every £100 Nike makes in revenue, they're keeping about £41 after paying for manufacturing and materials. Last year it was £44. That £3 difference across $50 billion in annual revenue is over $1.5 billion in lost profit. What's eating the margin? Two things:

Tariffs: Higher import taxes on products made in Asia cost Nike 3.2 percentage points of margin. That's about $1.5 billion per year in extra costs.
Discounting: To clear old inventory, especially in China, Nike has been selling products at lower prices.

Inventory: Getting Cleaner

Inventory down 3% year-over-year. Units down high single digits.

Real Talk: This is good news. Nike had too much stuff sitting in warehouses last year. They've been clearing it out (at a margin hit), and now North America and Europe are "clean." China still has work to do.

The Tariff Headache

Nike said tariffs will cost them $1.5 billion this fiscal year and knocked 3 percentage points off gross margin this quarter.

Real Talk: Most Nike products are made in Vietnam, Indonesia, and China. When the US raises tariffs on imports from these countries, Nike either eats the cost or raises prices. So far, they're mostly eating it. In North America, margins would actually be improving if you ignore the tariff hit.

What Management Said

CEO Elliott Hill on where they stand: "We're in the middle innings of our comeback."

Real Talk: Baseball analogy. Middle innings means they're not losing anymore, but they haven't won yet either. Expect 2-3 more quarters of grinding before things look clearly better.

On China: "It's not happening at the level or the pace we need to drive wider change."

Real Talk: Honest admission that China is struggling more than expected. He sees it as a long-term opportunity but expects headwinds to continue through the rest of the fiscal year.

On getting back to double-digit profit margins: "We see the path back to double-digit EBIT margins for Nike Inc."

Real Talk: Currently running around 8-9% operating margin. They want to get back above 10%. That's going to take a combination of revenue growth, cleaning up promotions, and cost cutting. No timeline given.

On leadership changes: "All geographies will now report directly to me."

Real Talk: Hill is getting more hands-on. He's eliminated some executive layers (including the Chief Technology Officer and Chief Commercial Officer roles) and now runs the regions directly. That's a sign he wants faster decisions and more control over the turnaround.

What Analysts Pushed On

China, China, China

Every analyst wanted to know when China would bottom out. Nike couldn't give a straight answer. The company acknowledged they need a "fresh perspective" and "new approach" but wouldn't commit to a timeline for recovery.

Can North America momentum continue?

Nike is more confident here. They expect "modest growth" in North America next quarter. The wholesale growth will slow down as they do less liquidation, but full-price sales should improve.

When will margins recover?

CFO Matt Friend said if you exclude tariffs, margins would actually be expanding in Q3. The underlying business is improving, but tariffs are masking it. Full margin recovery depends on growth returning and promotions normalizing.

Jargon From This Report

Term	What It Means
Fiscal Q2 2026	Nike's financial year runs June to May. Their Q2 is September-November 2025. Confusing, but that's how they do it.
Win Now Actions	Nike's turnaround strategy: fix the product, clean up the marketplace, rebuild wholesale relationships.
Sport Offense	Their new operating structure. Small, sport-focused teams (running, basketball, football) driving product innovation.
Classics	Iconic sneakers like Air Force 1, Dunk, Air Jordan 1. Overproduced and now being cut back.
Nike Direct	Sales through Nike's own stores and website. Higher margin but currently declining.
DTC (Direct-to-Consumer)	Same as Nike Direct. The strategy of cutting out retailers. Now being reversed.
EBIT Margin	Operating profit as a percentage of revenue. Nike wants this above 10%.
Organic Growth	Revenue growth excluding currency and acquisitions. The "real" number.
Sell-through	How fast products actually sell to consumers (vs. just being shipped to stores).

What's Next

Q3 Guidance:

Revenue: Down low single digits (worse than this quarter)
Gross margin: Down 175-225 basis points (better than this quarter)
China: Similar weakness to Q2
North America: Modest growth expected

Key Dates:

Q3 earnings expected: March 2026
World Cup 2026: Major marketing and product opportunity

Milestones to Watch:

Does China stabilize or get worse?
Can running momentum continue?
Do new product launches (Nike Mind, AeroFit) get traction?
Will tariff situation change under new trade policies?

The Bottom Line

Nike is in a genuine turnaround, and turnarounds are ugly before they're beautiful. The good news: North America is working, running is thriving, inventory is cleaner, and wholesale relationships are rebuilding. The bad news: China is a significant drag with no clear end in sight, tariffs are eating into margins, and the iconic "classic" sneakers that built the brand are being intentionally shrunk.

CEO Elliott Hill knows how to run this playbook. He's done it before. But investors expecting a quick fix are going to be disappointed. "Middle innings" means we're probably 12-18 months from seeing this clearly reflected in the numbers.

If you believe in Nike's brand power and are willing to wait, this is what a turnaround looks like from the inside. If you want growth now, look elsewhere.

One number to remember: North America wholesale grew 24%. That's the proof the turnaround strategy works. The question is how long before China catches up.

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Sources: Nike Q2 FY2026 Earnings Release, Earnings Call Transcript (December 18, 2025)

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