Nike Beats Earnings but Warns of Deeper Decline Amid Turnaround Strains

Nike’s fiscal third-quarter report offered a mixed bag for investors late Thursday. While the company beat earnings and revenue estimates, the upbeat results were quickly overshadowed by a cautious outlook for the current quarter. Shares initially moved higher after the print, but quickly reversed course after management warned of intensified pressures from restructuring efforts, a challenging inventory environment, rising tariffs, and weak consumer demand. The stock is now down over 6% in premarket trading, hovering around $67—just above its 200-month moving average of $64 and perilously close to its pandemic lows of $60 set in March 2020.

The sneaker giant is deep into a corporate overhaul led by returning CEO Elliott Hill, who’s seeking to reignite innovation, rebuild wholesale partnerships, and reclaim market share. However, the company made it clear that the pain from these changes will peak in the current quarter. Analysts have largely kept their ratings steady, with Stifel reiterating a Hold and BMO maintaining an Outperform while acknowledging that Nike’s road to recovery may take several more quarters.

Q3 Results: Better Than Feared, But Still Under Pressure

For the fiscal third quarter ended February 28, nike reported EPS of $0.54, well above consensus estimates of $0.30. Revenue fell 9% year-over-year to $11.27 billion but still exceeded the $11.01 billion analysts expected. Net income declined 32% to $794 million, as the company took hits from deeper discounts and inventory write-downs.

Gross margin declined 330 basis points to 41.5%, just shy of Street expectations, due to heightened promotional activity and efforts to liquidate excess inventory. Management attributed the pressure to higher product costs, mix shifts, and a continued pullback in full-price sales. Nike’s inventory position improved slightly, falling 2.4% year-over-year to $7.5 billion, though levels remain elevated across most categories.

Regional Breakdown: China Drags, North America Holds

Nike’s revenue was down across all major geographies, but Greater China was the standout weak spot. Sales in the region declined 17% year-over-year to $1.73 billion, missing expectations of $1.84 billion. CEO Elliott Hill acknowledged growing competition in China and called for a faster pace of innovation and engagement.

North America revenue fell 4% to $4.86 billion but still topped consensus estimates of $4.53 billion, aided by a favorable shipment schedule. emea dropped 10% to $2.81 billion, while Asia Pacific & Latin America declined 11% to $1.47 billion.

On the product front, footwear revenue came in at $7.21 billion, down 12% year-over-year. Apparel revenue fell a more modest 2.9% to $3.19 billion, while equipment declined 2.1% to $477 million. Converse, often a bellwether for Nike’s lifestyle segment, posted an 18% drop in sales to $405 million—well below the $446 million estimate.

Turnaround Underway, But Headwinds Still Building

Five months into his second stint at Nike, CEO Elliott Hill has moved quickly to reset priorities. His “Win Now” strategy is centered on product innovation, digital engagement, and repairing ties with wholesale partners. There are early signs of progress: Nike reported strong early sell-through on its new Pegasus Premium and Romero 18 models, with broader rollouts expected into fiscal 2025.

However, Hill acknowledged the long road ahead. “We met the expectations we set, but we’re not satisfied with our overall results,” he said. “We can and will be better.”

The company’s renewed focus on women’s apparel and marketing also gained traction last quarter. Nike launched its highly anticipated NikeSKIMS collaboration with Kim Kardashian and debuted a female-focused Super Bowl ad—the brand’s first big-game spot in decades.

Q4 Guidance: The Real Gut Punch

Nike’s fiscal fourth-quarter guidance was the real source of investor concern. Management expects revenue to decline in the “low end of the mid-teens range,” implying a drop worse than the 12% consensus estimate. Gross margins are forecast to fall 400 to 500 basis points year-over-year, reflecting liquidation efforts, higher input costs, and the initial impact of 20% tariffs on Chinese imports.

CFO Matt Friend noted that Q4 will see the largest impact from the “Win Now” restructuring efforts. He also warned of ongoing headwinds from a softening consumer, geopolitical volatility, and rising duties. Digital traffic is expected to decline in the double digits in FY26, and legacy lifestyle franchises such as Jordan and classic sneakers underperformed in Q3.

Investor Sentiment: Walking the Line Between Patience and Pain

Nike’s stock is now down over 5% year-to-date and sitting just above key technical support levels. Analysts remain split. Stifel, which maintains a $75 price target, expects the turnaround to take time and doesn’t see a risk-adjusted upside from current levels. BMO, more optimistic with a $92 target, argues that the trough is near and the payoff could be meaningful for patient investors.

Still, Wall Street recognizes that Nike’s brand equity remains strong. If the company can deliver on its innovation roadmap, clean up inventory, and navigate macro and trade headwinds, the long-term upside case remains intact. But for now, Nike is still in the early miles of what’s shaping up to be a grueling marathon.