Nike's Q2 Earnings: A Pivotal Test for the 'Win Now' Strategy Amid Tariff and China Headwinds

Nike's Q2 2025 earnings report, released on November 26, 2025, has become a focal point for investors evaluating the effectiveness of the company's aggressive "Win Now" strategy. While the results showed a revenue decline of 8% year-over-year to $12.4 billion and a 24% drop in diluted EPS to $0.78, the company narrowly exceeded analyst expectations, sparking debate about whether its strategic reset is generating sufficient near-term momentum to justify long-term investment.

Financial Performance: Mixed Signals Amid Strategic Overhaul

Nike's Q2 results reflect the dual-edged nature of its "Win Now" strategy, which prioritizes long-term brand revitalization over short-term financial stability. On one hand, the company's decision to phase out legacy product lines like Air Force 1 and Dunk-designed to curb over-reliance on discounted inventory-has led to double-digit declines in organic digital traffic. On the other, early wins in categories such as Running, where revenue surged over 20% in Q1 2026 driven by revamped product lines like the Pegasus and Vomero, suggest the strategy is beginning to resonate with core consumers.

However, profitability metrics remain under pressure. Gross margins contracted to 43.6% in Q2 2025, a decline attributed to tariffs and supply chain costs, while operating and net margins stood at 7.36% and 6.23%, respectively. Analysts warn that these trends could persist: Nike anticipates a 300–375 basis point contraction in gross margins for Q2 2026, driven by ongoing challenges in the Greater China market, where revenue fell 10% in the prior quarter.

Strategic Reset: Balancing Long-Term Vision With Near-Term Pain

The "Win Now" strategy, launched to accelerate Nike's turnaround, has involved recalibrating distribution channels and re-engaging with wholesale partners such as DSW, Macy's, and Amazon according to market analysis. This shift aims to counteract the limitations of an overreliance on direct-to-consumer (DTC) sales and expand market reach. Early signs of progress include a rebound in wholesale order confidence, signaling that retail partners are regaining trust in the brand.

Yet, the strategy's trade-offs are evident. By deliberately reducing supply for classic franchises, Nike has sacrificed short-term revenue to reset pricing power and brand equity. This approach mirrors Apple's playbook in the 2000s, where product rationalization drove long-term value, but it carries risks in a market where competitors like On Holding and Lululemon are gaining traction in premium performance segments according to financial analysis.

Competitive Landscape: Gaining Ground or Losing Share?

Nike's Q2 2025 market share in the sportswear industry stood at 19.75%, down from 24.89% in Q1 2025, highlighting intensifying competition. Adidas, with a 14.28% market share, and emerging rivals like On Holding continue to challenge Nike's dominance, particularly in categories where innovation and niche appeal are critical. Analysts note that Nike's premium positioning remains intact, but its ability to sustain this edge will depend on the success of its product reinvigoration efforts.

Analyst Sentiment: Caution Amid Conditional Optimism

While some analysts maintain a "Buy" rating, citing potential for earnings and margin improvement in the second half of fiscal 2026, others remain cautious. Citi Research and Barclays emphasize that Nike's recovery will likely be nonlinear, with near-term headwinds from China and tariffs persisting. Guggenheim Securities, however, is more bullish, forecasting higher-than-consensus earnings for Q2.

The market has priced in some recovery, with Nike's shares trading at a forward P/E of 31.47, but analysts agree that a "clearer revenue and EBIT% inflection" is needed before a meaningful stock re-rating occurs according to market reports.

Conclusion: A High-Stakes Inflection Point

Nike's Q2 2025 earnings underscore the tension between strategic reinvention and financial performance. While the "Win Now" strategy has generated early momentum in key categories and restored some confidence among wholesale partners, the company faces significant headwinds, including margin compression, China's economic slowdown, and competitive pressures. For long-term investors, the critical question is whether these near-term sacrifices will translate into sustainable growth.

The upcoming Q2 2026 earnings report, scheduled for December 18, 2025, will serve as a pivotal test. If Nike can demonstrate that its strategic reset is driving both revenue growth and margin stability, the stock could unlock new value. Until then, the investment case remains conditional on the company's ability to navigate its most challenging quarter yet.