NKE · Q1 2026 Earnings

Cautious

Nike, Inc.

Reported September 30, 2025

30-second summary

Q1 revenue grew 1.1% YoY to $11.72B — a clean beat versus the "down mid-single digits" guide — and gross margin at 42.2% (-320bps YoY) landed ~30–105bps better than the -350 to -425bps guide. But the FY26 setup got materially worse: annualized tariff cost was revised up from $1.0B to $1.5B, the FY26 gross margin headwind from tariffs nearly doubled (75bps → 120bps), and management explicitly removed Nike Direct from the FY26 recovery list. The quarter beat; the year got harder.

Headline numbers

EPS

Q1 FY2026

$0.49

Revenue

Q1 FY2026

$11.72B

+1.1% YoY

Gross margin

Q1 FY2026

42.2%

Operating margin

Q1 FY2026

7.7%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$11.72B	+1.1%	$11.10B	+5.6%
EPS	$0.49	—	$0.14	+250.0%
Gross margin	42.2%	—	40.3%	+190bps
Operating margin	7.7%	—	2.7%	+500bps

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	down mid-single digits	11.72 billion	in-line (1.1% YoY decline within mid-single digit range)	Met
Gross margin	Q1 FY2026	down 350 to 425 basis points	42.2%	+25 to +100 bps above guidance (midpoint of guide ~387 bps decline implies ~39.3% margin; actual 42.2% is ~290 bps decline, beating by ~97 bps)	Beat
SG&A dollars	Q1 FY2026	up low single digits	reported (low single digit growth implied)	in-line	Met

New guidance

Metric	Period	Guide	YoY
Wholesale revenue	FY2026	return to modest growth	—
Nike Direct growth	FY2026	do not expect return to growth	—
Revenue growth direction	Q2 FY2026	down low single digits	—
Gross margin	Q2 FY2026	down 300 to 375 basis points	—
SG&A dollars	Q2 FY2026	up high single digits	—
Other expense, net of interest income	Q2 FY2026	$10 to $20 million expense	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Tariff headwind to gross margin	FY2026	approximately 75 basis points	120 basis points	+45 basis points (guidance increased from 75 bps to 120 bps headwind)	Lowered
Tax rate	FY2026	19 to 20%	low 20% range	~+50 to +100 bps (range shifted from 19-20% to implied ~20-22% 'low 20s' range)	Lowered

Reaffirmed unchanged this quarter: SG&A growth (low single digits)

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Nike Brand	$11.362B	+2.3%
Converse	$0.366B	-27.0%
Nike Direct	$4.5B	-4.0%
Wholesale	$6.8B	+7.0%
Footwear revenue (Nike Brand)	$7.41B	—
Apparel revenue (Nike Brand)	$3.31B	—
Equipment revenue (Nike Brand)	$0.63B	—

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Nike Brand Digital revenue decline	-12%
Nike-owned retail stores decline	-1%

Profitability

Q1 FY2026

Segment	Q1 FY2026
EBIT margin	7.7%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
North America	$5.02B	+4.0%
Europe, Middle East & Africa	$3.331B	+6.0%
Greater China	$1.512B	-9.0%
Asia Pacific & Latin America	$1.49B	+2.0%
Dividend per share	$0.40	—
Share repurchases	$123M	—

Management tone

Q3 FY25 "Win-Now plan working" → Q4 FY25 "90 days at a time, largest financial impact behind us" → Q1 FY26 "progress won't be linear, much work ahead"

Last quarter management framed Q4 as the trough and signaled improvement "from here." This quarter, despite genuinely beating that low bar, the tone got more guarded, not less. Elliot Hill: "Nike's journey back to greatness has only just begun. There is significant work ahead, especially in the areas of Sportswear, Greater China, and Nike Direct." A management team that beat its own revenue and gross margin guide and saw wholesale inflect positive could have claimed momentum; instead it pre-emptively added Sportswear to the list of problem areas it had not previously called out. That widening, not narrowing, of the problem set is the most important tonal signal in the quarter.

The tariff disclosure is now on its second upward revision in 90 days. Matt Friend: "we now estimate the gross incremental cost to Nike on an annualized basis to be approximately $1.5 billion. Up from the $1 billion we shared 90 days ago." Last quarter the FY26 net headwind to gross margin was framed as 75bps "after mitigation" with confidence that Nike could "fully mitigate over time." This quarter that 75bps became 120bps, and the "fully mitigate" language is gone. The gap between gross tariff cost ($1.5B annualized) and net P&L impact (120bps ≈ ~$550M on FY26 revenue) implies meaningful mitigation is still assumed — but the trajectory of the gross number is the leading indicator, and it is moving against Nike.

Nike Direct went from "stabilize and return to growth" to flatly off the FY26 recovery list. Matt Friend: "we do not expect Nike Direct to return to growth for fiscal 26." This is not a guidance refinement; it is an explicit retraction of a segment from the year's recovery story. Combined with organic digital traffic still declining double-digits, the "premium destination" thesis is now an FY27 thesis at the earliest. Last quarter's watch item — whether AOV would offset traffic — was implicitly answered: not enough, and management is no longer asking the market to underwrite that math this year.

Greater China hardened from "near-term recovery opportunity" to "will require more time due to unique marketplace dynamics" with explicit confirmation that revenue and gross margin headwinds continue throughout FY26. The Q1 print of -9% is much better than Q4's -21%, but the forward language is more pessimistic — a tell that the Q1 improvement was inventory-cleanup-driven rather than demand-driven.

The Sport Offense reorganization is now being named as an active headwind, not a clean restructuring. Elliot Hill: "teams that are still settling into the sport offense." Last quarter this was framed as an enabling structural change; this quarter it is one of three named drags ("cautious consumer, tariff uncertainty, and teams still settling"). The 8,000 teammates realigned figure is new — and large enough to explain why "settling in" is being cited as an ongoing operational friction.

Recurring themes management leaned on this quarter:

Sport offense organizational restructuring and athlete-centric alignmentRunning business as proof point of sport-led momentum and innovationWholesale partnership recovery versus Nike Direct repositioning strugglesGreater China marketplace structural headwinds and inventory managementTariff cost escalation and gross margin compressionMarketplace elevation and premium retail positioning in North America

Risks management surfaced:

Tariff uncertainty and new reciprocal tariff rate increasesCautious consumer spending environmentGreater China seasonal sell-through underperformance and store traffic declinesNike Digital organic traffic declining double digits with promotional marketplace dynamicsSportswear business continued decline and classic footwear franchise weakness

Q&A highlights

Michael Bonetti · Evercore ISI

Can you characterize the spring order book progress relative to holiday, and what are your median-term margin targets and phases of recovery with key inputs to track?

Spring order book is up year-over-year with North America and APLA offsetting Greater China headwinds. Double-digit margins are achievable long-term, driven by reigniting organic growth, improving full-price mix through win-now actions, and driving operating leverage on supply chain and overhead. Fiscal 2026 margins are pressured by product/channel mix, transitory win-now costs, and new tariffs, with improvement expected in H2 as inventory clearance abates.

Spring order book up year-over-yearNorth America and APLA order book offsetting Greater China headwindsNike running grew over 20% in the quarterDouble-digit margins are achievable long-term

Matthew Boss · JP Morgan

Can you elaborate on early wins (North America growth, running acceleration) and the structural foundation that enables expansion to other portfolio parts?

Early wins stem from win-now priorities (athlete-centered innovative product, emotional storytelling, integrated marketplace, ground game activation) showing in running (+20%), wholesale growth, and spring order book strength. Sport Offense, a September reorganization into cross-functional teams by brand/sport/country/channel, is designed to deepen consumer insights and competitive positioning. Teams are embracing change with work still needed in China, Nike Direct, sportswear, and Converse.

Running up 20%North America wholesale growth achievedSpring order book positiveSport Offense organizational restructure activated in early September

Brooke Roach · Goldman Sachs

How much of Nike Digital traffic headwinds are due to strategic promo reduction versus other factors, and what milestones signal return to profitable growth?

Double-digit organic traffic decline in Nike Digital is primarily due to strategic repositioning: reduced promo days, improved markdown rates, lower classic/launch share, and pulled back paid media. EMEA and North America are furthest ahead, APLA making progress, Greater China is structurally different. Progress measured by wholesale partner momentum building. Direct not expected to return to growth in FY26 but should be healthier and more profitable in future.

Organic traffic expected down double digits in Nike DigitalReduced promo days, improved markdown ratesReduced classic and launch share of businessPulled back on paid media

Lorraine Hutchinson · Bank of America

What strategies are being deployed to turn China's digital business, and what are the costs and timelines for store refresh initiatives?

China strategy centers on leading with sport (running, training, basketball, football), supplementing with geo express local product, telling better stories with local athletes, and elevating marketplace. Digital is promotional (11-11 events); physical needs stronger assortments, depth, presentation, and service. Store pilots underperforming and need further optimization before scaling with partners. China will remain a headwind on topline and margin for balance of FY26 due to structural differences and need for sell-through improvement.

Nike inventory down 11% versus prior yearLeading with sport (running, training, basketball, football, outdoor basketball)Geo express local product strategyStore pilots underperforming broader fleet, need improvement before scaling

John Kernan · TD Cowen

With inventory down 2% (implying greater unit reduction), how healthy is wholesale channel inventory and when will wholesale discounts fade from margins?

Inventory management progressing well; units down in North America, EMEA, Greater China, but up in APLA (area of focus). Wholesale partner inventory is healthy as evidenced by forward-looking order book strength. Gross margin benefit from inventory cleanup actions expected in H2 FY26. Wholesale discounts/aggressive promotional actions are lapping, but other headwinds (tariffs, mix, Converse, Greater China) will mute H2 margin improvement.

Inventory down 2% balance sheet (units down further)Units down in North America, EMEA, Greater ChinaUnits up in APLA (area of focus)Wholesale partner inventory healthy

Answers to last quarter's watch list

Q1 gross margin vs the -350 to -425bps guide. Came in at -320bps — better than the high end of the guide by ~30bps. Tariff mitigation in the quarter ran ahead of plan, but the FY26 net tariff headwind was simultaneously raised from 75bps to 120bps, so the favorable Q1 outcome does not extrapolate. Status: Resolved positively (for the quarter only).

Greater China revenue trajectory. Q1 was -9%, materially better than Q4's -21% and inside the "narrow to better than -15%" threshold. But management explicitly guided revenue and gross margin headwinds to continue throughout FY26, framing the Q1 improvement as inventory-cleanup-driven rather than demand-led. Status: Resolved positively on the print, Continue monitoring on the trajectory.

Nike Brand Digital growth. -12% versus Q4's -26% — narrowed faster than the "toward -10% by Q2" threshold required. But organic traffic is still down double-digits and Nike Direct is now explicitly off the FY26 recovery list, so the AOV-offsets-traffic thesis is deferred to FY27. Status: Resolved positively on the metric, Resolved negatively on the underlying thesis.

Wholesale order book commentary. Management confirmed Spring order book is up YoY with NA and APLA offsetting Greater China, and Q1 wholesale revenue inflected to +7%. No explicit dollar figure was given, but the directional disclosure was clear.

Resolved positively

Whether FY26 revenue guidance is ever issued. No — Nike continues to guide only one quarter forward, supplemented by qualitative full-year directional commentary (wholesale modest growth, Direct no growth, China headwind throughout). Internal visibility has not recovered enough to commit to an annual revenue range.

Resolved negatively

Demand creation expense ratio. Q2 SG&A dollars are guided up high single digits driven by "an acceleration of demand creation investment" — i.e. Nike is committing to a higher marketing intensity, not moderating the Q4 +15% pace. This is now a long-run choice, not a transitional anomaly. Status: Resolved negatively (for margin holders); Resolved positively (for revenue inflection believers).

What to watch into next quarter

Whether Q2 gross margin lands inside the -300 to -375bps guide. The Q2 guide is barely better than Q1's actual decline (-320bps) despite a 175bps tariff hit being layered in, implying ~120–195bps of underlying improvement. A miss would say Win-Now cleanup is not pulling its weight.

Whether the $1.5B annualized gross tariff number gets revised again. Two upward revisions in two quarters (from undisclosed → $1.0B → $1.5B) is a trend. A third revision would force the market to discount the "fully mitigate over time" framing entirely.

Greater China — does -9% hold or revert? Management explicitly guided China headwinds to continue all year. If Q2 prints -12% or worse, the Q1 improvement was inventory pull-forward, not demand recovery.

Nike Brand Digital trajectory. -12% in Q1 needs to hold or improve. A reversion toward -20% would mean the promotional cleanup base effect has already played out and underlying digital demand is the problem.

Converse. Four straight quarters of ~-25%+. Watch for any disclosure suggesting an impairment review, divestiture exploration, or accelerated brand reset spend.

Demand creation as % of revenue. Q2 SG&A up high single digits with explicit "acceleration of demand creation investment" — watch whether this is a one-quarter campaign push or the new run rate. If Q3 also accelerates, Nike is structurally choosing a higher marketing-intensity model.

Sources

Nike Q1 FY26 Press Release (Form 8-K Exhibit 99.1), filed September 30, 2025 — https://www.sec.gov/Archives/edgar/data/320187/000032018725000091/q1fy26exhibit991er.htm
Nike Q1 FY26 earnings call prepared remarks and Q&A (Elliot Hill, Matt Friend)

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