NKE · Q2 2026 Earnings

Cautious

Nike, Inc.

Reported December 18, 2025

30-second summary

Q2 FY2026 revenue grew 0.6% YoY to $12.43B — a clean beat versus the "down low single digits" guide — and gross margin at 40.6% landed at the favorable end of the guide range (-300bps). But Greater China deteriorated sharply (-16% cn vs. Q1 FY2026's -9%), Converse fell -31%, Nike Brand Digital re-accelerated its decline to -14%, and management swapped "stabilizing" for "middle innings of our comeback." The print is better than the guide; the runway just got longer.

Headline numbers

EPS

Q2 FY2026

$0.53

Revenue

Q2 FY2026

$12.43B

+0.6% YoY

Gross margin

Q2 FY2026

40.6%

Operating margin

Q2 FY2026

8.0%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2026	QoQ
Revenue	$12.43B	+0.6%	$11.72B	+6.0%
EPS	$0.53	—	$0.49	+8.2%
Gross margin	40.6%	—	42.2%	-160bps
Operating margin	8.0%	—	7.7%	+30bps

Guidance

Q2 FY2026 results met gross margin and SG&A guidance; Q3 FY2026 outlook revised lower on revenue but tariff-adjusted margins show cost control, with 3-point FX benefit partially offsetting continued Greater China weakness.

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	Q2 FY2026	down low single digits	12.427 billion (0.6% YoY growth)	in-line with qualitative guide	Met
Gross Margin	Q2 FY2026	down 300 to 375 basis points	40.6%	better than worst-case guide	Beat
SG&A Dollars	Q2 FY2026	up high single digits	Operating Overhead $2.8B + Demand Creation $1.3B = $4.1B total	in-line with high single-digit growth expectation	Met
Tax Rate	Q2 FY2026	low 20% range	20.7%	in-line with low 20% range	Met

New guidance

Metric	Period	Guide	YoY
Revenue Growth	Q3 FY2026	down low single digits	—
Gross Margin Change	Q3 FY2026	down 175 to 225 basis points	—
SG&A Dollar Change	Q3 FY2026	low single digit increase	—
Other Expense/Interest Income	Q3 FY2026	zero to $10 million income	—
FX Benefit	Q3 FY2026	3-point benefit	—

Segment performance

Q2 FY2026

Segment	Q2 FY2026	YoY
Footwear	$7.659B	-1.0%
Apparel	$3.906B	+4.0%
Equipment	$0.55B	—
Converse	$0.3B	-31.0%
Wholesale Revenues	$7.5 billion	—
NIKE Direct Revenues	$4.6 billion	—

Platform metrics

Q2 FY2026

Segment	Q2 FY2026
NIKE Brand Digital	down 14%
NIKE-owned Stores	down 3%
Inventory	$7.7 billion

Profitability

Q2 FY2026

Segment	Q2 FY2026
Demand Creation Expense	$1.3 billion
Operating Overhead Expense	$2.8 billion
Effective Tax Rate	20.7%

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	YoY
North America	$5.633B	+9.0%
Europe, Middle East & Africa	$3.392B	-1.0%
Greater China	$1.423B	-16.0%
Asia Pacific & Latin America	$1.667B	-4.0%

Management tone

Q3 FY2025 "Win-Now plan working" → Q4 FY2025 "90 days at a time, largest financial impact behind us" → Q1 FY2026 "progress won't be linear" → Q2 FY2026 "middle innings of our comeback"

Each quarter the timeline framing has gotten longer and more abstract. Last quarter Hill said "Nike's journey back to greatness has only just begun"; this quarter the operative phrase is "middle innings of our comeback" — sports metaphor doing the work of replacing a specific recovery date. The substantive shift is the explicit downgrade of margin recovery to a multi-year project: Friend told the call "margin expansion is a top priority for me and my leadership team. While it will take time, we see the path back to double-digit EBIT margins." "Path" and "while it will take time" are the new framing — last quarter's "headwinds to revenue and gross margin to begin to moderate from here" has been retired. A management team that beat both top-line and gross margin guides could have claimed momentum; instead it extended the timeline.

China's framing has hardened across three consecutive quarters: from "course correction" (Q4 FY2025) to "unique marketplace dynamics" (Q1 FY2026) to "reset" requiring "a fresh way of thinking" and "new capabilities" this quarter. Hill: "The reset requires a fresh way of thinking from our Nike teammates and our Nike store partners, and it will take time." The Q1 FY2026 -9% looks now to have been a one-quarter inventory unwind, not a turn. The new disclosure that China leadership now reports directly to the CEO and the company is bringing in external partners (Powell Shannon, Top Sports) to rework the marketplace is the strongest signal yet that the prior playbook failed.

The tariff disclosure shifted from quantified-headwind to rhetorical device. Last quarter the annualized gross cost moved from $1.0B to $1.5B; this quarter management held the $1.5B number (no third revision — partially answering the watch list positively) but pivoted to "excluding tariffs, gross margin expansion would be positive" as the dominant framing. This is doing two things: it sets up the narrative that operational margin recovery is already underway and only obscured by an external policy headwind, and it pre-empts the conversation about underlying margin pressure. The 315bps tariff drag on Q3 FY2026 gross margin is now larger than the 175–225bps reported decline — meaning operational margins are already expanding by ~90–140bps on management's math. That math is real; whether tariffs prove "transitory" is the assumption.

The new "sport offense" investment language signals a strategic pivot from cost-cutting to brand spend, but the explicit installation of a new COO mid-quarter to fix operations is the more telling disclosure. Hill: "I made another change within my leadership team this quarter, asking Venkatesh Alighirasamy to be in the role of our chief operating officer... We see significant opportunity to get our core operations running more efficiently and more profitably." A COO appointed nine months into a turnaround to address "core operations" running inefficiently is an admission that the FY2025 Win-Now framework did not touch underlying cost structure — and that margin recovery requires a separate, structural workstream that is only now starting.

Hill's "we're nowhere near our potential" is the rawest line of the call. Last quarter ended with confidence about momentum; this quarter ends with explicit acknowledgment of a wide execution gap. That is not a guidance refinement — it is a recalibration of where management itself thinks Nike sits relative to its own franchise value.

Recurring themes management leaned on this quarter:

Sport offense as growth accelerator and organizational restructuringMargin pressure from tariffs and inventory actions requiring long-term operational fixesGeographic divergence with North America momentum offsetting China deteriorationProduct innovation pipeline (running, football, basketball) as competitive moatPromotional discipline and marketplace elevation as brand health measuresMiddle innings positioning implying extended turnaround timeline

Risks management surfaced:

Greater China requires longer recovery and will continue to be headwind through fiscal 2026Tariffs impose $1.5 billion annualized product cost increase reducing gross margin 320 bpsNon-linear recovery across brands, sports, and geographies at different pacesConverse brand continues to struggle with unspecified headwinds through balance of yearMarketplace still requires significant cleanup work across inventory obsolescence and positioning

Q&A highlights

Matthew Voss · J.P. Morgan

Elaboration on 'middle innings' turnaround progress - where have runs been scored vs. remaining opportunities and confidence level. Also requested breakdown of gross margin components and progression outlook.

Management explained middle innings as different business dimensions moving at different speeds. Nike brand growing with running up 20%+ and taking share. North America grew 9%, wholesale grew, order book up. Gross margins down 330bps in NA despite 500bps tariff headwind, showing underlying expansion. Q3 guidance shows 175-225bps margin decline including 315bps tariff impact, with expansion excluding tariffs reflecting transitory headwind recovery.

Running growing over 20% with market share gainsNorth America revenue growth of 9%Classics declined ~$4 billion from peakNorth America gross margins down 330bps despite 500bps tariff headwind

Bob Durable · BTIG

Timeline for returning to double-digit EBIT margins and depth of China reset needed; are we near revenue/EBIT bottom in China?

Management stated improving margins is top priority with clear path back to double-digit EBIT margins. Margin pressure from intentional win-now actions and tariffs. Path to margin expansion through: (1) growth driving leverage, (2) full-price mix recovery, (3) supply chain cost leverage, (4) operating cost discipline. For China: acknowledged it needs structural reset starting with reporting line changes and multi-action plan (marketplace cleanup, retail basics, store investment). Early success seen but progress slower than desired; requires fresh perspective and new capabilities with Powell Shannon Top Sports partnership.

Clear path to double-digit EBIT margins identified but no specific timeline providedNorth America showing margin expansion excluding tariffsChina senior leader (Angela) now reporting to CEO as part of SLTChina actions include marketplace cleanup, store fleet investment in Shanghai/Beijing

Anisha Sherman · Bernstein

Phasing of growth across product verticals with conviction level comparable to running; mix of wholesale partners and distribution point expansion strategy.

Management highlighted running as flagship with Structure 26 and upcoming Structure Plus launches plus apparel expansion. Global football noted as furthest along with three silos (Mercurial, Tiempo in Q3, Phantom). Basketball dimensionalizing through women's (Sabrina, Caitlin) and men's. Training and skims also called out. Order book up for back half. On wholesale: satisfied with current partner mix, both new and existing partners contributing balanced growth; marketplace strategy is consumer-based rather than distribution-expansion-driven.

Running: Romero Premium and Structure 26 launched this quarter; Structure Plus launching next monthGlobal football: three footwear silos; World Cup order book up 40% vs. 2022Basketball: women's diversifying through Sabrina and Caitlin; GT Future strong sell-through with kids lining upJordan: AJ4 Black Cat largest Black Friday launch ever; AJ11 game generating demand

Ike Borico · Wells Fargo

When can management stop caveat that recovery won't be linear and provide better visibility; timeline for when momentum becomes predictable.

Management explained different timelines across brands, geographies, and sports due to sport offense launch in September and cross-functional team ramp-up globally. Acknowledged operating at different stages across portfolio. Referenced North America as area of focus with confidence in momentum sustainability. Noted modest wholesale growth confidence and willingness to take 90-day flexibility windows for unplanned actions (e.g., Greater China moves) rather than commit to linear recovery narrative.

Sport offense launched September with cross-functional teams still rampingNorth America increasingly confident momentum can be sustainedModest wholesale growth expected for full yearTaking 90-day decision windows for flexibility on major market actions

Jonathan Kompf · Baird

Is North America playbook (2-3 quarters of pressure then return to growth) applicable to China timeline? Why not provide 2-3 year targets and specific margin timeline given structural headwinds characterization?

Management declined direct timeline comparison, stating China requires 'fresh perspective,' 'new approach,' and 'new capabilities' versus North America analog. Attributed resistance to providing multi-year targets to operating in 'dynamic environment' with complex multi-brand, multi-sport, multi-geography turnaround. Stated preference to maintain flexibility to 'read and react every day' and make 'right decisions every week' rather than commit to long-term targets. Indicated targets will be shared 'as our confidence grows.'

China reset cannot be directly timed to North America playbookRequires fresh perspective, new approach, new capabilities in ChinaManagement operating on week-by-week flexibility rather than quarterly/annual targetsWill share longer-term visibility only 'as confidence grows'

Answers to last quarter's watch list

Whether Q2 FY2026 gross margin lands inside the -300 to -375bps guide. Yes — Q2 FY2026 gross margin of 40.6% landed at the favorable end of the prior guide range (-300bps). The ~120–195bps of implied underlying improvement asked for largely materialized, with North America showing ~190bps of operational margin expansion underneath a 520bps tariff headwind.

Resolved positively

Whether the $1.5B annualized gross tariff number gets revised again. No third revision this quarter — the $1.5B figure held, and the Q3 FY2026 315bps tariff drag is consistent with prior framing. Management did, however, pivot the narrative to "excluding tariffs, margin expansion would be positive" — using the number rhetorically rather than expanding it. Status: Resolved positively (on the number); Continue monitoring (on the framing shift).

Greater China — does -9% hold or revert? Reverted hard. Q2 FY2026 came in at -16% versus the -12% threshold for the bear case, confirming the Q1 FY2026 improvement was inventory-cleanup-driven. Management explicitly characterized China as needing a multi-quarter "reset" with structural organizational changes and external partners.

Resolved negatively

Nike Brand Digital trajectory. Worsened from -12% to -14%. The "premium destination" thesis is not delivering AOV offsets sufficient to absorb traffic loss, and Nike-owned stores also moved from -1% to -3%.

Resolved negatively

Converse. -31% in Q2 FY2026, worse than Q1 FY2026's -27% and now five consecutive quarters of ~-25%+ declines. No disclosure of an impairment review or divestiture exploration, but the trajectory is incompatible with the carrying value at some point.

Resolved negatively

Demand creation as % of revenue. Q2 FY2026 SG&A came in at +1% reported — well below the up-HSD guide — driven by operating overhead savings (down 4%) even as demand creation grew +13%. Q3 FY2026 SG&A is guided up low single digits, an acceleration from Q2 FY2026's +1% and explicitly attributed to higher demand creation and sport-offense investments. The "sport offense" language confirms this is a structural choice toward higher marketing intensity, not a one-quarter campaign push. Status: Resolved negatively (for margin holders); Resolved positively (for revenue inflection believers).

What to watch into next quarter

Q3 FY2026 gross margin vs. the -175 to -225bps guide. The ~90–140bps of underlying expansion (ex-tariffs) baked into the guide is the cleanest test of whether North America's operational margin progress is generalizing. A miss to the low end would suggest the tariff-adjusted improvement is geographically narrow.

Greater China — does -16% mark the bottom or extend further? Management has now described China as a "reset" with multi-year framing and refused to commit to a North America-style 2–3 quarter recovery. Watch for Q3 FY2026 to print -18% or worse, which would force the question of whether China impairment or strategic alternatives need to be on the table.

Nike Brand Digital and owned stores. Both reverted this quarter (-12% → -14% digital; -1% → -3% stores). A third consecutive deterioration in Q3 FY2026 would invalidate the "premium destination" thesis entirely and force a Nike Direct strategy reset on top of everything else.

Converse — fifth consecutive ~-25%+ quarter just printed. Watch for any disclosure language suggesting an impairment review, strategic review, or accelerated brand reset spend. Continued silence with -30%+ declines is itself the signal.

Whether a quantitative double-digit EBIT margin timeline emerges. Management committed to the destination and refused the date. The Q1 FY2026 watch flagged whether FY2026 revenue guidance would ever return; this watch is the same logic applied to margins. Reinstating a multi-year margin target would be the cleanest signal that internal visibility has recovered.

Whether the new COO produces visible structural cost actions. A COO appointment nine months into a turnaround is an admission that operational cost structure has not yet been addressed. Watch for any FY2027 cost program disclosure or restructuring charge taken in H2 FY2026.

Sources

Nike Q2 FY2026 Press Release (Form 8-K Exhibit 99.1), filed December 18, 2025 — https://www.sec.gov/Archives/edgar/data/320187/000032018725000138/q2fy26exhibit991er.htm
Nike Q2 FY2026 earnings call prepared remarks and Q&A (Elliot Hill, Matt Friend)

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