$Nike(NKE)$’s upcoming Fiscal Q2 2026 earnings, which is scheduled for release on Thursday, December 18, 2025, suggests a highly anticipated report amidst a challenging period for the company.
Earnings Preview and Analysis
Consensus expectations point toward a year-over-year decline in both the top and bottom lines, largely reflecting difficult macroeconomic conditions, competitive pressure, and the temporary effects of Nike's strategic "Win Now" turnaround initiative.
Key Analyst Expectations:
Near-Term Pressure: Management's own guidance has been soft, reflecting ongoing revenue pressure as the company phases out legacy lifestyle franchises and navigates a challenging demand environment.
Gross Margin Headwinds: Profitability is expected to be under strain. Analysts forecast a significant drop in Gross Margin (around 300-375 basis points) due to:
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Higher tariffs (estimated basis points impact).
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Increased promotional activity.
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Unfavorable channel mix shifts.
Operating Expense: Selling, General, and Administrative (SG&A) expenses are expected to rise (high-single digits) due to increased investment in demand creation.
Signs of Stabilization: Despite the expected decline, analysts are looking for "green shoots" indicating the turnaround strategy is working, particularly stabilization in the wholesale business and North America region.
Summary of Nike (NKE) Fiscal Q1 2026 Earnings
Nike's Fiscal Q1 2026 (ending August 31, 2025) report delivered a significant "double beat" on both the top and bottom lines, yet the results highlighted an uneven path for the company's turnaround plan, dubbed "Win Now."
Key Financial Results (Q1 FY2026)
Drivers and Challenges
Wholesale Strength: The primary driver of the revenue beat was the Wholesale channel, which grew 7% (reported) as partners restocked inventory, signaling improved marketplace health in key regions.
Regional Bright Spot: North America and EMEA showed growth, validating the initial focus of the "Win Now" actions. North America revenue grew by 4% (reported).
Profitability Pressure: Despite the revenue beat, Gross Margin declined 320 bps due to aggressive promotional activity (higher discounts) to clear out slow-moving inventory (especially legacy lifestyle products like the Dunk and Air Force 1) and an increased financial hit from tariffs in North America.
Digital/Direct Weakness: The shift back to wholesale and the clearing of old inventory hurt the once-vaunted NIKE Direct segment, which saw revenues fall 4% (reported), with Digital Sales dropping significantly by 12%.
Greater China Headwind: Greater China continued to be a major drag, with revenue declining 9% (reported) and a sharp 27% drop in its digital channel, highlighting persistent market-specific challenges.
Lesson Learned from Q2 2026 Guidance
The main lesson learned from the forward guidance provided during the Q1 earnings call is that the turnaround will be non-linear, and profitability will be sacrificed for marketplace health in the near term.
1. The Revenue Recovery is Iffy (Beware of Head Fakes)
Q2 Revenue Guidance: Nike guided for low single-digit revenue decline (including a low single-digit drop on a currency-neutral basis).
Lesson: The one-time boost from wholesale restocking in Q1 did not translate into a sustained recovery. Management is signaling that the fundamental work of retiring old franchises and introducing new, full-price innovation (the Sport Offense) will continue to weigh on the top line through the first half of the fiscal year. The market should not expect consistent revenue growth until the second half of FY2026.
2. Gross Margin is the Key Vulnerability (The Cost of Cleaning Up)
Q2 Gross Margin Guidance: Nike guided for a 300-375 bps contraction in Gross Margin for Q2.
Tariff Increase: Nike also announced an increased headwind from tariffs, boosting the full-year impact from bps to bps, translating to an expected bps headwind in Q2.
Lesson: The company is intentionally prioritizing a "clean marketplace" over short-term profit margins. The heavy discounting needed to move old inventory, combined with the structural headwind from tariffs, means that profitability will remain the biggest pressure point until the new, high-margin product cadence (like new Running models and the Sport Offense) truly hits scale in the second half.
The Q1 earnings provided a much-needed sentiment beat that the turnaround is starting, driven by initial success in North America and Running. However, the subsequent guidance made it clear that Q2 will feel the full brunt of the financial pain—with declining revenue and sharply compressed margins—as Nike completes the deep, painful work of its strategic reset.
Key Metrics Investors Should Watch
Investors and traders should focus on the following metrics, as positive surprises or disappointments here are most likely to drive stock movement:
1. Gross Margin and Profitability
Why it Matters: This is the most crucial metric for measuring the health of the business and the effectiveness of the "Win Now" strategy, which aims to restore brand energy and reduce market-cleaning promotions.
What to Watch:
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Reported Gross Margin: Did the decline fall within or beat the company's prior guidance (300-375 bps decline)?
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Guidance for Q3 and Full Year: Any indication that gross margin is stabilizing or improving faster than expected would be a major positive catalyst.
2. Regional Revenue Growth
Why it Matters: Provides insight into global demand and the success of localized strategies.
What to Watch:
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North America Revenue (NA): Consensus expects modest growth (). Outperforming this would signal a successful anchor for the turnaround.
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Greater China (GC) Revenue: Consensus expects a significant decline ( to ). Performance better than this weak expectation would be a huge relief, as China is a major risk factor.
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EMEA (Europe, Middle East, Africa): Look for continued modest growth () and commentary on improving inventory levels and a shift toward full-price selling.
3. Inventory Levels
Why it Matters: High inventory levels force promotional activity, which damages brand equity and crushes margins. A continued reduction signals a healthier marketplace.
What to Watch: The absolute value of Inventory on the balance sheet and management's commentary on the quality and health of inventory across regions.
4. Future Guidance (Q3 FY2026 and Full Year)
Why it Matters: For a long-term growth stock like NKE, forward guidance often outweighs the current quarter's results.
What to Watch: Any sign of a conservative guide, especially for the second half of the fiscal year, could pressure the stock. Conversely, a better-than-expected outlook would be a strong bullish signal.
Nike (NKE) Price Target
Based on 36 analysts from Tiger Brokers app offering 12 month price targets for Nike in the last 3 months. The average price target is $82.80 with a high forecast of $120.00 and a low forecast of $38.00. The average price target represents a 23.37% change from the last price of $67.12.
Opportunity for Trading Short-Term Post-Earnings
Post-earnings trading opportunities are high due to elevated uncertainty. The options market is currently pricing in an implied volatility for a post-earnings move of around 7.4% in either direction, which is slightly higher than the historical average of .
Bullish Scenario (Buy Opportunity):
What to Look For: An Earnings Beat (EPS $0.38) paired with positive forward guidance for Q3 and the full year. Crucially, stronger-than-expected Gross Margin and better-than-feared Greater China results would signal that the transition to more sustainable growth is accelerating.
Trade Rationale: The market may view the decline in Q2 as the "trough" of the turnaround, leading to a relief rally.
Bearish Scenario (Short Opportunity):
What to Look For: A Miss on EPS/Revenue combined with a weak outlook/guidance for Q3 or the full year. Any commentary suggesting that the turnaround is stalling, particularly in North America or if inventory levels remain stubbornly high, would be a strong negative catalyst.
Trade Rationale: An admission of continued near-term friction would confirm investor fears about competitive pressures and weak demand, leading to a sharp drop.
Technical Analysis - Exponential Moving Average (EMA)
We are seeing NKE bulls to make an upside but effort seem to be tough as now it is trading sideway in a negative RSI momentum situation. So with the consumer spending expected to slow down, would Nike be able to regain its customer base in North America?
If Nike could provide a surprise on its gross margins due to an increase of customer spending coming back in the North America, we should be able to see an upside significantly, and a short rally might also be possible if Nike provide a much strong positive outlook for next quarter and beyond.
So I am watching Nike to see how this sports brand would continue to navigate the challenging environment, as some of their products that I am using have served me well over the years.
Summary
Nike (NKE) is expected to report its fiscal Q2 2026 earnings (for the period ending November 30, 2025) on December 18, 2025. Consensus estimates project a year-over-year decline in both the top and bottom lines, reflecting the near-term pain of its "Win Now" turnaround strategy.
Key Expectations
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Revenue: Expected to decline by 1.7% YoY to $12.2 Billion.
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EPS: Expected to decline sharply by 52.6% YoY to $0.37 per share.
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The Headwind: This decline is driven by management's cautious guidance, significant pressure on Gross Margin due to heavy promotional activity to clear old inventory, and the impact of higher tariffs (estimated at 175 bps in Q2).
Key Metrics to Watch
Investors are focused on signals that the turnaround is taking hold:
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Gross Margin: Did the decline meet or exceed the guided 300-375 bps contraction? This measures marketplace health.
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North America/EMEA Momentum: Look for modest growth and commentary on improved wholesale order flow.
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Greater China: A major risk factor; better-than-feared results here would be a significant positive.
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Forward Guidance: Any sign of stabilization or a stronger outlook for the second half of FY2026.
Trading Opportunity
The options market implies a post-earnings stock move of around 7.4%. A Bullish catalyst would be a surprise on Gross Margin coupled with a strong outlook. A Bearish result would stem from a weakness in the core North America region or a lack of clarity on the full-year recovery plan.
Appreciate if you could share your thoughts in the comment section whether you think Nike could provide a surprise on its gross margin and also with a strong outlook for next quarter and beyond.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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