Nike Beats Expectations But Tariff Windfall Masks a Deeper Struggle

A Beat With an Asterisk

Nike posted quarterly earnings and revenue that topped Wall Street expectations , but investors weren't exactly celebrating. The headline numbers told one story — the underlying reality told another. Nike reported fiscal fourth-quarter earnings of 72 cents per diluted share, a figure that included a 52-cent benefit tied to the anticipated recovery of import tariffs. Strip out that tariff windfall and the per-share profit came to just 20 cents.

A $986 million anticipated refund of duties collected under the International Emergency Economic Powers Act provided the primary lift to the headline number, pushing gross margin up roughly 900 basis points to 49.2%. Without it, the picture looks far less rosy. Net sales in the quarter tallied $10.97 billion, down 1 percent from the fourth quarter last year on a reported basis, and down 4 percent on a currency-neutral basis.

Where the Pain Is Coming From

Nike reported a 12% drop in sales in its Greater China market. That's a significant blow for a brand that has long counted on China as one of its most important growth engines. Nike Direct revenues were $4.1 billion, down 7 percent on a reported basis and down 9 percent on a currency-neutral basis, due to a 12 percent decrease in Nike Brand Digital and a 7 percent decrease in Nike-owned stores.

Revenues for Converse in Q4 were $244 million, down 32 percent on a reported basis and down 34 percent on a currency-neutral basis, due to declines across all territories. CEO Elliott Hill didn't sugarcoat it. "Overall, the results aren't there yet," Hill said. "We know we're not living up to our full potential, particularly in Nike sportswear and Jordan streetwear, where sell through remains challenged, impacting both current discounting and future order books."

The Turnaround Plan and Its Growing Pains

The quarter reflected Nike's intentional strategic pivot, with wholesale revenues climbing 5% to $6.50 billion while Nike Direct slipped 4% to $4.50 billion, underscoring the company's deliberate rebalancing toward retail partners under its "Win Now" framework. Performance business grew mid-single digits, led by Running, Football, and Basketball, while Sportswear and Jordan streetwear remained challenged.

For the full fiscal year 2026, net income was $3.11 billion, down 3 percent from $3.22 billion in fiscal 2025. Diluted earnings per share was $2.10, a decrease of 3 percent from $2.16. Net sales for the full year tallied $46.4 billion, flat on a reported basis and down 2 percent on a currency-neutral basis. The company's stock is down nearly 42% over the last year, owing to weakness in key markets in North America and China.

What Comes Next

Outgoing CFO Matthew Friend cautioned that sell-through continues to struggle and offered no relief for investors, saying conditions in the marketplace were unlikely to get better through at least the first half of fiscal 2027. The company reiterated guidance expecting earnings to be "flattish" through the first two quarters of fiscal 2027, and also expects gross margin for the first fiscal quarter of 2027 to be slightly positive.

A growing chorus of analysts are looking for signs of demand recovery, with some even touting that Nike might now be undervalued at its $61.4 billion market capitalization. Investments in supply chain, technology, and marketplace elevation were prioritized, with over 15,000 wholesale spaces and 150 Nike Direct stores refreshed. The Swoosh has been here before — battered, questioned, and ultimately resilient. Whether the "Win Now" strategy delivers real wins, or just manages the decline more gracefully, is the question Wall Street will be watching closely in the months ahead.