Nike’s earnings beat on Tuesday turned into a significant after-hours rout, with shares falling around 9% as investors focused not on the quarterly numbers but on the guidance that accompanied them, specifically a forecast of revenue declining 2% to 4% in the fiscal fourth quarter and continuing to fall throughout the rest of 2026.
Analysts had been expecting guidance of roughly 2% revenue growth for the current quarter and larger gains deeper into the year. Management citing “volatility” from the Iran war and tariffs as factors in the outlook downgrade is entirely defensible, but it extends the period during which the company cannot demonstrate the turnaround is actually working.
China is the most acute problem. Revenue in Greater China fell 7% in Q3, the seventh consecutive quarterly decline, and China earnings before interest and taxes came in at $467 million versus analyst estimates of $269.5 million, one of the few genuinely positive surprises in the report. But the broader China trajectory, six straight quarters of revenue decline in the company’s most important long-term growth market, continues to weigh heavily on the investment case.
Nike CEO Elliott Hill said: “This quarter we took meaningful actions to improve the health and quality of our business. The work is not finished, but the direction is clear, our teams are moving with focus and urgency, and our foundation is getting even stronger to build the future of NIKE.” That language is consistent with a multiyear turnaround story, which is precisely the issue for investors who expected faster progress.
Gross margin fell 130 basis points to 40.2%, “primarily due to higher tariffs in North America,” with management warning of further gross margin pressure ahead. The company is exposed on multiple fronts simultaneously: tariff costs on manufacturing in Vietnam, Indonesia and China, Iran war supply chain disruption, China demand weakness and a digital direct-to-consumer channel that is not recovering as quickly as management projected.
