Nike’s third quarter came in above expectations on revenue and earnings, with wholesale channels recovering and North America in growth. But a Q4 guidance miss — anchored by an expected 20% revenue decline in Greater China — sent shares down sharply after hours.
This article has been updated on 08:25 am CEST
Nike reported third-quarter revenues of $11.28 billion for the period ended February 28, 2026, beating analyst expectations — then watched its shares fall more than 8% in extended trading after management delivered a materially weaker outlook than markets had anticipated, anchored by a forecast 20% revenue decline in Greater China in the current quarter.
The result is the defining tension of the company’s ongoing turnaround under President and Chief Executive Elliott Hill: a quarter that shows genuine progress in some parts of the business, undercut by a guidance range that raised fresh questions about how long the full recovery will take.
Nike beats revenue expectations as wholesale gains offset weaker Direct sales
Revenue of $11.28 billion came in ahead of the consensus estimate of approximately $11.24 billion compiled by LSEG, and earnings per share of $0.35 exceeded expectations of $0.28. Net income of $520 million, however, was 35 percent lower than the $794 million recorded a year earlier — partly a function of a one-time non-cash tax benefit in the prior-year period that suppressed the comparable effective tax rate to 5.9 percent, against 20 percent this quarter.
| Line item | 9M FY2026 | 9M FY2025 | % change |
|---|---|---|---|
| Revenues | $35,426m | $35,212m | +1% |
| Cost of sales | $20,908m | $19,891m | +5% |
| Gross profit | $14,518m | $15,321m | –5% |
| Gross margin | 41.0% | 43.5% | |
| Demand creation expense | $3,551m | $3,436m | +3% |
| Operating overhead expense | $8,481m | $8,504m | 0% |
| Total selling & administrative expense | $12,032m | $11,940m | +1% |
| % of revenues | 34.0% | 33.9% | |
| Income before income taxes | $2,571m | $3,567m | –28% |
| Income tax expense | $532m | $559m | –5% |
| Effective tax rate | 20.7% | 15.7% | |
| Net income | $2,039m | $3,008m | –32% |
Gross margin contracted 130 basis points to 40.2 percent, with Chief Financial Officer Matthew Friend attributing approximately 300 basis points of that pressure specifically to higher U.S. tariffs in North America. The quarter also absorbed $230 million in employee-related severance costs, primarily in supply chain and technology — charges Friend described as a deliberate reset of the cost base to improve long-term profitability as the company moves away from the fixed-cost structure built during the pandemic.
Wholesale back in growth, DTC retreats
The quarter’s clearest structural signal was the ongoing channel rebalancing. Wholesale revenues rose 5 percent to $6.5 billion, driven by North America, where the brand has been rebuilding retail partnerships after years of prioritizing its own direct channels. Nike Direct revenues fell 4 percent to $4.5 billion, with Nike Brand Digital down 9 percent and Nike-owned stores contracting 5 percent — in part a managed reduction in discounting rather than pure demand erosion.
Friend noted that February was the first month in two years in which North America recorded positive growth across all channels simultaneously.
On the earnings call, Hill described the wholesale recovery in North America in concrete terms: the NBA All-Star Weekend drove full-price sell-through and deepened partnerships with Shoe Palace, Dick’s Sporting Goods and Foot Locker in Los Angeles, an experience he characterized as a rehearsal for the brand’s presence at the World Cup 2026, the Super Bowl and the 2028 Olympics.
North America and running — the proof points
North America revenues grew 3 percent to $5.03 billion, just below the StreetAccount estimate of $5.04 billion but broadly in line with management’s own expectations. Hill singled out Nike Running — up more than 20 percent in the quarter — as the clearest evidence that the sport-led “offense” strategy is working and the template other categories will follow. Global football and basketball also grew, while sportswear continued to decline double digits, reflecting an intentional pullback from classic footwear franchises that Hill said created roughly a five-point headwind to reported results.
“It was intentional, it was necessary,” Hill said of the inventory reduction, adding that it is improving marketplace health and laying the foundation for more sustainable growth.
| Region / category | 9M FY2026 | 9M FY2025 | % chg | % chg (currency-neutral) |
|---|---|---|---|---|
| North America | ||||
| Footwear | $10,087m | $9,580m | +5% | +5% |
| Apparel | $4,765m | $4,534m | +5% | +5% |
| Equipment | $827m | $755m | +10% | +10% |
| Total | $15,679m | $14,869m | +5% | +5% |
| Europe, Middle East & Africa | ||||
| Footwear | $5,822m | $5,676m | +3% | –3% |
| Apparel | $3,228m | $3,042m | +6% | 0% |
| Equipment | $547m | $539m | +1% | –5% |
| Total | $9,597m | $9,257m | +4% | –2% |
| Greater China | ||||
| Footwear | $3,250m | $3,731m | –13% | –14% |
| Apparel | $1,201m | $1,244m | –3% | –5% |
| Equipment | $99m | $135m | –27% | –27% |
| Total | $4,550m | $5,110m | –11% | –12% |
| Asia Pacific & Latin America | ||||
| Footwear | $3,263m | $3,338m | –2% | –3% |
| Apparel | $1,209m | $1,143m | +6% | +5% |
| Equipment | $175m | $195m | –10% | –11% |
| Total | $4,647m | $4,676m | –1% | –2% |
| Global Brand Divisions | $25m | $39m | –36% | –34% |
| Total Nike Brand | $34,498m | $33,951m | +2% | 0% |
| Converse | $930m | $1,335m | –30% | –32% |
| Corporate | ($2m) | ($74m) | — | — |
| Total Nike, Inc. Revenues | $35,426m | $35,212m | +1% | –1% |
Converse deserves a separate reading. Revenues at the subsidiary fell 35 percent to $264 million, with declines across every territory. The brand swung to an EBIT loss of $40 million in the quarter, against a $39 million profit a year earlier. No strategic repositioning was announced in the earnings release.
Greater China: revenue falls, margins recover - for now
Greater China revenues fell 7 percent on a reported basis (down 10 percent currency-neutral) to $1.615 billion in the quarter, but beat the StreetAccount estimate of $1.50 billion. Notably, the segment’s earnings before interest and taxes improved 11 percent, reflecting a deliberate prioritization of margin over volume — cleaning up digital channels, pulling key styles off discount, and expanding the Nike store pilot to 100 doors including a House of Innovation in Shanghai.
Friend acknowledged the structural challenges plainly on the call: digital sell-through improvement remains sequential but incomplete, partner inventory is still elevated, and new leadership is now in place to drive the next phase of restructuring. The company expects the Greater China cleanup to remain a revenue headwind through fiscal 2027, while profitability “should bottom sooner” as marketplace management makes progress.
The guidance that moved the stock
What sent NKE shares down more than 8 percent in after-hours trading — and contributed to a 8.7 percent drop at the open of Frankfurt trading the following morning — was the Q4 outlook.
Friend guided for fiscal Q4 revenues to decline between 2 and 4 percent, against a Wall Street consensus that had anticipated a 1.9 percent increase. The central driver: Greater China revenue is expected to fall approximately 20 percent in Q4, reflecting accelerated marketplace cleanup actions on top of the reduced sell-in already flagged last quarter.
For the full calendar year through December 2026, management projected revenues to decline by a low single-digit percentage overall, with North America growth offset by China declines. Friend also cautioned that this guidance assumed no significant deterioration in the current geopolitical environment, noting Middle East disruption, rising oil prices and potential tariff changes as factors the company cannot control.
On gross margin, Friend indicated the tariff headwind will persist through the first quarter of fiscal 2027, with margin expansion expected to begin in Q2 FY2027. Nike plans to host an Investor Day at the Philip H. Knight Campus in Beaverton later in 2026 calendar year, where it will provide longer-term financial targets.
The turnaround framing and its limits
Hill’s prepared remarks on the call leaned on an extended Camp Nou metaphor: FC Barcelona rebuilding its stadium tier by tier while still competing at the highest level. The image is coherent and the underlying logic — fixing the foundation without stopping the business — is defensible.
But the market’s response reflects an investor base that is recalibrating its timeline expectations. Eighteen months into Hill’s tenure, the parts of the portfolio that were prioritized first are showing results. The parts that were not — Greater China, Converse, and the sportswear/streetwear franchise — remain in varying states of earlier-stage restructuring, with no clear inflection date visible from the current vantage point.
Converse, which swung from a $39 million EBIT contribution a year ago to a $40 million loss this quarter on revenues down 35 percent, received brief acknowledgment from Hill as a “beloved brand” with long-term prospects — but no repositioning timeline or strategic detail was offered.
“The work is not finished, but the direction is clear, our teams are moving with focus and urgency,” Hill said.
No, the work is not finished.
See also: NIKE Investor Relations Consolidated Statement of Income (Inaudited)
