Nike is losing China — and the stock falls 10%

Nike $NKE stock tanked about 10% on Friday, despite posting quarterly earnings on Thursday that surpassed Wall Street's estimates.

For the quarter ending Nov. 30, 2025, the retail giant reported $12.4 billion in revenue, a year-over-year increase of about 1% after a series of declines. Earnings per share came in at $0.53. Both revenue and earnings sit comfortably above consensus estimates from LSEG of around $12.1 billion and $0.37, respectively.

While Nike beat analysts' forecasts, digging beneath the top line reveals a thornier picture of tariff pressures and weak sales in China, thus failing to convince investors of a clear path to sustained growth.

Net income tumbled roughly 32% from the prior year, while gross margins shrank by 300 basis points to around 40.6%, and inventories dropped 3%, primarily due to higher tariffs.

Nike Direct revenues — the company’s higher-margin direct-to-consumer channels, including Nike-owned stores and digital business— slid about 8%. Digital sales alone declined double digits, hinting that consumers aren’t flocking to Nike’s own platforms as strongly as hoped.

China also remains a weak spot. Sales in Greater China fell sharply — shrinking 17% to roughly $1.42 billion, continuing a multi-quarter slump that has frustrated investors and undercut hopes for a global rebound.

Nike also projected that the impact of tariffs and competitive dynamics won’t ease immediately, forecasting a slight revenue decline in the next quarter and continued margin pressure.

In a bid to reassure investors, Nike’s leadership is trying to frame this as a mere blip, and part of a broader turnaround.

Describing the quarter as “in the middle innings of our comeback," CEO Elliott Hill, highlighted efforts to rebalance the portfolio, strengthen wholesale partnerships, and lean into core sport categories. CFO Matthew Friend echoed: "We are making the shifts required to position our portfolio for a full recovery [...]."

The juxtaposition of solid headline numbers paired with underlying weakness in its direct-to-consumer business encapsulates where Nike finds itself: a globally iconic brand that has steadied its top line, yet still grapples with persistent tariff pressures and lingering doubts about its turnaround.

Analysts and investors are torn between competing narratives: a story of stabilization or merely a pause in a much slower rebound cycle.