Nike reported fiscal 2026 Q2 revenue of $12.43 billion, up 1% year‑over‑year on a reported basis and flat on a currency‑neutral basis, and diluted earnings per share of $0.53, a $0.15 beat to the consensus estimate of $0.38. The company’s gross margin fell to 40.6%, a 300‑basis‑point decline from the prior quarter, reflecting the combined impact of higher U.S. tariffs and aggressive inventory clearance actions.
North America revenue grew 9% to $5.2 billion, driven by strong demand in the running and lifestyle segments, while wholesale sales increased 8% to $1.9 billion. Greater China revenue dropped 17% to $1.1 billion, largely due to a sharp decline in Nike‑Brand Digital and Nike‑Owned Store sales and inventory obsolescence. Nike Direct revenue fell 8% to $2.3 billion, with the decline concentrated in digital channels; Converse revenue also slipped, contributing to the overall Direct‑to‑Consumer weakness.
The margin contraction is largely attributable to a 330‑basis‑point headwind from new U.S. tariffs on Southeast Asian‑manufactured goods and a 300‑basis‑point inventory‑clearance effect that reduced the average cost of goods sold. The company’s CFO noted that North America’s gross margin was down 330 basis points despite a 500‑basis‑point product‑cost headwind, underscoring the severity of tariff costs.
Nike guided third‑quarter revenue to decline in the low single‑digit range and projected gross margin contraction of 175–225 basis points, signaling continued pressure from tariffs and inventory challenges. CEO Elliott Hill described the quarter as part of the company’s “middle innings” comeback, emphasizing progress in running and wholesale channels while acknowledging that China remains a significant drag on growth.
Market reaction was muted, with investors focusing on margin compression and persistent weakness in Greater China. Despite the earnings beat, the company’s guidance and the headwinds from tariffs and inventory obsolescence tempered enthusiasm, reflecting concerns about the speed of the recovery.
Management reiterated confidence in the “Win Now” strategy, noting that the company is realigning teams, strengthening partner relationships, and rebalancing its portfolio. Hill highlighted that tariffs remain a “significant headwind” and that the company is “slightly better than we had anticipated 90 days ago” but still “nowhere near our potential.”
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