To The Moon

$Nike(NKE)$ is expected to report its fiscal Q1 2026 earnings on Tuesday, September 30, 2025, after the market close. The general consensus points to a challenging quarter, largely due to management's "Win Now" turnaround strategy and external macroeconomic pressures.

Summary Write-up of Nike (NKE) Fiscal Q4 2025 Earnings

Nike reported its fiscal fourth quarter (Q4) 2025 earnings which, while showing significant year-over-year declines, surpassed analysts' lowered expectations for both revenue and earnings per share (EPS). The quarter, which ended May 31, 2025, was described by management as a transitional and "bottoming-out" point in the company's "Win Now" transformation strategy.

Key Financial Highlights (Q4 FY2025 vs. Q4 FY2024):

Revenue: $11.1 billion, down 12% (reported) and 11% (currency-neutral) year-over-year, but still beat the consensus forecast.

Earnings Per Share (Diluted EPS): $0.14, a substantial 86% decline year-over-year, but exceeded the analyst forecast.

Gross Margin: Fell significantly by 440 basis points to 40.3%, primarily due to higher discounts used for clearing excess inventory and shifts in channel mix.

NIKE Direct: Revenue decreased 14%, driven by a sharp 26% drop in NIKE Digital sales, partially offset by a modest increase in NIKE-owned stores.

Geographic Performance: All geographies saw revenue declines, with Greater China experiencing the most significant drop at 20%.

The overall weak results were largely attributed to the ongoing efforts to clear out an oversupply of classic lifestyle products and a strategic shift to reduce aggressive discounting, particularly in the digital channel, to reposition the brand as more premium. The positive market reaction despite the weak numbers suggested investors were focused on the management's confidence that the worst of the cleanup phase was over and that the actual results were better than anticipated.

Lesson Learnt from the Guidance Given

The primary lesson learned from Nike's Q4 2025 guidance for the upcoming fiscal year (FY2026) is the acknowledgment that a major strategic transformation requires near-term pain for long-term gain, and that Digital and China are the primary battlegrounds for the turnaround.

Key Lessons from FY2026 Guidance:

1. The Turnaround is a Multi-Quarter Effort (Near-Term Pain):

Guidance: Nike expects revenue for Q1 FY2026 to decline in the mid-single digits, with gross margins remaining under pressure in the first half of FY2026 (including a 350-425 basis point hit to gross margin in Q1).

Lesson Learned: Investors and the company must have patience. The effort to clean up inventory, reset the brand, and pivot strategy is not a quick fix. The financial headwinds (like lower revenues and gross margins) are expected to persist throughout the first half of the new fiscal year before potential moderation in the second half.

2. The Digital Premium is a Hard Reset:

Guidance: Management expects digital traffic and sales to decline by double digits as they reposition NIKE Digital to a full-price, more premium model.

Lesson Learned: Chasing sales volume through aggressive digital discounting can dilute brand equity. Nike is prioritizing brand integrity and profitability over digital volume, meaning they are willing to accept lower digital sales in the short term to make their online channel a more exclusive and less promotional destination. This is a deliberate, difficult choice to "rightsize" key popular but over-distributed franchises (like the Air Force 1, Dunk, and AJ1).

3. Strategic Investment in Growth is Non-Negotiable:

Guidance: Selling and Administrative (SG&A) expenses are expected to increase by a low-single-digit rate as the company strategically invests in demand creation (marketing) to reignite brand engagement. They are organizing into a new "Sport Offense" structure focused on performance categories like running and basketball.

Lesson Learned: Even during a period of declining revenues, a strong brand must continue to invest in innovation and consumer connection to secure future growth. Pulling back on marketing and R&D during a slump risks permanent brand damage and losing ground to competitors.

4. External Headwinds Require Internal Adaptability:

Guidance: New tariffs represent a meaningful and non-recurring cost headwind (estimated at approximately $1 billion). The recovery in Greater China is expected to "take longer" due to unique marketplace characteristics.

Lesson Learned: The company must be nimble and execute multi-faceted mitigation strategies (e.g., sourcing mix optimization, surgical price increases, corporate cost reduction) to manage unpredictable external factors like tariffs and geopolitical complexity, especially in a critical market like China.

Analysis of Upcoming Q1 2026 Earnings

The consensus from Wall Street analysts for Q1 fiscal 2026 earnings indicates significant year-over-year declines in both the top and bottom lines. This expectation is largely baked into the stock price following cautious guidance from management in the previous quarter.

Key Context:

"Win Now" Strategy Impact: Management has indicated that the first half of fiscal 2026 would be the most difficult period as the company executes its turnaround plan. This involves streamlining operations, accelerating innovation (e.g., Vomero 18, Pegasus Premium), and repositioning its digital and wholesale channels for premium, full-price selling.

External Headwinds: The company is managing pressures from weak demand in lifestyle categories, inventory correction efforts (leading to higher discounting/obsolescence), and the structural challenge of new U.S. tariffs, which management expects to have a substantial negative impact on gross margin in the first half of the year.

Earnings Beat Potential: Despite the gloomy outlook, the stock has a history of beating low consensus estimates. Some predictive models, like the Zacks Earnings ESP, suggest a likelihood of an EPS beat for this quarter.

Key Metrics Investors Should Watch

Since the expected headline numbers (Revenue and EPS) are already low, investor focus will be heavily skewed toward signs that the "Win Now" strategy is beginning to stabilize the business and provide confidence in the second half of the fiscal year (H2 2026).

Nike (NKE) Price Target

Based on 33 analysts from Tiger Brokers offering 12 month price targets for Nike in the last 3 months. The average price target is $80.52 with a high forecast of $120.00 and a low forecast of $38.00. The average price target represents a 16.17% change from the last price of $69.31.

Opportunity for Trading Short-Term Post-Earnings

Trading NKE post-earnings is high-risk/high-reward due to the high volatility the stock has shown around recent reports. The market has generally been punishing for weak results but rewards clear signs of a path to recovery.

Bullish Outcome (The "Beat & Raise"): EPS/Revenue modestly beats consensus, AND management provides more optimistic or less cautious forward guidance (especially on Gross Margin or China).

Market Reaction & Potential Trade Idea: Likely Strong Upside. The market could quickly price in a quicker turnaround. Previous quarter's beat and positive commentary resulted in a +15% jump. Trade: Long position, potentially using calls or vertical call spreads to define risk.

Neutral/Mixed Outcome: EPS beats (due to cost control) but Revenue misses or is at the low end, AND guidance remains cautious or is slightly reduced.

Market Reaction & Potential Trade Idea: Likely Neutral to Negative Volatility. The market may focus on the top-line weakness and margin pressure. The stock could open flat-to-down, trading in a tight range. Trade: May present an opportunity for a high-risk long position if the stock sells off disproportionately, targeting a quick bounce back to technical support (∼$69-$70 range).

Bearish Outcome (The "Double Miss"): Misses on both EPS and Revenue, AND guidance is significantly lowered, suggesting the "Win Now" strategy is faltering.

Market Reaction & Potential Trade Idea: Likely Significant Downside. Investors will panic sell as the turnaround timeline gets pushed out further. Trade: Short position, potentially using puts or vertical put spreads, targeting a break of key technical support levels.

Technical Analysis - Exponential Moving Average (EMA)

Nike really need to provide an earnings surprises for investors to see confidence and start loading, because we are seeing negative momentum forming and with the 26-EMA crossing the 50-EMA from above, which could mean a downward trend coming.

Persistent weakness in the greater china market and also Nike is facing with ageing lifestyle product, these could impact the “Win Now” turnaround strategy, so I will be watching how the results would turned out with this turnaround strategy.

Summary

Nike (NKE) is expected to report a challenging start to its fiscal year, with analysts generally forecasting a sharp year-over-year decline for Q1 2026 earnings and a modest drop in revenue.

Consensus Estimates:

EPS: Expected to be around $0.27−$0.28, a significant decline from $0.70 in Q1 2025.

Revenue: Projected to be approximately $11 billion, reflecting a mid-single-digit percentage decline.

Key Factors Driving the Outlook:

The cautious outlook stems from the continued impact of Nike's "Win Now" turnaround strategy. Management has indicated that this quarter is expected to feel the full weight of its operational reset. Challenges include:

Persistent weakness in the Greater China market.

Pressure on gross margins due to higher promotions, shifts in channel mix, and a structural headwind from new U.S. tariffs.

Restructuring efforts focusing on core sports performance and a shift away from some aging lifestyle products.

Despite the weak guidance, there is underlying optimism that the restructuring is laying the groundwork for a long-term recovery, with some analysts predicting a gradual improvement in performance later in the fiscal year.

Appreciate if you could share your thoughts in the comment section whether you think Nike would be able to overcome the persistent weakness in the China market.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.