• Nike (NKE) shares plunged over 10%, the steepest drop since April, driven by a 17% decline in China sales, worsening from a 9% fall in the prior quarter.
  • Revenue of $12.43 billion for Q2 ended November 30, 2025, exceeded estimates, but net income dropped 32% year-over-year to $792 million amid margin pressures and inventory clearance.
  • Analysts remain cautiously optimistic long-term, citing product resets and strategic shifts in China, though Q3 guidance forecasts a low-single-digit revenue decline.

Nike's latest quarterly results, released on December 19, 2025, delivered a mixed bag that sent shockwaves through the market. While the sportswear giant topped revenue expectations with $12.43 billion, up slightly year-over-year, investors zeroed in on a deepening crisis in China, where sales plummeted 17%. This marked a sharp deterioration from the 9% decline in the previous quarter, overshadowing beats elsewhere and triggering the stock's worst single-day performance in months.

The China slump, which accounts for about 15% of Nike's revenue, has become a persistent headache, exacerbated by fierce competition from local rivals like Anta (ANTA) and Li-Ning (3968.HK). Digital sales in the region nosedived 36%, according to people familiar with the matter, highlighting the challenges in a market where consumer sentiment remains weak. In response, CEO Elliott Hill emphasized efforts to reset the China strategy, including store refreshes and addressing monobrand retail limits, but without a swift turnaround, the company risks further erosion in its key growth engine.

Gross margins contracted by 3 percentage points, squeezed by higher North American tariffs and inventory clearance initiatives, even as North America posted a 9% sales gain and EMEA grew 3%. The Converse brand also showed weakness, adding to concerns ahead of a Q3 forecast that predicts a low-single-digit revenue decline. "We're seeing uneven recovery across regions," Hill said in a statement, underscoring the focus on streamlining products and rebuilding partnerships amid softening traffic.

Analysts offered a tempered outlook. Jefferies maintained a Buy rating with a $110 price target, citing product resets as a potential catalyst for growth, while KeyBanc's Overweight rating and $90 target point to sustainable revenue prospects. Morningstar's $104 fair value estimate hinges on innovation and marketing driving a return to growth, and BTIG views the margin dip as a step toward long-term profitability. Efforts to reach Nike for additional comment were not immediately successful.

In broader context, Nike's struggles contrast with positive forecasts from peers like Lululemon (LULU), highlighting the sportswear sector's fragmented recovery. The stock's sharp decline reflects investor impatience with China's prolonged turnaround, which has now extended beyond initial expectations. As the company navigates tariff pressures and inventory challenges, all eyes will be on whether its "Win Now" initiatives can stem the bleeding in time for a holiday season rebound.