Nike Shares Tumble as Margin Pressures and China Slump Persist

Summary

• Nike shares dropped 10% after reporting Q2 fiscal 2026 results that saw net income fall 32%
• Greater China continues to be a major hurdle, with revenue sliding 17% for the sixth straight quarter, even as North American wholesale growth provided a slight boost to overall revenue
• CFO Matthew Friend confirmed that $1.5 billion USD in annualized tariff costs from Southeast Asia is severely impacting profitability, though the company remains committed to its long-term strategy of prioritizing core sports and retail partnerships.

Nike’s arduous journey back to the top hit another snag this week as the sportswear giant reported a fresh set of financial hurdles. Despite a modest revenue beat of $12.4 billion USD — up 1% year-on-year—the company’s stock plunged 10% following a sobering Q2 earnings call on December 18, 2025. While top-line figures showed resilience, the underlying “profitability bleed” has left investors questioning the speed of the brand’s comeback.

The most significant drag remains Greater China, where sales plummeted 17%, marking the sixth consecutive quarter of decline in the region. This structural weakness, coupled with a 32% drop in net income, highlights a difficult transition period for the company. CFO Matthew Friend revealed that a new regime of tariffs on Southeast Asian manufacturing has become a primary antagonist, costing the company an estimated $1.5 billion USD this year alone. This headwind contributed to a sharp 300-basis-point contraction in gross margins, with further declines expected in the coming months.

CEO Elliott Hill remains steadfast, describing the company as being in the “middle innings” of a strategic reset. The “Sport Offense” recovery plan focuses on re-energizing core categories like running and strengthening ties with wholesale partners to regain market share from agile competitors like On and Hoka. However, the move back to third-party retail—while driving volume—is temporarily hurting margins through increased discounting. For Nike, the path to a “virtuous cycle” of full-price sales and brand heat is proving to be a marathon, not a sprint.