Nike Q3 Earnings Show Mixed Results
Nike Q3 earnings showed an EPS beat but net income and margins fell and China sales weakened, pushing investors to weigh margin recovery and cash flow.
KEY TAKEAWAYS
- EPS $0.35 beat consensus $0.28 while revenue was $11.3 billion, flat reported.
- Net income fell 35% to $520 million and gross margin compressed 130 basis points to 40.2%.
- Greater China sales declined 17%, marking six consecutive quarterly drops and prompting new local leadership.
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Nike’s fiscal third-quarter earnings on March 31, 2026, showed per-share results above Street expectations despite a sharp year-over-year profit decline and ongoing weakness in China that complicate the company’s recovery.
Quarter Results and Balance Sheet
Nike, Inc. (NKE) reported in an 8-K filing and earnings release that its fiscal third quarter, ending February 28, 2026, generated revenue of $11.3 billion, flat on a reported basis and down 3.0% on a currency-neutral basis. Net income fell 35.0% year over year to $520 million, and diluted earnings per share declined 35.0% to $0.35. Wall Street had expected EPS of $0.28 on revenue of $11.24 billion.
Gross margin narrowed 130 basis points to 40.2%, mainly due to higher tariffs in North America. This left an EBIT margin of 5.6% and an effective tax rate of 20.0%, up from 5.9% a year earlier. Inventories totaled $7.5 billion, down 1.0% year over year. Cash, equivalents, and short-term investments stood at $8.1 billion, down $2.3 billion from the prior year as the company funded dividends, bond repayments, capital spending, and share repurchases.
Dividends returned $609 million in the quarter, up 3.0% year over year, extending a 24-year streak of payout increases. Total assets were $37.1 billion, long-term debt $7.0 billion, and shareholders’ equity $14.1 billion.
Channel results showed a split between wholesale and direct operations. Wholesale revenue rose 5.0% reported and 1.0% currency-neutral to $6.5 billion. Nike Direct revenue declined 4.0% reported and 7.0% currency-neutral to $4.5 billion. Converse revenue fell 35.0% year over year to $264 million, with EBIT turning negative.
The company did not provide explicit forward revenue or earnings guidance. Senior management identified Greater China as the most challenging part of the turnaround, describing the region as requiring a strategic reset without specifying targets.
China Sales Decline and Leadership Change
Greater China has experienced six consecutive quarters of sales declines. The latest quarter, covering December 2025, showed a 17.0% drop, contributing to a roughly 21.0% revenue erosion from the fiscal 2021 peak and a 50.0% decline in operating income over the same period. Greater China accounts for about 15.0% of Nike’s global revenue and is the company’s second-largest market after North America.
Competitive pressure has intensified as domestic rivals Anta and Li-Ning have gained share through more flexible supply chains and lower-priced retail distribution. Nike’s local operations have faced criticism for outdated retail outlets, sluggish inventory management, and insufficient investment in store refreshes, which have eroded its premium positioning.
In early 2026, Nike appointed Cathy Sparks, a 25-year company veteran, as vice president and general manager of Greater China, replacing Angela Dong. Investors will monitor whether margin recovery, cash generation, and improved execution in Greater China can reverse the recent deterioration.
The combination of margin compression, cash outflows from capital returns, and persistent China weakness will shape investor focus on margin recovery and execution in the region.
