VALUATION HIGHLIGHTS

1. Nike Brand Footwear constitutes 64% of the Trefis price estimate for NIKE's stock.
2. Nike Brand Apparel constitutes 28% of the Trefis price estimate for NIKE's stock.

WHAT HAS CHANGED?

Nike Q2 2026 Snapshot

Nike's Q2 revenue came in at about $12.4 billion, up roughly 1% year over year and modestly ahead of expectations, while EPS of $0.53 comfortably topped consensus. However, net income fell sharply, and gross margin slid to about 40.6%, pressured by higher tariffs, discounting, and an unfavorable mix. Operationally, wholesale rebounded with high single-digit growth, helping offset continued weakness in Nike Direct and digital, while Greater China remained a key drag with double-digit declines.

Note: Nike's FY'25 ended on May 31, 2025. Q2 FY'26 refers to the quarter that ended on November 30, 2025.

Impact of Tariffs

Higher tariff costs are hampering Nike’s efforts to turn around its business. The company now expects tariffs to cost it $1.5 billion and hit its gross margin by 1.2 percentage points in its current fiscal year 2026. That’s up from the $1 billion and 0.75 percentage point gross margin impact it projected in June.

Looking Ahead

Nike expects fiscal third quarter revenues to fall by a low single-digit percentage, with modest growth in North America. It also anticipates gross margins will drop 1.75 to 2.25 percentage points – including a 3.15 percentage point hit from tariffs.

Fiscal year ’26 continues to be a year of taking action to rightsize the company's classics business, return Nike digital to a premium experience, diversify the product portfolio, deepen consumer connection, strengthen partner relationships, and realign teams and leadership.

The company also said it expects revenue and gross margin headwinds to continue throughout fiscal 2026 in both China and at Converse. Nike does not expect its direct business to return to growth in fiscal 2026. Nike also plans to launch a new footwear platform in January called Nike Mind, which aims to help athletes prepare for performance and competition.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Nike's value that present opportunities for upside or downside to the current Trefis price estimate for Nike:

• Nike Footwear Revenues: Nike Footwear Revenues have consistently grown over the years and stood at $33.4 billion by the end of Fiscal 2024. This can be attributed to strong marketing spend and innovation to enhance the product line. Trefis expects this figure to increase to around $39 billion over the forecast period. If this metric increases to $45 billion by the end of our forecast period, there could be a 10% upside to the Trefis estimate. On the other hand, if it declines to around $36 billion, it represents a 5% downside to the Trefis estimate for Nike.
• Nike Brand Footwear Gross Profit Margin: Nike Gross Profit Margin declined from 45.9% in FY 2022 to 43.5% in FY 2023, primarily due to higher product costs, higher markdowns, and unfavorable changes in foreign currency exchange rates. In FY 2024, the figure stood at 44.5%. This 110 basis points increase was driven by strategic pricing actions and lower ocean freight rates and logistics costs. We expect the figure to decline in the near term and then increase slightly to stabilize at 43% by the end of our Trefis forecast period. In case the gross margin increases to 46% by the end of the Trefis forecast period, there can be a 5% upside to our price estimate for Nike's stock. On the other hand, if it declines to about 39%, there could be a 5% downside to the Trefis price estimate.

For additional details, select a driver above or select a division from the interactive Trefis split for Nike at the top of the page.

BUSINESS SUMMARY

Nike specializes in designing, manufacturing, and marketing athletic footwear, apparel, and equipment. Its brands include Converse, Hurley, and Nike Golf, and its proprietary technologies include Nike Air, Zoom, and Flyknit. Nike typically outsources the manufacturing of its products to Asia and focuses on innovation and product design.

Recently, Nike has focused on product innovation and enhancing its digital engagement platforms. Its strategic emphasis has been on bolstering its brand strength and consumer connection - key competitive factors in a highly dynamic retail landscape.

SOURCES OF VALUE

The primary sources of Nike's value are footwear and apparel sold under the Nike brand, and together they contribute about 90% of Nike's value. Nike Brand Footwear is more valuable than Nike Brand Apparel and Converse Brand Footwear for the following reasons:

Nike Footwear is more valuable than Nike Apparel

Nike's footwear revenues stood at $33.4 billion in FY 2024, more than double that of its apparel revenues which were around $14 billion. As the economy improves in the U.S. and Europe, and demand increases in China and emerging markets, we expect footwear revenues to continue to rise. With aggressive marketing and innovation, Nike branded footwear has been able to capture a significant chunk of the global sports footwear market.

KEY TRENDS

Demand for low-performance athletic wear is increasing

In the last few years, demand for low-performance footwear in the U.S. and Europe has grown significantly. Low-performance footwear refers to footwear that is not intended for athletic use. In this segment, Nike faces competition from low-cost manufacturers that are trying to establish a foothold in the U.S. and other international markets. Nike has gradually increased its focus on selling low-performance footwear through its Converse and Hurley brands. However, the brand is facing stiff competition from competitors like Adidas that threaten to level the playing field.

Nike CEO's 'Win Now' Strategy Seeks to Regain Lost Ground in China

The company has highlighted the need to accelerate the pace in China, a major growth market that has weighed on sales for more than two years. China sales have seen a substantial sales decline amid weaker discretionary spending in the country. The new CEO's 'Win Now' strategy aims to recover lost market share, but results are yet to materialize, signaling a prolonged turnaround effort. The strategy includes boosting on-the-ground presence in five key cities such as Shanghai and Beijing. Of all the geographies, product innovation is the most important in China. So, the key for them to start to see stabilization is still going to be product newness. Hill has fast-tracked certain sneaker launches such as Pegasus Premium and Vomero 18 that helped the company post a smaller-than-expected drop in quarterly revenue and profit in Q3 2025.

Growth of digital platform

Both the SNKRs app - which sells limited-edition shoes using collaborations with athletes, celebrities, and universities - and the NIKE app resonate strongly with consumers. NIKE Direct drove the majority of Nike's incremental revenue growth, with Nike Direct constituting approximately 44% in FY 2024. While the company is seeking weaker digital sales in FY 2025 so far, we expect growth momentum in Nike Digital to pick up steam once the turnaround efforts are in place.

Nike is expanding its stores which provide higher margins

In the footwear business, producers and distributors jointly earn a profit per shoe of about 12%, while retailers earn a profit of 13%. By selling through its retail stores, Nike can capture both margins. The total number of Retail stores for Nike in the U.S. has increased from about 344 at the end of the fiscal year 2022 to around 377 stores at the end of FY 2024. Just by looking at the numbers, one can see how much Nike is focused on growing its DTC networks and increasing sales in the stream.