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NIKE (NKE) reported 2Q26 results that surpassed expectations on both the top and bottom lines, yet the company’s cautious outlook for the crucial holiday quarter and continued struggles in Greater China have sent shares tumbling lower. While North American growth provided a bright spot, management’s guidance reflects a steep climb ahead as the brand navigates structural transitions and macroeconomic headwinds. Furthermore, for Q3, NKE’s revenue guidance of a low-single-digit decline fell short of the more optimistic forecast for growth of just of 1%, according to the FactSet Consensus.

• NKE delivered Q2 revenue of $12.4 bln, an increase of 1% that beat the company's own guidance for a low-single-digit decline.
• North American revenue surged 9% to $5.63 bln, driven by double-digit growth in Running and a 24% increase in the wholesale channel as NKE focuses on "winning on the ground" through its "Win Now" strategy.
• However, Greater China revenue plummeted 16% on a constant-currency basis to $1.4 bln, weighed down by declining store traffic, soft sell-through, and a highly promotional retail environment.
• Also, Direct-to-Consumer (DTC) revenues fell 9% currency-neutral, led by a 14% drop in digital sales as the company deliberately reduced its reliance on high-volume legacy franchises like Dunks, which saw declines of over 20%, to restore brand premiumization.
• Gross margin fell 300 bps to 40.6%, a result that was at the favorable end of management’s prior forecast of a 300–375 bps decline.
• Q3 gross margin is projected to contract by 175–225 bps. Notably, excluding a 315-bps headwind from higher product costs related to new tariffs, margins would have expanded yr/yr.
• For Q3, NKE expects revenue to decline in the low single digits, below the FactSet consensus of roughly 1% growth.

Briefing.com Analyst Insight:

NKE's Q2 performance offers a "good news, bad news" narrative that leaves the market skeptical. On one hand, the "Win Now" strategy is bearing fruit in North America, where a return to wholesale partnerships and a focus on performance running are stabilizing the brand's home turf. On the other hand, the "middle innings" of this comeback look increasingly grueling. China remains a significant drag with no immediate sign of a floor, and the company's aggressive clearing of legacy "classics" is creating a revenue hole that new innovation hasn't yet filled. Furthermore, the looming 315 bps tariff hit in Q3 serves as a stark reminder of the external volatility NKE faces. With the stock trading at a premium P/E multiple of 34x despite stagnant organic growth, we would wait until seeing stronger evidence that a recovery is gaining traction before taking a more aggressive approach with the stock.