Nike Stock Plunges 10% After Q2 Beat as Tariffs and China Bite

Yesterday, December 18, 2025, Nike published its fiscal second-quarter results for FY2026. $12.43 billion, a slight increase from the prior year and above Wall Street’s expectations. Earnings per share of $0.53 also topped estimates, even though they were down a third from a year ago. But these headline beats couldn’t hide deeper problems.

CEO Elliott Hill, who took over in 2024, has been pushing a turnaround plan dubbed “Win Now.” The strategy emphasises core sports like running and football, rebuilds relationships with retailers such as Dick’s Sporting Goods, and experiments with new partnerships like the NikeSKIMS line. Hill admits this makeover is still in the “middle innings,” and cautions that progress won’t be linear. Meanwhile, tariffs on Southeast Asian imports are costing Nike roughly $1.5 billion this year.

Those headwinds showed up in the quarter’s details. Gross margin shrank by 300 basis points to 40.6% because higher product costs, tariffs, and clearing out old inventory ate into profits. Nike’s high‑margin digital business stumbled, with Nike Direct revenue sliding 8% as online sales dropped 14% and store sales fell 3%. In Greater China, a market Nike once counted on for growth, sales fell 17%, and digital revenue plummeted 36%. By contrast, wholesale revenue climbed 8% as retailers sold through discounted inventory.

Watch 'Fast Money' traders react to Nike Earnings

Investors punished the stock despite the earnings beat

The market’s verdict was swift. Nike shares plunged roughly 10% in after‑hours trading following the release and were still down about 9% the next morning. That’s a big move for a Dow component whose stock had been stuck in a range between $52 and $82 over the prior year. Many investors focused on shrinking profit margins and persistent weakness in China. The Motley Fool noted that Nike’s net margin contracted to 6.4%, down from 9.4% a year earlier, suggesting the turnaround isn’t yet paying off.

Comments from social‑media traders underscored how divided opinion is. On Stocktwits, retail sentiment was described as “extremely bullish” even amid the slide. Some saw the sell‑off as a chance to buy a premium brand on sale; others grumbled that tariffs and price hikes were driving away customers.

What options traders and analysts are watching

Before earnings, options activity on Nike was more than double normal volume, with call contracts outnumbering puts roughly 7‑to‑5. Implied volatility suggested a 5.5% swing — far smaller than what actually occurred. That mismatch implies that many options “whales” were prepared for movement, but not for the steep drop that followed.

Analysts remain cautiously optimistic. According to data collected by QuiverQuant, 15 Wall Street firms currently rate Nike a buy or overweight, and none rate it a sell. Recent price targets range widely, from around $68 up to $100, with a median near $81. Many bulls argue that once tariffs ease and the company’s digital makeover gains traction, margins should recover. Skeptics worry that weakness in China and the struggling Converse brand — which saw revenue sink 30% this quarter — will continue to weigh on growth.

Where the story goes from here

Management expects revenue to dip slightly in the current quarter, with China and Converse trends similar to Q2. Gross margin could decline another 175–225 basis points, although excluding tariff impacts, it might improve. Investors will watch how quickly Nike can get its digital channel back on track, clear out old inventory, and reignite growth in China. For traders tracking unusual options activity, any uptick in bullish flow could signal renewed confidence.

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