Nike ( NKE ) surprised Wall Street with a stronger-than-expected fiscal fourth quarter in 2026. Both revenue and profit beat consensus estimates by wide margins. However, the Q4 print failed to impress investors, with the stock down 31% year-to-date (YTD), underperforming the overall market’s gain of 9.1%. This muted reaction shows that investors need more than just one good quarter to believe in Nike’s ongoing turnaround story.
So, despite the earnings beat, are investors right to be cautious?
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The Quarter Was Good, But The Basic Story Is More Complicated
In the fourth quarter of fiscal 2026, Nike reported a 1% dip in revenue on a reported basis to $11 billion. This slight decline was a contribution from the North American business which partially offset continued weakness in Greater China, Europe, Middle East & Africa (EMEA), and Converse. Revenue beat Wall Street expectations by $122.6 million. Gross profit increased significantly to 49.2%, an increase of 890 points year-on-year. However, this improvement was to effect a refund of $986 million in previously paid raffles. Without this acquisition, gross profit would have been 40.2%.
Accordingly, reported earnings per share came in at $0.72, beating consensus estimates by $0.59. But remove the after-tax benefit, and EPS would have been just $0.20. However, Nike maintained direct cost control in the quarter, with selling, general, and administrative expenses down 2% despite higher investment for the FIFA Women’s World Cup.
In a full fiscal year, revenue is generally lower on a reported basis. Gross profit for the year also improved to 42.9% due to tax returns. Diluted EPS came in at $2.10, down 3% from last year. Nike also had to incur about $400 million in severance costs as part of its restructuring efforts. However, these efforts are aimed at streamlining operations and ultimately increasing long-term profitability.
Investors Always Focus on Gradual Returns
Despite these performance improvements, investors remain focused on Nike’s larger businesses which continue to struggle. Sportswear and Jordan Streetwear still face difficult retail trends, high discounting, and weak future order books. Together, both of these businesses account for half of Nike’s total revenue. Therefore, their recovery is essential to restore long-term sustainable growth. Management expects both categories to remain negative through fiscal 2027, with improvement expected only in the second half of the year.
Coming to regional performance, while North America remained in the bright spot, revenue fell by 6% in EMEA, while Greater China fell by 17%. Meanwhile, Asia Pacific and Latin America (APLA) fell by 1%. Executives cited weak consumer spending, declining retail traffic, changing tax policies, geopolitical turmoil in the Middle East, and high oil prices as factors weighing on the need. Perhaps most disappointing to investors was when management said Nike does not expect the larger environment to improve significantly over the next six months.
Overall, Nike now expects revenue for the first quarter of fiscal 2027 to decline by a low to mid-single digit, with a similar trend expected for the first half of the year. Consensus revenue estimates for fiscal 2027 are in line with the company’s projections, but analysts estimate that revenue will rise 8.8% in fiscal 2027, before rising 38.4% in fiscal 2028. To summarize, the near-term growth story failed to impress investors.
Is Nike Still a Good Dividend Stock?
While the turnaround hasn’t impressed growth investors, NKE stock is still attractive to income investors. It pays a dividend yield of 3.8%, which is much higher than the market average. Its 71% payout ratio may be high, raising concerns about earnings sustainability. But Nike has been paying and growing dividends for the past 23 years, despite pressure on earnings. In fact, the company is close to earning the title of “Dividend Aristocrat,” which is given to companies that have paid and increased dividends for 25 consecutive years.
During the earnings call, management reiterated that the company is improving supply chain efficiency, operating costs, and revenue generation, all of which could strengthen long-term profitability sustainability. The company ended the quarter with $9 billion in cash, equity and short-term investments.
The lowest price of NKE Stock shares
Undoubtedly, Nike’s Q4 and fiscal 2026 results were stronger than Wall Street expected. However, Sportswear and Jordan Streetwear, which account for the majority of revenue, remain under pressure, while Greater China continues to struggle. Even management has warned of another six months of difficult working conditions. While these factors make the short-term issue vulnerable, the case is different for long-term investors. Nike rebuilt its product pipeline, regained momentum in functional areas such as athletics and soccer, modernized its retail environment, and maintained one of the strongest balance sheets in the industry. The turnaround may take time, so long-term investors may want to hold onto the stock.
On Wall Street, NKE stock is rated “Neutral Buy.” Of the 36 analysts covering the stock, 11 rated it a “Strong Buy,” two rated it a “Neutral Buy,” 20 rated it a “Hold,” and three rated it a “Strong Sell.” The average analyst price target of $54.32 for Nike suggests a 24% upside from current levels. Moreover, its Street-high estimate of $90 suggests that the stock could reach 105% in the next year.
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As of the date of publication, Sushree Mohanty did not have (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published Barchart.com
