Nike Stock Extends Its Post-Earnings Rally Today as Investors Bet the Long-Awaited Turnaround

Nike shares climbed further Thursday, extending a two-day recovery from a dramatic after-hours selloff that followed Tuesday's fourth-quarter results as investors increasingly bet that the worst of the athletic giant's prolonged slump may be behind it, even if the road ahead remains difficult.

Shares of the Beaverton, Oregon-based company were trading at $43.81 as of 10:42 a.m. EDT, up 75 cents, or 1.74%, on the day, building on Wednesday's 4.9% surge during regular trading that effectively reversed the initial panic selling that had sent the stock down as much as 10% in after-hours trading immediately following the results.

Nike's fiscal fourth-quarter earnings report, released Tuesday after the close, showed quarterly revenue of $10.97 billion, modestly ahead of the $10.86 billion consensus estimate, while earnings per share came in at 72 cents versus the 13-cent estimate that analysts had set ahead of the report. The enormous EPS beat, however, came almost entirely from a one-time benefit: a 52-cent per-share gain tied to an expected recovery of tariffs under the International Emergency Economic Powers Act, worth approximately $986 million before tax, that inflated the bottom line well beyond what the underlying business produced in the quarter.

Stripping out that tariff-related windfall, adjusted earnings per share came in at approximately 20 cents, up from 14 cents in the year-ago period, representing what the company described as its first quarter of underlying earnings per share growth in two years, a milestone that has given bulls something to point to as evidence of gradual improvement.

Nike Chief Executive Elliott Hill, who took over the company last year and has been overseeing what management describes as a multiyear reset of the brand's competitive positioning, was candid on the earnings call about where the company still falls short.

"Overall, the results aren't there yet," Hill said. "We know we're not living up to our full potential, particularly in Nike sportswear and Jordan streetwear, where sell through remains challenged, impacting both current discounting and future order books."

Despite those frank admissions, Hill also highlighted the areas where the turnaround appears to be gaining traction, particularly in running footwear.

"What feels different this time around is we're not treating the tournament as a single moment, we're using it to reshape our business, telling a connected story over time, engaging different communities in relevant ways and building momentum that carries well beyond the tournament," Hill said of the company's strategy around the 2026 World Cup, which Nike is participating in aggressively through advertising and athlete partnerships despite not being an official sponsor of the event.

The World Cup reference captures one of the more interesting dynamics of Nike's recent quarter. The company reported that its advertising campaigns during the World Cup have dramatically outpaced rival Adidas in social media traction and brand attention metrics, even without the formal sponsorship rights that Adidas holds, a distinction that has given the marketing team confidence that the brand's storytelling capabilities remain intact even as product sell-through has struggled.

Among the results themselves, several trends stood out as genuine positives despite the broader revenue decline of 1% on a reported basis or 4% on a currency-neutral basis. North American wholesale revenue rose 10% in the quarter, a meaningful reversal from periods in which Nike's wholesale business had been deliberately scaled back as the company pushed toward its direct-to-consumer channels. Nike Direct fell 6%, reflecting continued softness in the company's digital and owned-retail channels, and the Greater China market declined 12%, continuing a streak of weakness in what has historically been one of Nike's highest-margin geographies.

Running footwear posted its fifth consecutive quarter of double-digit growth, a streak that has demonstrated Nike's ability to fight back against competitive pressure from newer brands including Deckers' Hoka and On Holding, two companies that had rapidly taken market share from Nike in the premium performance running category over the prior several years. Comparable sales and revenue at Foot Locker, one of Nike's most important wholesale distribution partners and a relationship Nike had deliberately deprioritized during its earlier push toward direct-to-consumer, were positive for the first time in four years, a concrete sign that the company's efforts to repair and rebuild its wholesale channel relationships are beginning to produce results.

On operating margin, Nike generated a 12% operating margin in the quarter, up 9.1 percentage points year over year, though that improvement was entirely attributable to the tariff windfall rather than underlying operational efficiency gains.

Looking ahead, Nike's guidance was sober rather than optimistic. Chief Financial Officer Matt Friend indicated the company expects earnings to be "flattish" through the first two fiscal quarters of 2027, while gross margin for the first fiscal quarter of 2027 is expected to be slightly positive on a year-over-year basis, the first such improvement in several quarters.

The stock's response to all of that reflects investor psychology at a critical inflection point. Shares had fallen to 11-year lows heading into the report, with the stock trading down nearly 42% over the trailing year and well below levels that many analysts had characterized as reflecting already-depressed expectations. When a deeply beaten-down stock beats estimates, even for complicated reasons involving one-time items, the response frequently reflects relief that the situation is not as bad as feared rather than genuine enthusiasm about fundamental improvement.

Analysts' consensus price targets remain well above current levels, with several covering the stock citing the stock's valuation at approximately three times trailing sales as a potential floor even if the turnaround takes longer than expected. Wall Street's assessment is mixed, however, with some analysts cautioning that flat earnings guidance for fiscal 2027 reflects a missed opportunity at a moment when the World Cup, the NBA Finals, and other cultural moments could have provided meaningful revenue tailwinds if the brand had been better positioned to capitalize on them.