Nike’s Earnings Test: 3 Things Investors Need To See For A Real Turnaround

After a strong Q1 report in September, investors and analysts are looking for another solid showing to confirm that the turnaround is delivering tangible gains.

• Nike will report its fiscal 2026 second-quarter earnings after the market close on Thursday, with analysts expecting a topline decline.
• After a strong Q1 report in September, expectations that Nike will keep the turnaround momentum going are high.
• Under CEO Elliott Hill, Nike needs to show significant progress across key measures, including inventory levels, the product roadmap, and its China business.

Nike’s second-quarter earnings report after the market close on Thursday is largely expected to show a “stable” business with moderate improvements from the ongoing turnaround under CEO Elliott Hill, analysts say. 

Although the sentiment is more optimistic than glum, at least among Stocktwits users, for Nike to hit a home run, it has to show progress on at least these three fronts: inventory cleanup, new products, and its China business.

Nike delighted Wall Street after posting top-line growth in its fiscal 2026 first quarter – its first in six quarters – sending the stock higher in October, with analysts hailing that “the turnaround is well underway” and the "sleeping bear awakens."

But, with Nike’s stock still down nearly 14% year-to-date, investors are looking for more. The company's Q2 results will likely "represent an inflection," where it would likely move beyond "at least some internal disruptions," Oppenheimer analysts said in a recent note.

Now more than a year in the CEO role, Hill needs to show sustained gains. His turnaround plan centers on pivoting Nike to excel in top-of-the-line sportswear and improving the company’s sales and distribution. Under the plan, he has shaken up top management, trimmed the workforce, returned to direct selling on Amazon, and struck partnerships (Nike-Skims, and the Faith Kipyegon a-mile-under-a-minute challenge, to name a few) to reposition Nike as a brand for elite athletes.

Inventory Cleanup

Over the last few years, Nike has built up excess due to supply chain disruptions in the aftermath of the COVID-19 pandemic and Nike’s erstwhile focus on lifestyle wear and shoes. Last quarter, the company reported a 2% drop in inventory levels, and Hill said Nike had stabilized inventory of Air Force 1 and Air Jordan sneakers but still had excess Nike Dunks. 

Analysts have flagged that healthy inventory levels are essential as Nike makes space for new launches, including the Nike Mind shoe collection and Aero-Fit cooling technology.

New Products

Hill's predecessor, John Donahoe, focused Nike heavily on lifestyle products, which the company is now trying to undo. Hill has said that Nike is returning to its focus on sports, namely running and basketball, as it seeks to regain ground lost to brands like On Holdings, Asics, Under Armour, and Adidas.

Nike would likely discuss upcoming launches, which would also be key given a strong sporting calendar next year, including the FIFA World Cup and the Winter Olympics. Sportswear sales typically spike during major tournaments, and brands use this period to launch event-focused and signature collections.

The China Problem

Although North America is Nike's key market, part of its rebound hinges on China. Sales in the region had lagged of late, and analysts see little to no change in the situation. Nike’s sales in China tumbled 10% to $1.51 billion in Q1 – the figure is at the low end historically – and Hill blamed “structural challenges” in the market. China accounts for about one-fifth of Nike’s total revenue.

On Stocktwits, retail sentiment for NKE has been climbing this month and was ‘extremely bullish’ in the last reading, with users broadly expecting a strong earnings report. 

Analysts expect Nike’s Q2 revenue to decline 1.2% to $11.41 billion, and adjusted per share earnings to decline 13.4% to $0.47, according to consensus estimates from Koyfin. About two-thirds of analysts covering Nike recommend a ‘Buy’ or higher.

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