Nike (NYSE:NKE) Jumps After Earnings: Why a Weak-Looking Quarter Still Lifted the Stock

Nike (NYSE:NKE) gave investors a two-day rollercoaster this week. When results landed after the US market closed on Tuesday, June 30, the stock first fell around 4% in after-hours trading, and headlines quickly declared the quarter a disappointment. But when regular trading opened the next day, Wednesday, July 1, the mood flipped: shares climbed more than 2% to around US$42. So why did the market change its mind overnight and decide a weak-looking quarter was worth buying? The answer says a lot about how low expectations had already fallen.

The Beat That Needs a Closer Look

At first glance, Nike’s profit looked strong. It earned 72 cents per share, far above the 12 cents Wall Street expected. But most of that came from a one-off boost: a US$986 million refund of import tariffs Nike had paid after a court ruled those tariffs invalid. That refund alone added 52 cents per share.

Take the refund away, and Nike really earned about 20 cents per share. That still beat forecasts, but it shows the profit was flattered by a one-time payment, not a booming business. Revenue came in at US$11.0 billion, down 1% on the year but slightly ahead of expectations.

The lesson for investors: a big headline number can be misleading when a one-off item does the heavy lifting. It always pays to check what’s really behind a “beat.”

China Is Still the Big Problem

The clear weak spot was China. Nike’s sales in Greater China fell 12% from a year ago, a bigger drop than the 10% fall the quarter before. One of Nike’s most important markets is still getting worse, not better.

The causes are hard to fix quickly: strong local Chinese brands, changing tastes, and too much old stock to clear. Nike has deliberately been shipping less to reset the business, which hurts sales now. Nike also faces a separate, ongoing tariff problem: management has flagged roughly US$1 billion or more in annual tariff costs to absorb, which it plans to offset through price rises and shifting production out of China.

So Why Did the Stock Rise?

Here’s the key. The initial after-hours drop on June 30 was a knee-jerk reaction to the ugly China number and the low-quality profit beat. But by the July 1 session, investors had digested the full picture.

Nike shares had already tumbled around 40% over the past year and were sitting near an 11-year low. When expectations are that low, a result that’s simply “not as bad as feared” can be enough to spark a relief rally, especially with no fresh analyst downgrades after the report.

There was real good news too. Nike’s running business grew by double digits for the fifth quarter in a row, adding around US$1 billion in sales and winning back customers. CEO Elliott Hill’s “Sport Offence” turnaround plan is showing early signs of working.

Our view: the bounce reflects relief, not a full recovery. Nike is a powerful brand making genuine progress in running and product, but China is still sliding, tariffs are biting, and the profit beat leaned on a one-off refund. The stock rose because the bad news was already priced in, and the bright spots gave investors a reason to hope.

The bottom line: for patient investors who believe in the brand, the low price and early turnaround signs are encouraging. But Nike itself warned conditions are unlikely to improve much before 2027. Watch China and profit margins closely before betting on a lasting rebound.