Nike Predicts Sharp Q4 Revenue Decline, Triggering Share Price Drop

Unexpected Forecast Overshadows Q3 Earnings Success / Reuters

Nike recently unveiled a troubling forecast for its fourth-quarter 2025 revenue, projecting a decline that has sent shockwaves through the stock market and caused a notable drop in its share price. The sportswear giant anticipates a revenue decrease in the mid-teens percentage range, significantly steeper than the 12.22% drop to $11.07 billion that analysts had predicted based on LSEG data. This unexpected announcement came during the company’s third-quarter earnings call, where Chief Financial Officer Matthew Friend outlined a cautious outlook driven by challenges such as discounting old inventory and persistent weakness in key markets like China. Despite a third-quarter performance that exceeded Wall Street expectations, with revenue of $11.27 billion and earnings per share of 54 cents against forecasts of $11.01 billion and a sharper earnings decline, the focus quickly shifted to the troubling Q4 projection. Shares, which initially rose after the Q3 report, reversed course and fell nearly 5% from their closing price of $71.86, reflecting investor unease about Nike’s near-term growth prospects in a highly competitive athletic apparel market.

The roots of this forecast lie in a combination of internal and external pressures that Nike is grappling with as it seeks to regain its footing under new CEO Elliott Hill, who assumed leadership in October 2024. One major factor is the company’s ongoing effort to clear excess inventory, particularly legacy products like the Air Jordan 1, Air Force 1, and Dunk lines, which have lost some of their appeal amid rising competition from trendier brands such as On and Hoka. Friend noted that discounting these items to stimulate sales and rebuild strained relationships with retailers will weigh heavily on Q4 revenue, a process he expects to span several quarters. This inventory clearance has already taken a toll on profitability, with the gross margin dropping 330 basis points to 41.5% in Q3, a decline attributed to higher discounts, increased product costs, and an oversupply of outdated stock. Adding to these woes is a significant 17% revenue drop in China during Q3, a market that has long been a growth engine for Nike but is now faltering due to economic concerns including job insecurity and a prolonged property slump. Friend emphasized the urgency of accelerating Nike’s presence in China, stating that sport is still growing there, yet the company’s pace has not kept up with shifting consumer demands.

Despite these challenges, Nike’s Q3 results offered some glimmers of hope, showcasing early successes from Hill’s turnaround strategy dubbed “Win Now.” The company reported stronger-than-expected demand for new shoe launches like the Pegasus Pro and Vomero 18, which have helped rekindle consumer interest after several quarters of lackluster performance. Hill, in his five months at the helm, has prioritized refocusing Nike on its core sports business and repairing retailer partnerships that deteriorated under predecessor John Donahoe’s direct-to-consumer push. The quarter also saw a significant boost in marketing efforts, including Nike’s first Super Bowl ad in 27 years featuring rising female sports stars like Caitlin Clark, a move Hill highlighted as a quick way to reconnect with consumers. Analysts like Ramiz Chelat from Vontobel, an investor in Nike, pointed to these new product successes as a potential positive surprise, suggesting that they bode well for future launches and long-term recovery. However, Morningstar’s David Swartz cautioned that the weak performance in China and softening sales in Europe cannot be ignored, casting a shadow over the otherwise encouraging Q3 figures.

Looking deeper into the “Win Now” strategy, Hill outlined a five-pillar plan designed to steer Nike back to dominance in the athletic footwear and apparel market. This includes rolling out a broader range of innovative shoe products, intensifying marketing and retail efforts in five key global cities (Shanghai, Beijing, Los Angeles, New York, and London), and strengthening ties with wholesale partners. The strategy marks a deliberate shift away from the previous focus on direct-to-consumer sales, which had alienated some retailers and contributed to an inventory buildup. While these efforts have shown early promise, as evidenced by the Q3 beat, the Q4 forecast suggests that the road to recovery remains bumpy. Friend projected that revenue declines will begin to moderate after Q4, hinting at a potential stabilization in fiscal 2026, but the immediate outlook has rattled investors. The stock’s after-hours plunge to around $68.17 underscores the market’s sensitivity to Nike’s ability to navigate these challenges, particularly as rivals continue to capture consumer attention with fresher designs and nimbler strategies.

For stakeholders and investors tracking Nike’s stock performance and revenue trends, the Q4 2025 forecast serves as a critical indicator of the company’s ability to balance short-term sacrifices with long-term growth. The projected revenue decline to approximately $10.71 billion, based on a 15% drop from the $12.6 billion reported in Q4 2024, highlights the scale of the challenge ahead. This figure starkly contrasts with analyst expectations and reflects the combined impact of regional weaknesses, competitive pressures, and inventory management hurdles. While Hill’s leadership has injected new energy into Nike’s product pipeline and marketing playbook, the persistent drag from China and the need to work through discounted legacy stock suggest that patience will be required. As the company continues to execute its turnaround plan, its ability to regain momentum in key markets and restore profitability will likely determine whether this share price drop is a temporary setback or a signal of deeper struggles in the evolving sportswear landscape.