Nike (NKE)

Athletic apparel brand Nike (NYSE:NKE) announced better-than-expected revenue in Q4 CY2025, but sales were flat year on year at $12.43 billion. Its GAAP profit of $0.53 per share was 41.9% above analysts’ consensus estimates.

Company Overview

Originally selling Japanese Onitsuka Tiger sneakers as Blue Ribbon Sports, Nike (NYSE:NKE) is a global titan in athletic footwear, apparel, equipment, and accessories.

Before the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Nike's primary competitors include Adidas (ETR:ADS), Under Armour (NYSE:UAA), Puma (ETR:PUM), ASICS (TYO:7936), Columbia Sportswear (NASDAQ:COLM), and Reebok (owned by private company Authentic Brands Group).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Nike’s sales grew at a weak 4% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Nike’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5% annually.

Nike also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 4.6% year-on-year declines. Because this number aligns with its normal revenue growth, we can see that Nike has properly hedged its foreign currency exposure.

This quarter, Nike’s $12.43 billion of revenue was flat year on year but beat Wall Street’s estimates by 1.7%.

Looking ahead, sell-side analysts expect revenue to grow 3.3% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

Nike’s operating margin has shrunk over the last 12 months and averaged 8.9% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

In Q4, Nike generated an operating margin profit margin of 8%, down 3.2 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Nike’s flat EPS over the last five years was below its 4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

In Q4, Nike reported EPS of $0.53, down from $0.78 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Nike’s full-year EPS of $1.70 to grow 27.6%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Nike has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9.2%, lousy for a consumer discretionary business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Nike historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 37.9%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Nike’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

It was good to see Nike beat analysts’ constant currency revenue and EPS expectations this quarter. On the other hand, China revenue declined meaningfully. Zooming out, we think this was a mixed print. The market seemed to be hoping for more, and the stock traded down 2.3% to $64.35 immediately after reporting.

Updated: December 18, 2025 at 4:25 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Nike.

We see the value of companies helping consumers, but in the case of Nike, we’re out. For starters, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. On top of that, Nike’s constant currency sales performance has disappointed, and its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

Nike’s P/E ratio based on the next 12 months is 30.4x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $83.07 on the company (compared to the current share price of $64.35).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.