Key Takeaways
- Nike’s fiscal 2026 gross margin expansion and near-flat EPS were driven almost entirely by a one-time $986 million tariff refund; excluding it, full-year gross margin fell roughly 190 basis points and EPS dropped about 27% instead of the reported 3%.
- Free cash flow across Nike’s four fiscal 2026 quarters totaled $2.18 billion, down about a third from $3.27 billion in fiscal 2025, even after counting the tariff cash collected in the final quarter.
- The share of analysts rating Nike stock a buy or outperform fell from 62% of coverage in November 2025 to just 24% by September 18, 2026, even as the average price target still implies about 36% upside from $35.51.
- Nike stock trades at 20.78 times forward normalized earnings, just above its own multi-year low of 19.51x and well under its multi-year average of 31.51x, suggesting the market has already priced in real skepticism.
Nike Stock’s Fiscal 2026 Turnaround Leaned on a One-Time Tariff Refund
Nike (NKE) told investors on its fiscal fourth-quarter call that gross margin reached 49.2%, up 890 basis points year over year, and that full-year revenue held roughly flat. Buried inside that number is a one-time item that does almost all the work. CFO Matt Friend disclosed that Nike determined during the quarter that recovery of incremental tariffs paid under IEEPA had become probable, triggering recognition of a $986 million benefit that added 900 basis points to fourth-quarter gross margin alone. Strip it out and fourth-quarter gross margin was actually down 10 basis points year over year, to 40.2%.
The same distortion runs through the full year. Reported full-year gross margin was 42.9%, up 20 basis points, but that figure includes a 210 basis point tariff benefit; excluding it, margin was 40.8%, down closer to 190 basis points from a year earlier. Reported fourth-quarter EPS was $0.72; excluding the tariff item, it was $0.20. Full-year diluted EPS of $2.10 looked down just 3% year over year as reported, but excluding the benefit, EPS was $1.58, a decline of roughly 27% from the prior year’s underlying level.
As of the May 31 quarter end, Nike had actually collected only about $302 million of the $986 million in cash, with the rest still sitting in accounts receivable awaiting recovery.
NKE Stock’s Free Cash Flow Fell Even After the Tariff Boost
If the tariff credit were simply pulling forward real operating improvement, Nike’s cash generation should look stronger this year, not weaker, but it doesn’t.
Summing the four fiscal 2026 quarters, free cash flow came to $2.18 billion, down from $3.27 billion across fiscal 2025, a decline of about a third even though fiscal 2026 includes the tariff cash Nike did collect.
The quarterly path explains why. In the quarter ended August 31, 2025, the first of fiscal 2026, free cash flow was just $15 million, a 0.13% margin, practically a stall. That quarter absorbed incremental tariff costs before any refund was recognized, alongside a stretch of severance charges; Nike’s own filings show $385 million of estimated employee severance tied to organizational changes recognized during 2026, including an April 2026 cut of roughly 1,400 roles, the second round of layoffs that year.
Free cash flow did recover sharply in the quarter ended May 31, 2026, jumping to $1.499 billion, a 13.66% margin, from $363 million a year earlier. But that is exactly the quarter in which Nike collected the $302 million of tariff cash. Backing that out leaves underlying free cash flow closer to $1.2 billion for the quarter, still a genuine improvement over the prior year but a meaningfully smaller one than the headline number implies.
Wall Street Turned Bearish on Nike Stock Before Mbappe Left for On
Nike stock’s coverage has moved from mostly bullish to mostly cautious over the past ten months. As of November 30, 2025, 19 analysts rated Nike stock a buy and 6 rated it outperform, against 13 holds, 1 underperform and 1 sell, putting 62% of covered analysts in the bullish camp. By September 18, 2026, that had inverted: 9 buys and 1 outperform against 26 holds, 1 no opinion, 2 underperforms and 3 sells, leaving just 24% of coverage bullish and holds alone accounting for well over half the panel.
Price targets moved with the ratings. The mean target fell from $83.30 in November 2025 to $48.21 by September 18, 2026, even as Nike’s own share price fell from $64.63 to $35.51 over the same stretch. Despite that, the average target still implies about 36% upside from the September 18 close, a gap that has persisted through the entire decline rather than closing. Telsey Advisory Group even cut its target to $44 from $47 a week earlier.
The September 18 snapshot lands the same day Reuters reported Mbappe had ended his two-decade partnership with Nike to join On Holding’s push into soccer, itself following Lamine Yamal’s move to Adidas, and days before Nike’s scheduled removal from the S&P 100 on September 21.
What Would Actually Prove Nike’s Margin Recovery Is Real
None of this means the market has been caught off guard by Nike’s accounting.
Nike stock trades at 20.78x forward normalized earnings, barely above its own multi-year low of 19.51x and well below its multi-year average of 31.51x. A multiple sitting near a floor is not the signature of investors who missed the tariff footnote; it is the signature of investors who have already discounted a turnaround they are not yet ready to believe.
That leaves a narrower and more testable question than whether Nike is “back.” Management says gross margin should inflect positive starting in fiscal 2027’s first quarter, driven by supply chain and headcount actions taken in fiscal 2026, not by another tariff credit.
The first real evidence arrives with the quarter ending August 31, 2026, the direct comparison to this year’s $15 million free cash flow floor. If that quarter clears last year’s base without a one-time item doing the lifting, and if the North America wholesale growth management has partly attributed to lower returns and cancellations starts showing up as real sell-in instead, the structural case gets real support. Losing Mbappe is a brand story, not a cash flow one, but it lands at a moment when Nike has little room left to explain away a weak print as one-time noise.
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Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
