Nike reported a $986mn tariff refund that lifted its quarterly net income to $1.07bn, but underlying struggles persisted with flat revenue and a 17% drop in China sales. The $11bn revenue figure marked the company’s lowest since February 2022, signaling ongoing pressure. Shares fell 3.4% post-announcement, reflecting investor skepticism about long-term recovery.

Under CEO Elliott Hill, Nike is executing a turnaround strategy focused on cost management and market diversification. While the 49.2% gross margin improvement offers short-term relief, the company warned margins would have remained flat without the tariff windfall. China’s performance—down 17% year-over-year—remains a critical headache, as the region has driven much of Nike’s historical growth. The brand’s reliance on this market underscores vulnerabilities in its global strategy.

The profit surge from the refund masks deeper issues. Revenue stagnation and China’s decline highlight operational challenges, particularly in a market where tariffs and shifting consumer preferences have eroded sales. Investors are now weighing whether Hill’s leadership can reverse these trends without relying on external factors like tariff adjustments. With full-year profits down 3%, Nike faces a tough balancing act: leveraging one-time gains while addressing structural weaknesses in its core markets.