Nike Inc. (NYSE:NKE) shares plummeted nearly 11% in after-hours trading on Thursday, as management issued a cautious outlook defined by shrinking margins and deepening struggles in China during the second-quarter earnings call.

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Tariffs And Guidance Weigh On Margins

Despite reporting revenue of $12.43 billion—topping analyst estimates—the sportswear giant warned that its recovery remains fragile, with executives emphasizing that the “comeback continues to move at different speeds”.

A disappointing forecast for the third quarter triggered the sharp sell-off. CFO Matt Friend guided for third quarter revenue to decline in the low single digits and for gross margins to contract by approximately 175 to 225 basis points.

The primary culprit is a steep rise in product costs due to reciprocal tariffs, which management estimates will create a $1.5 billion annualized headwind.

Friend noted that without the projected 315-basis-point hit from these ...