When Nike reported their fiscal Q3 ’26 last Tuesday night, March 31 ’26, there was very little to cheer about, and in fact the lowered guidance for fiscal Q4, ’26, which I was hoping wouldn’t have to be done, put a significant knife in the back of Nike’s prospects for not only the ’26 fiscal year (when ends May 31 ’26) but for the calendar year as well.<\/p>\n
The actual Q3 ’26 Nike revenue and EPS really doesn’t matter much since the stock has seen heavy selling starting on April 1, and continuing through yesterday April 6, ’26, where even yesterday, 4\/6\/26, Nike’s stock fell again on average daily volume of 26.7 million shares, versus the average trading volume of 18 million.<\/p>\n
This blog sold all but a few positions for a few clients who want to keep the stock, on April 1. This blog is still sitting on a 1,000 share NKE position bought for a client in May, 2004.<\/p>\n
Fiscal Q3’s reported metrics showed Nike beating on revenue and a 21% beat on EPS (Nike has put up a series of whopping EPS beats over the last few years, that has done little for the stock price performance), and even operating income beat for the quarter by 24%, reporting $635 million in operating income versus the $512 million estimate.<\/p>\n
Unfortunately, the key metric for Nike is that looking at the “average” revenue growth last 12 quarters, Nike has averaged 0% revenue growth, and that has really cut into margins, badly. Nike’s gross margin the last several quarters has fallen to 40% versus the 44% from juts a few years ago, and if you look back 10 years, the normal gross margin usually gravitated around 45% – 46.<\/p>\n
Same with Nike’s operating margin: the last 4 quarters have averaged 6% versus the 12 quarter average of 9.31% and the 20-quarter average of 11.05%.<\/p>\n
Here’s the fiscal year EPS and revenue reductions following the quarter:<\/p>\n
<\/p>\n
The EPS and estimate revisions are not what you want to see if looking for a turn in the stock.<\/p>\n
(One hat-tip to Nike CFO Matt Friend, who within 24 hours after the release of the fiscal Q3 ’26 quarterly numbers, released the 10-Q so that investors could get a quick look at cash-flow and free-cash-flow. Although many, many, larger-cap members of the SP 500 now release cash-flow results with the quarterly EPS and revenue data, Nike was still delaying the 10-Q release for the usual 6-week release, but that looks to have ended, and this investor anyway is grateful to Matt Friend and the Nike accounting and investor relations team for the quick release of the “Q”. )<\/p>\n
Speaking of cash-flow one way this blog gauges quality of earnings for a company is to compare net income to cash-flow for longer periods of time.<\/p>\n
Nike TTM (trailing twelve month) cash-flow from operations and free-cash-flow fell below 1x for the footwear and apparel giant this past fiscal Q3 ’26 but since the company is now quickly releasing the data, let’s see what fiscal Q4 and the next quarter look like in terms of net income relative to cash-flow and free-cash.<\/p>\n
Nike remains free-cash-flow positive to the tune of $1 billion (TTM), although as readers would likely assume it’s growing more slowly.<\/p>\n