Nike reported results that technically cleared Wall Street's lowered bar, but the headline beat was overshadowed by forward guidance warning of continued revenue declines. Full-year revenue came in at $46.3B, down 9.8% year-over-year, with gross margins at 42.7% and net margins compressed to just 7.0% — a thin cushion for a brand of Nike's scale. Diluted EPS landed at $2.16 for the fiscal year ending May 2025.

The China segment is the core concern. Once positioned as Nike's high-growth engine, the market is now a drag, with the company citing both macro softness and intensifying competition from domestic Chinese sportswear brands like Anta and Li-Ning that have gained significant shelf space and cultural relevance with Chinese consumers.

The 'beat-and-lower' dynamic is historically unfavorable for consumer discretionary names. When a company guides down while already in a revenue contraction, the market tends to re-rate the multiple downward even if near-term numbers clear consensus — because the question shifts from 'can they beat?' to 'when does the decline stop?'

Key things to watch: the pace of China recovery (or further deterioration), whether Nike's North America DTC strategy can offset international weakness, and whether gross margin stabilizes above 42% as the brand leans harder on full-price selling and pulls back on promotions. Any further macro deterioration in China or a stronger yuan headwind would compound the problem.

The stock's trajectory from here hinges on whether investors price in a multi-quarter trough or treat the guidance cut as kitchen-sink clearing — a debate that won't resolve without 1-2 more quarters of data.