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Nike (NKE) reported decent 1QFY26 earnings after the close on Tuesday. Let’s be clear: these weren’t blowout numbers. Turnarounds of this magnitude take time. But it was a step in the right direction.

Currency neutral revenue declined a less than expected 1% and NKE guided 2Q revenue to down low-single digits. This is a significant improvement from recent quarters in which currency neutral revenue has been down in the high single digits – or worse.

But, like I said, the quarter wasn’t great. Gross margin declined 320 basis points from a year ago. As a result EPS declined 30% to 49 cents from 70 cents a year ago. And NKE guided gross margin to be down 300 to 375 basis points in the 2Q.

Profitability will not be great in FY26 and the stock will continue to appear expensive on a current P/E basis. But if you look a couple years out, the current price could very well represent a bargain.

Wall Street appears to like what it heard with shares currently +3% in the premarket (5:25am EST).

After NKE’s disastrous 3QFY25 announced on the afternoon of March 20, 2025 I wrote a blog entitled “NKE: This Is When You Back Up The Truck”. After watching the stock for quite a while and initiating a small starter position, I went bigger into the selloff following that earnings report as all the talking heads said it was a disaster with no light at the end of the tunnel. Six months later and it looks more and more like that was a durable bottom.

Nevertheless, this is a process and it will take time to right the ship. But I have confidence in management and the continuing strength of the Nike brand.

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