Nike Inc. (NKE) managed to beat earnings estimates on Thursday, but investors weren't having it. Shares continued their slide in Friday trading, dropping nearly 10% despite fiscal second-quarter results that topped expectations.

The disconnect? While the numbers look decent on paper, the underlying story suggests Nike's turnaround under CEO Elliott Hill is proving messier and slower than anyone hoped.

What the Analysts Are Saying

Four major analysts weighed in with varying degrees of optimism, but all acknowledged the challenges ahead:

• Needham analyst Tom Nikic kept his Buy rating but slashed his price target from $78 to $68.
• Telsey Advisory Group analyst Cristina Fernández maintained a Market Perform rating and trimmed her target from $75 to $72.
• JPMorgan analyst Matthew Boss held firm with an Overweight rating and $86 price target.
• Guggenheim Securities analyst Simeon Siegel stuck with a Buy rating and $77 target.

The Turnaround Is Taking Longer Than Expected

Nikic didn't mince words: Nike's turnaround "is still struggling to gain traction and continues to take longer." The strategy of refocusing on sport and rebuilding wholesale relationships makes sense, he noted, but the problems Nike accumulated before Hill took the reins appear "far deeper than we initially realized."

The second-quarter performance tells a mixed story. Wholesale grew 8%, which is encouraging, but direct-to-consumer dropped 9%. Growth in performance categories helped offset declining sales in classics. And then there's China, where Nike continues to face "major challenges."

China Remains a Major Headwind

Fernández at Telsey pointed out that while Nike beat on earnings thanks to North America and wholesale growth, "all other regions remained negative." China's performance was "much worse than expected," she emphasized.

Looking forward, Nike management continues warning that progress won't be linear and that returning to double-digit operating margins will take time. Fernández thinks current consensus estimates for fiscal 2027, which project operating margin expansion to about 9% from around 6.5% in fiscal 2026, "could prove optimistic."

The Numbers Behind the Beat

Boss at JPMorgan laid out the details: Nike posted earnings of 53 cents per share, crushing Street expectations of 37 cents, with revenue up 1% year-over-year. Gross margins, however, took a hit, declining 300 basis points to 40.6%.

Management's guidance for third-quarter revenues calls for a low-single-digit decline, missing Street expectations of 1.5% growth. Still, Boss identified three bright spots showing "accelerating momentum": North America, wholesale, and running.

Regional Performance: A Tale of Two Markets

Siegel at Guggenheim broke down the regional picture: North America grew 9% year-over-year, while EMEA (Europe, the Middle East and Africa) slipped 1% in constant currency. APLA (Asia Pacific & Latin America) dropped 4%, and Greater China plummeted 16%. The company expects continued headwinds in Greater China, Siegel noted.

US tariffs continue pressuring profits, the analyst said. "However, we believe the beginning signs of revenue growth coupled with ongoing improvements in Operating Overhead, makes Nike's turnaround a 'When' rather than an 'If,'" he added.

Shares of Nike were trading at $59.29, down 9.66% at the time of publication on Friday.