Nike's stock plunged more than 10% in premarket trading Friday as investor concerns over its deteriorating performance in China eclipsed better-than-expected quarterly earnings. The drop also pressured European rivals Adidas and Puma.

For its fiscal second quarter, Nike reported earnings per share of 53 cents and revenue of $12.43 billion, both surpassing analyst estimates. Strong North American sales, which rose 9% to $5.63 billion, helped offset a severe 17% decline in Greater China revenue, which fell to $1.42 billion. Overall revenue grew just 1% year-over-year, while net income dropped 32% to $792 million.

The stark weakness in China, a critical long-term growth market, overshadowed the positive headline numbers. CEO Elliott Hill acknowledged the challenges, stating improvements in China are "not happening at the level or the pace we need." He emphasized the company remains in the "middle inning" of its broader turnaround strategy, which includes clearing inventory, strengthening wholesale partnerships, and diversifying its product portfolio.

The company also faces significant headwinds from higher tariffs, which it said reduced gross margin by 3 percentage points and contributed to a 3% inventory decline. Looking ahead, Nike forecast a low single-digit percentage revenue decline for the fiscal third quarter and expects gross margins to drop further due to tariff impacts.

Other areas of concern included Nike's direct-to-consumer sales, which fell 8%, and the continued struggle of its Converse brand, where revenue plummeted 30%. The company has recently undertaken leadership changes, part of what Hill calls a "Win Now" strategy to "remove layers" and refocus on growth.

While highlighting some bright spots, such as a record Black Friday for Nike.com, analysts remain cautious. Citi noted that expected China weakness through the rest of fiscal 2026 complicates the timeline for a full recovery, keeping the outlook muted despite the ongoing turnaround efforts.