NIKE, Inc. (NKE) is a global powerhouse in athletic footwear, apparel, and equipment. Understanding its business model and key financial indicators can help everyday investors gauge its health and potential.

The Business Model (How They Make Money)

NIKE, Inc. generates revenue by designing, developing, marketing, and selling a wide range of athletic products and services worldwide. Their success is built on a strong brand identity, continuous product innovation, and a vast global distribution network.

The company primarily sells its products through two main channels:

• Wholesale: This involves selling products to various retail stores and distributors globally. In fiscal year 2026, NIKE's wholesale revenues amounted to $27.5 billion.
• NIKE Direct: This channel encompasses sales directly to consumers through NIKE-owned retail stores and its digital platforms, such as websites and mobile applications. For fiscal year 2026, NIKE Direct revenues were $17.7 billion.

In terms of product categories, footwear remains the largest contributor to NIKE's revenue. In fiscal year 2026, footwear sales generated $30.54 billion, accounting for approximately 65.82% of the company's total revenue. Apparel sales contributed $15.72 billion, representing about 33.87% of the total revenue.

The Metrics That Matter Most

For a brand-driven company like NIKE, these performance metrics offer crucial insights into its operational and financial health:

• Revenue: This metric represents the total money NIKE earns from selling its products and services. For NIKE, revenue is a key indicator of global demand for its brand and products. Consistent or growing revenue suggests that their marketing strategies are effective, new products are appealing to customers, and their distribution channels are performing well. In fiscal year 2026, NIKE's total revenue was $46.4 billion.

• Gross Margin: This shows the profit NIKE makes from each sale after covering the direct costs of manufacturing its products, such as materials and labor. A healthy gross margin is vital for a company selling physical goods, reflecting efficient production and strong brand power that allows for effective pricing. A higher gross margin means more funds are available to cover other business expenses and contribute to overall profit. In fiscal year 2026, NIKE's gross margin was 42.9%.

• Selling and Administrative (S&A) Expenses: These are the costs associated with marketing, advertising, sales, and general business operations. For a company like NIKE, which relies heavily on brand image, these expenses are critical. They include significant investments in athlete endorsements, advertising campaigns, and the operational costs of their retail stores and digital platforms. Monitoring S&A expenses helps assess how much the company is investing to maintain and grow its brand and how efficiently it manages its overhead. In fiscal year 2026, NIKE's selling and administrative expense was $16.1 billion.

• Free Cash Flow (FCF): This metric indicates the cash a company generates after covering its operating expenses and capital expenditures (investments in assets like new stores or equipment). FCF represents the "extra" cash a business has, which can be used for purposes such as paying dividends to shareholders, repurchasing company stock, or reducing debt. For NIKE, a strong FCF signifies financial stability and flexibility, demonstrating its ability to fund growth and provide returns to investors. In fiscal year 2026, NIKE's free cash flow was $2.2 billion.

How to Value This Company

The most relevant valuation metric for NIKE is the P/E ratio (Price-to-Earnings ratio).

The P/E ratio helps investors determine if a stock is considered expensive or cheap by comparing its current share price to the company's earnings per share. It is calculated by dividing the stock's current market price by its earnings per share.

For a well-established and consistently profitable company like NIKE, the P/E ratio is a useful tool because it reflects how much investors are willing to pay for each dollar of the company's earnings.

• A higher P/E ratio compared to its historical average or industry peers might suggest that investors anticipate strong future growth, or that the stock is currently valued at a premium.
• Conversely, a lower P/E ratio could indicate expectations of slower growth or that the stock might be undervalued.

As of October 2026, NIKE's trailing twelve-month (TTM) P/E ratio ranged from approximately 16.2 to 16.75. Its forward P/E ratio was estimated to be between 20.12x and 21.0x. Comparing these figures to historical trends and competitors' P/E ratios can help investors make informed decisions about whether to buy or sell NIKE stock.