How NKE (Nike) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a global athletic apparel and footwear leader like Nike (NKE) makes money is essential for investors and anyone interested in the business of sportswear and consumer brands. In this post, we break down Nike's quarterly income statement (Q4 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Nike Overview

Nike operates as the world’s largest supplier of athletic shoes, apparel, and sports equipment. Revenue comes primarily from the design, development, marketing, and sale of athletic footwear, apparel, and equipment for men, women, and children. The company’s business is organized around product categories and geographies, with major segments including Footwear, Apparel, Equipment, and the Converse brand.

Revenue Breakdown

• Total Revenue (Q4 2025): $11.7B (+1.1% YoY)
  • Footwear Revenue: $7.41B (63.2% of total, -0.7% YoY)
  • Apparel Revenue: $3.31B (28.3% of total, +9.3% YoY)
  • Equipment Revenue: $630M (5.4% of total, +4.5% YoY)
  • Converse Revenue: $366M (3.1% of total, -26.9% YoY)
  • Other: $1M (negligible)
• Growth is powered by strong performance in the Apparel segment, offsetting softness in Footwear and a sharp decline in Converse.

Gross Profit and Margins

• Gross Profit: $4.94B (42.2% gross margin)
  • Cost of Revenue: $6.78B (+7.0% YoY)
  • Nike maintains robust margins due to its premium brand positioning, pricing power, and efficient global supply chain.
• Most costs come from manufacturing, sourcing, and logistics of finished goods.

Operating Income and Expenses

• Operating Income: $927M (-23.3% YoY, 7.9% margin)
• Operating Expenses: $4.02B (-0.8% YoY)
  • R&D: Not separately disclosed in this quarter
  • SG&A: $4.02B (-0.8% YoY, 34.3% of revenue) — includes marketing, advertising, administrative, and selling costs
  • Nike continues to invest in brand marketing and digital transformation while maintaining cost discipline in administrative functions.

Net Income

• Pre-Tax Income: $922M (-29.5% YoY, 7.9% margin)
• Income Tax: $195M (21.1% effective tax rate)
• Net Income: $727M (-30.8% YoY, 6.2% net margin)
• Nike converts a moderate portion of sales into profit due to its scale, brand strength, and operational efficiency, though profitability declined this quarter due to higher costs and lower operating leverage.

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What Drives Nike's Money Machine?

• Footwear: 63%+ of revenue, driven by iconic franchises like Air Jordan, Air Max, and performance running shoes.
• Direct-to-Consumer (DTC) Growth: Nike’s digital and owned retail channels continue to outpace wholesale, supporting higher margins.
• Brand Marketing: Strategic investments in athlete endorsements, global campaigns, and digital engagement.
• Future growth areas: Digital commerce and international expansion, though some regions and segments (like Converse) are not yet returning to growth.

Visualizing Nike's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant marketing and administrative costs, 6.2% of revenue drops to the bottom line.

Key Takeaways

• Nike's money comes overwhelmingly from footwear sales, with apparel as a fast-growing secondary engine.
• High gross and net margins illustrate the power of Nike’s global brand and premium pricing.
• Heavy investment in marketing and digital transformation, balanced by efficiency in supply chain and administration.
• Ongoing growth is driven by direct-to-consumer channels and international markets, despite headwinds in some segments.

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FAQ About Nike's Income Statement

1. What is the main source of Nike's revenue in 2025?

Nike generates over 63% of its revenue from footwear sales, led by popular lines such as Air Jordan and Nike Air. Apparel is the next largest contributor at 28%, with equipment and Converse making up the remainder.

2. How profitable is Nike in Q4 2025?

Nike reported net income of $727M in Q4 2025, with a net margin of approximately 6.2%, reflecting moderate profitability driven by strong brand equity and efficient operations, though down year-over-year due to higher costs.

3. What are the largest expense categories for Nike?

The biggest expenses on Nike’s income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs, which totaled $4.02B in Q4 2025 (34.3% of revenue). This includes heavy investment in marketing, advertising, and digital transformation.

4. Why does Converse operate at a loss?

Converse, despite generating $366M in revenue, posted a sharp year-over-year decline -26.9% and remains pressured by competitive dynamics and shifting consumer preferences. Nike continues to invest in repositioning Converse for long-term growth, even as the division is unprofitable today.

5. How does Nike's effective tax rate compare to previous years?

Nike’s effective tax rate in Q4 2025 was 21.1%, consistent with recent years. This moderate rate reflects the company’s global tax planning and benefits from international structuring.