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

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Understanding how a global athletic apparel leader like Nike (NKE) makes money is essential for investors and anyone interested in the business of sportswear and footwear. 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 a vertically integrated business model focused on designing, manufacturing, and marketing athletic footwear, apparel, and equipment. Revenue comes primarily from the sale of branded footwear and apparel through wholesale partners, direct-to-consumer channels (Nike.com, retail stores), and subsidiary brands like Converse.
Nike’s business segments include Footwear, Apparel, Equipment, and Converse, each contributing to overall sales.

Revenue Breakdown

• Total Revenue (Q4 2025): $11.7B (+1.2% 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: $8M (0.07% of total)
• Growth is powered by strong apparel sales and expansion in equipment, offset by a decline in Converse.

Gross Profit and Margins

• Gross Profit: $4.9B (41.8% gross margin)
  • Cost of Revenue: $6.83B (+7.8% YoY)
  • Nike maintains robust margins due to its scalable brand-driven model, premium pricing, and operational efficiencies in sourcing and logistics.
• Most costs come from product manufacturing, sourcing, and distribution.

Operating Income and Expenses

• Operating Income: $884M (-26.9% YoY, 7.5% margin)
• Operating Expenses: $4.02B (-0.8% YoY)
  • R&D: Not separately disclosed for Q4 2025; Nike’s innovation spending is embedded in SG&A, focusing on product development and digital transformation.
  • SG&A: $4.02B (-0.8% YoY, 34.2% of revenue) — includes marketing, advertising, administrative, and digital investments.
  • Nike continues to prioritize brand innovation and digital engagement while controlling costs and expanding direct-to-consumer operations.

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 global scale, brand strength, and pricing power, though margins contracted in Q4 2025.

What Drives Nike's Money Machine?

• Footwear Sales: 63%+ of revenue — Nike’s core business, driven by iconic product lines and global brand appeal.
• Direct-to-Consumer Growth: Digital and retail channels continue to expand, with Nike.com and flagship stores capturing higher margins.
• Brand Investment: Heavy spending on marketing and athlete endorsements sustains global demand and pricing power.
• Innovation: Ongoing investment in product R&D, sustainability, and digital experiences, though not broken out separately in Q4 2025.
• Future Growth Areas: Digital transformation, sustainability initiatives, and expansion in women’s and kids’ segments, though some investments (e.g., Converse) are not yet profitable.

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 digital investments, 6.2% of revenue drops to the bottom line.

Key Takeaways

• Nike’s money comes overwhelmingly from footwear sales
• High gross margins illustrate the power of Nike’s brand-driven, premium pricing model
• Heavy investment in marketing and digital transformation, balanced by efficiency in operating costs
• Ongoing growth is driven by apparel expansion and direct-to-consumer channels

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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. Apparel contributes 28%, equipment 5%, and Converse 3%, with footwear remaining the dominant driver.

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 brand strength and premium pricing, though margins contracted 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 reached $4.02B in Q4 2025 (34.2% of revenue). SG&A includes marketing, advertising, and digital investments.

4. Why does Converse operate at a loss?

Converse, despite generating $366M in revenue, posted an operating loss in Q4 2025. This is because Nike aggressively invests in brand repositioning and digital transformation for Converse, believing these will drive long-term growth—even if 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 prior years. This moderate rate is primarily due to international structuring and tax benefits from share-based compensation.