NIKE, Inc. (NKE) Cash Flow Statement

The OCF/NI ratio has swung from a robust 2.26 in 2025Q3 to a weak 0.31 in 2026Q1, suggesting that reported earnings are increasingly supported by non-cash items or working capital outflows. The gap between net income and operating cash flow widened to $505M in 2026Q1, implying that accruals are masking underlying cash generation. Investors should monitor whether this trend persists, as it may signal aggressive revenue recognition or inventory build-up.

The FCF trajectory is alarming: after a peak of $1.7B in 2025Q3, FCF fell to just $15M in 2026Q1, reflecting both lower operating cash flow and sustained capex. This collapse aligns with the income statement's five consecutive quarters of revenue decline, suggesting that the company is unable to convert its shrinking top line into cash. The FCF margin of 0.1% is far below the peer average, indicating a structural cash flow problem that may constrain future investments.

While absolute capex has been relatively stable around $100-200M per quarter, the ratio to revenue has increased because revenue is shrinking. This suggests that NIKE is maintaining its investment in infrastructure and technology despite lower sales, which could pressure near-term cash flows. The elevated capital intensity may reflect a strategic bet on digital and supply chain capabilities, but it also implies that the company is not scaling back investments in line with its revenue contraction.

The working capital swing from a $733M inflow to a $897M outflow is a major driver of the cash flow deterioration. This suggests that NIKE is either building inventory, extending receivables, or paying down payables, all of which consume cash. The negative working capital changes in four of the last five quarters indicate a persistent drag on operating cash flow, which may be a result of inventory management challenges or slower collections from wholesale partners.

Despite the cash flow crunch, NIKE has maintained its dividend payments, which totaled $591M in 2026Q1, while buybacks have been scaled back dramatically. This suggests that management is prioritizing dividend stability over buyback flexibility, which may be a signal of confidence in long-term cash generation. However, with FCF of only $15M in the same quarter, the dividend is not fully covered by free cash flow, implying that NIKE is either using balance sheet cash or debt to fund distributions, which warrants monitoring.

While the cumulative gap between net income and operating cash flow is only $200M, the quarterly swings are extreme, ranging from a $1.8B OCF in 2025Q3 to a $222M OCF in 2026Q1. This suggests that earnings quality is inconsistent, with some quarters showing strong cash conversion and others showing significant accruals. The cumulative data may obscure the recent deterioration, as the last two quarters have seen OCF/NI ratios below 1.0, indicating that the company is now generating less cash than its reported earnings.