Nike (NKE) shares surged 10.33% in pre-market trading on Friday, following the sportswear giant's fourth-quarter earnings report that exceeded analyst expectations despite ongoing challenges. The company's turnaround strategy and plans to reduce reliance on China production boosted investor confidence.

Nike reported revenue of $11.1 billion for the quarter ended May 31, down 12% year-over-year but above the $10.72 billion analysts had forecast. Earnings per share came in at $0.14, edging past estimates of $0.13. While sales declined across all geographic regions, with Greater China seeing the steepest drop of 21%, the results were better than feared given the company's ongoing turnaround efforts.

Looking ahead, Nike expects headwinds to moderate in the coming quarters. The company forecast first-quarter revenue to be down mid-single digits compared to the prior year, slightly better than the 7.3% drop analysts were expecting. This more positive outlook, coupled with progress in inventory cleanup and new product launches, has reignited investor optimism.

In a significant move to mitigate the impact of U.S. tariffs, Nike announced plans to reduce its reliance on production in China for the U.S. market. CFO Matthew Friend stated that China currently accounts for about 16% of Nike's footwear imports into the U.S., a figure the company aims to cut to a "high single-digit percentage range" by the end of its 2026 fiscal year. This strategic shift, along with other cost-cutting measures and "surgical" price increases, is part of Nike's efforts to offset an estimated $1 billion in additional costs from tariffs.