Under Armour, Inc. (NYSE:UAA) (NYSE:UA) experienced a significant uptick in its stock price on Friday following the release of its unaudited third-quarter fiscal 2026 results, which outperformed market expectations. The company also updated its fiscal year outlook positively, a combination that caught the attention of investors amid one of the highest short interest levels seen in the market.
For the third quarter, Under Armour reported revenue of $1.327 billion, a 5% decrease compared to the previous year but slightly above analysts' projections of $1.313 billion. The reported diluted loss per share was $1.01; however, the adjusted diluted earnings per share registered at 9 cents, surpassing the anticipated loss of 2 cents. This earnings beat proved pivotal in boosting investor confidence.
The company faced a contraction in gross margin, which declined by 310 basis points to 44.4%. Under Armour attributed this margin compression to a combination of factors including an increase in tariffs, pricing pressures within the market, and an adverse shift in sales channel and regional mix.
In operational metrics, Under Armour incurred $75 million in restructuring charges. The firm posted an operating loss of $150 million in contrast to an adjusted operating income of $26 million. The net loss for the quarter stood at $431 million, heavily influenced by a $247 million valuation allowance related to U.S. federal deferred tax assets, whereas adjusted net income reached $37 million.
Under Armour’s leadership conveyed a cautiously optimistic view. President and CEO Kevin Plank commented, "Our third quarter adjusted operating results exceeded expectations, and despite a few unfortunate, non-recurring impacts, we’re encouraged by the progress we’re making in the business to reignite brand momentum." He further noted, "In North America, we believe the December quarter marked the most challenging phase of our business reset, and we expect greater stability ahead as we build on this progress globally."
Analyzing segment and category performance, North American revenue declined 10% to $757 million. Conversely, international revenue grew 3% to $577 million, with regional variances: Europe, Middle East, and Africa (EMEA) increased by 6%, Asia-Pacific dropped 5%, and Latin America surged 20%. Wholesale revenue fell by 6% to $660 million, while the direct-to-consumer (DTC) segment decreased 4% to $647 million. Within DTC, eCommerce revenue dropped 7%, constituting 38% of total DTC sales.
Category-wise, apparel revenue slipped 3% to $934 million; footwear revenues declined 12% to $265 million; and accessories decreased 3% to $108 million.
On liquidity, inventory levels showed a modest 2% decrease, settling at $1.1 billion. Under Armour held $465 million in cash and cash equivalents, alongside $600 million in restricted investments earmarked for the repayment of senior notes due in June 2026. The company’s $1.1 billion revolving credit facility remained unused. Operating activities for the first nine months of fiscal 2026 generated net cash inflows of $257 million.
Under Armour lifted its fiscal 2026 outlook, raising its adjusted earnings per share guidance to a range between 10 and 11 cents, up from the previous forecast of 3 to 5 cents and exceeding the 5-cent consensus estimate. However, the company widened its GAAP earnings loss expectation to between $1.25 and $1.24 per share, which is more negative than the earlier forecast of a loss between 17 and 15 cents and worse than the consensus loss estimate of 15 cents.
The revenue outlook was also updated positively, with the company anticipating approximately $4.96 billion in sales, slightly above the prior range of $4.91 billion to $4.96 billion and just above the $4.95 billion consensus estimate. The firm still expects a revenue decline of roughly 4% for the year, alongside a gross margin reduction of about 190 basis points, largely attributed to increased U.S. tariffs.
A notable factor in Under Armour’s stock movement is the exceptionally high short interest. With a short float of 66.03 million shares, representing 41.22% of the publicly traded float, many investors have positioned for a potential downside or a short squeeze, which can cause rapid share price increases if sentiment shifts.
At the time of reporting, Under Armour’s shares had climbed approximately 11.46% to $7.00, signaling a strong market reaction to the combination of earnings performance and updated guidance amid heavy short positioning.
Key Points
- Under Armour’s Q3 fiscal 2026 results exceeded expectations, reporting revenue of $1.327 billion and adjusted EPS of 9 cents versus an expected loss of 2 cents.
- The company experienced a 5% year-over-year revenue decline but improved adjusted earnings and raised fiscal guidance boosted investor confidence.
- High short interest, with over 41% of the public float sold short, contributed to the stock’s sharp increase, reflecting a possible short squeeze scenario.
- Despite challenges such as tariffs, pricing pressures, and a mixed regional sales performance, the company anticipates greater stability and momentum going forward.
Risks and Uncertainties
- Gross margin contraction driven by higher tariffs, pricing pressure, and unfavorable sales mix could continue to pressure profitability.
- Operating losses and net losses remain significant despite adjusted positive earnings, reflecting ongoing restructuring and tax valuation impacts.
- Revenue in key segments like North America and apparel categories continues to decline, signaling potential difficulties in regaining market share.
- High short interest levels indicate a degree of market skepticism, which could lead to volatility depending on forthcoming company performance and broader market conditions.