Nike (NKE) shares tumbled over 5% in after-hours trading on Thursday, despite the sportswear giant beating Wall Street expectations for its fiscal third quarter. The drop came as the company's guidance for the fourth quarter fell short of analyst forecasts, overshadowing the better-than-expected Q3 results.

For the quarter ended February 28, Nike reported earnings per share of $0.54, surpassing the consensus estimate of $0.29. Revenue came in at $11.27 billion, exceeding expectations of $11.01 billion. However, this still represented a 9% decline compared to the same period last year. The company's gross margin also faced pressure, dropping to 41.5% from 44.8% a year earlier.

While Nike managed to beat estimates for Q3, it was the company's outlook for Q4 that appeared to spook investors. Chief Financial Officer Matthew Friend said on the earnings call that Nike expects fourth-quarter revenue to be down in the "mid-teens" range. Additionally, the company anticipates Q4 gross margins to decline by about 400 to 500 basis points. This gloomy forecast suggests that Nike's challenges, including inventory management and competitive pressures, are likely to persist in the near term.

The stark contrast between Nike's Q3 performance and its Q4 guidance highlights the ongoing hurdles the company faces as it works to regain market share and navigate a highly competitive landscape. As Nike continues its efforts to clean up inventory and bring new products to market, investors will be closely watching how these initiatives impact the company's financial performance in the coming quarters.