Shares of Nike (NKE -0.76%) soared on its latest earnings report, and it's easy to see why.

The company smashed expectations on the top and bottom lines with revenue increasing 17%, or 27% on a constant-currency basis, to $13.3 billion, well ahead of estimates at $12.6 billion.

Profits were essentially flat from a year ago as the company paid a higher tax rate and markdowns were higher than normal due to excess inventory. Pre-tax income increased 10% to $1.65 billion, and earnings per share rose from $0.83 to $0.85, which breezed past expectations at $0.65.

Inventory in the quarter was up 43% to $9.3 billion, showing the company is still overstocked, but management said on the earnings call that the inventory peak had passed. Inventory dollars were down 3% sequentially and units fell by double digits, showing the company is making progress.

Chief financial officer Matt Friend said that year-over-year comparisons were misleading because a factory closure in Vietnam in the quarter a year ago had led to below-normal supply levels. The company also delivered growth in average selling prices even as it took steps to liquidate excess merchandise.

Lasting gains, temporary challenges

The most encouraging data in Nike's earnings report was the surge in revenue coming at a time when so many consumer discretionary brands and retailers are struggling with the macro environment.

Growth was broad-based, with direct sales up 16%, wholesale revenue increasing 19%, and Nike digital sales 25% higher. Strong digital sales are particularly notable as most e-commerce companies have been challenged this year due to difficult comparisons and as shopper traffic has shifted back to brick-and-mortar stores. Results in China began to recover from the first quarter as revenue declined 3% -- or rose 6% on a constant-currency basis.  

Meanwhile, revenue soared more than 30% on a constant currency basis in its three reporting regions outside of Greater China, which add up to more than 85% of total sales.

Investors had been concerned about elevated inventory levels, which is one reason the stock is down 31% this year. And indeed Nike's gross margin did decline 300 basis points due to efforts to clear inventory in North America, as well as higher freight and logistics costs and currency-translation headwinds. 

With the inventory peak having passed, Nike should soon be able to send more of its additional revenue to the bottom line, which should help propel the stock higher. 

What's next for Nike

Management's guidance for the rest of the fiscal year was relatively conservative. The company said it was taking a "measured approach" and called for currency-neutral full-year revenue to grow in the low teens, up from its previous guidance for the low double digits. In addition, it forecast 700 basis points of foreign currency headwinds, meaning reported revenue growth will be in the mid-single digits, and it sees gross margin falling 200 to 250 basis points as it continues to focus on reducing inventory.

While that forecast indicates Nike expects revenue growth over the next two quarters, the company is still bucking the broader macro headwinds, especially compared to peers like Adidas and Under Armour, which reported currency-neutral revenue growth of just 4% and 5%, respectively, in their most recent quarters.

When you compare those two figures to the 27% currency-neutral revenue growth at Nike, it's clear that the company's product and brand are resonating with customers, and it is grabbing significant market share from its closest competitors. 

Though a recession would impact the Swoosh as much as the rest of the discretionary consumer goods sector, the latest results show the company is in a good position for long-term growth on both the top and bottom lines and continues to gain share in a massive market. 

Nike has led its industry for more than a generation, and the latest results show why it's a top buy-and-hold stock for any portfolio.