Starbucks Corporation (SBUX) Earnings & Analysis

Latest quarter

Starbucks reported Q3 FY2026 revenue of $9.3 billion, down from $9.5 billion a year earlier. Revenue missed the consensus of $9.4 billion, while adjusted EPS of $0.85 exceeded the consensus of $0.66.

The company reported diluted EPS of $0.91, compared with $0.49 in Q3 FY2025. Starbucks attributed the revenue decline largely to converting its China retail operations to a licensed joint-venture model, which removed the business’s revenues and expenses from consolidated reporting. The filing said global comparable store sales increased 7.9%, including a 7.9% gain in the U.S., with comparable transactions up 4.2% and average ticket up 3.6%.

Starbucks reported gross margin of 69.7%, compared with 68.7% a year earlier, and operating margin of 10.5%, compared with 9.89%. The company reported free cash flow of $1.4 billion, compared with $434.3 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Brian Nickell said the quarter’s momentum reflected operating practices under Green Apron Service, including staffing, routines and coaching intended to improve customer experience. He said Starbucks still sees room to add transactions in both the morning and afternoon, and described menu, marketing and digital innovation as additional areas for growth.

Kathy Smith said U.S. comparable-sales growth was led by transactions and average ticket, with delivery, beverage modifications and food attachment contributing to ticket growth. She said pricing contributed less than a point of ticket growth in the quarter. Smith also said the company’s active Rewards membership increased sequentially and year over year, without quantifying membership in her outlook comments.

On margins, Smith said sales leverage, cost savings, lower inflation and tariff refunds supported Q3 expansion. She said the company views year-to-date product and distribution costs as a more normalized measure because Q3 refunds largely offset tariffs incurred earlier in FY2026. Smith said margins expanded in both the consolidated and North America businesses even excluding tariff refunds, while coffee remained a cost headwind.

Analysts asked about store uplifts, labor and licensed-store performance. Nickell said uplifted coffeehouses were generating transaction gains across access points and dayparts, while Smith said the company had surpassed 1,000 uplifts in North America and intended to complete at least 1,500 by fiscal year-end. Smith said each planned uplift is estimated to cost about $150,000.00. Nickell said Starbucks would continue evaluating underperforming North American locations based on performance, location and whether remodeling or a replacement site made more sense.

On China, Smith said the retail operations were deconsolidated and are now reported as a licensed business, with Starbucks’ 40% joint-venture economics recorded through income from equity investees. Nickell said the China structure means about 90% of the international portfolio is managed through licensed arrangements. Smith said Starbucks expects coffee price pressures to ease in Q4 and become largely immaterial to year-over-year margin comparisons.

Guidance

Starbucks raised its FY2026 EPS outlook from $2.25–$2.45 to $2.55–$2.65. The company raised its U.S. comparable-sales outlook from 5% or better to slightly greater than 6.0%, and its global comparable-sales outlook from 5% or better to nearing 6.0%.

Starbucks raised its consolidated operating-margin outlook from slight year-over-year growth to greater than 11.0%. The company now expects consolidated net revenues to be flat to slightly higher year over year, compared with its earlier expectation for roughly flat revenue.