Key Stats
- Current Price: ~$97
- Q2 FY2026 Revenue: $9.5B, up ~9% year-over-year
- Q2 FY2026 EPS (non-GAAP): $0.50, up ~22% year-over-year
- Global Comps: +6.2% YoY; U.S. comps +7.1% YoY
- FY2026 Global Comp Guidance (raised): 5% or better (previously lower)
- FY2026 EPS Guidance (raised): $2.25 to $2.45
- FY2026 Revenue Guidance: Roughly flat year-over-year (China JV transition impact)
- TIKR Model Price Target: ~$151
- Implied Upside: ~55%
Starbucks Stock Posts First Simultaneous Top- and Bottom-Line Growth in Over Two Years
Starbucks stock (SBUX) delivered Q2 FY2026 revenue of $9.5B, up ~9% year-over-year, alongside non-GAAP EPS of $0.50, up ~22% from the prior-year quarter.
Global comparable store sales grew 6.2%, driven by the company’s strongest U.S. transaction growth in three years.
North America led the result, with U.S. comps accelerating to 7.1% on transaction growth of more than 4 percentage points across all dayparts, income cohorts, and age demographics.
CEO Brian Niccol framed the quarter directly on the call: “Q2 marked a milestone for the business. We delivered growth on both the top and bottom line for the first time in more than 2 years.”
International revenues grew ~10% year-over-year to $2.1B, with all 10 of Starbucks’ largest markets posting positive comps for the first time in nine quarters, including China, which delivered transaction-led comp growth of 50 basis points.
Channel Development revenue grew ~39% year-over-year, driven by higher revenues from the Global Coffee Alliance and strong early performance from the new multi-serve refreshers concentrate, described by CFO Cathy Smith as the company’s largest CPG launch in over a decade.
North America operating margin contracted ~170 basis points to 10.2%, pressured by Green Apron Service investment annualization, product and distribution cost increases of ~190 basis points, and elevated coffee prices running nearly $1 per pound higher year-over-year, according to Smith on the Q2 earnings call.
Management raised full-year global comp guidance to 5% or better (up from prior range), raised EPS guidance at both ends to $2.25 to $2.45, and maintained unit count guidance of 600 to 650 net new coffeehouses for the fiscal year.
Consolidated revenue guidance for FY2026 is now roughly flat year-over-year, reflecting the deconsolidation of Starbucks China following the close of the Boyu Capital transaction, which reduces China-related revenues in the back half to less than 20% of what would have previously been reported.
Starbucks received approximately $3.1B in gross cash proceeds from the China transaction and used a portion to repay $1B in February debt maturities, with remaining proceeds directed toward further debt reduction.
Financials: Starbucks Stock Shows First Signs of Margin Recovery After Multi-Year Compression
The annual income statement shows a business under meaningful margin pressure, with operating margins compressing from a peak of ~16% in FY2021 to ~10% in FY2025, and total revenues growing modestly from $36.2B in FY2024 to $37.2B in FY2025, up around 3%.
Gross margin has followed a consistent downward trend across the same period: 29% in FY2021, 26% in FY2022, 27% in FY2023, 27% in FY2024, and 23% in FY2025.
Operating income fell from $5.5B in FY2023 to $5.1B in FY2024 and then to $3.7B in FY2025, a 28% decline year-over-year.
Operating margin followed the same trajectory: 15% in FY2023, 14% in FY2024, and 10% in FY2025.
The Q2 FY2026 consolidated operating margin of 9.4% marks the first quarter of margin expansion since Q1 FY2024, up ~110 basis points year-over-year, led by the International segment where operating margin expanded ~790 basis points to 20.3%, according to Smith on the earnings call.
Smith noted that approximately half of the International margin expansion in Q2 was driven by held-for-sale accounting related to the China transaction, which temporarily reduced store operating expenses and depreciation by approximately $118M.
Valuation Model Take
The TIKR model prices Starbucks stock at approximately $151, implying about 55% upside from the current price of ~$97.
The mid-case assumptions driving that target include a revenue CAGR of ~5.1% and a net income margin of ~10.3% over the forecast period through FY2035, both reasonable given the company’s current trajectory and cost savings program.
This earnings report strengthens the investment case at the margin: Q2 delivered the first simultaneous top- and bottom-line growth in over two years, comp guidance was raised, and EPS guidance moved higher at both ends, all ahead of Green Apron Service costs annualizing in August.
The risk/reward on Starbucks stock is more attractive today than it was a year ago, with the turnaround narrative now supported by consecutive quarters of positive data rather than management aspiration alone.
The question now is not whether the turnaround is real, but whether the margin recovery can keep pace with the comp momentum.
What Has to Go Right
- U.S. comps sustain above 5% through H2 FY2026, consistent with April trends cited by Niccol, enabling operating leverage to flow through as Green Apron costs annualize in August
- Coffee prices continue to abate from near-$1-per-pound YoY inflation, as management guided, with back-half COGS relief allowing North America margins to recover from 10.2%
- The Starbucks Rewards program, now at a record 35.6 million 90-day active members (up 4% YoY), continues to drive frequency gains following the March loyalty overhaul
- The China JV structure contributes ~50% margin flow-through on licensing revenues, offsetting the ~80% reduction in reported China revenue in H2
What Could Still Go Wrong
- North America operating margin contracted ~170 basis points in Q2 despite strong comps; if product and distribution cost pressures persist beyond H2 guided moderation, margin expansion could stall even as revenue grows
- Consolidated revenue guidance of roughly flat year-over-year reflects the full China deconsolidation impact; any softness in underlying comp trends would directly compress reported results with little buffer
- The EPS guidance raise of $2.25 to $2.45 was modest relative to the Q2 beat, signaling management’s caution around macro uncertainty, gas prices, and tariff pass-through risks that have not yet fully normalized
- Only ~300 of 8,000-plus U.S. stores have completed coffeehouse uplifts; execution risk on the accelerated rollout to 1,000+ stores by fiscal year-end is real and unproven at scale
Should You Invest in Starbucks Corporation?
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