# How Starbucks makes money

CXProWealth Business Lens · Starbucks (SBUX) · Q3 FY2026

Read from the 10-Q for the period 2026-03-30 to 2026-06-28, filed 2026-07-29 with the SEC (accession 0000829224-26-000130): https://www.sec.gov/Archives/edgar/data/829224/000082922426000130/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $9.3B (-1.4% on the year)
- Operating income: $980.4M (operating margin 10.5%)
- Net income: $1.0B (net margin 11.2%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: $1.4B (14.5% of revenue)
- Cash conversion (operating cash flow / net income): 1.57x
- Capital expenditure: 3.1% of revenue

## Where the money goes (Q3 FY2026)

- Company-operated stores → Total net revenues: $7.5B
- Licensed stores → Total net revenues: $1.2B
- Other → Total net revenues: $615.8M
- Total net revenues → Total operating expenses: $8.4B
- Total operating expenses → Product and distribution costs: $2.8B
- Total operating expenses → Store operating expenses: $4.2B
- Total operating expenses → Other operating expenses: $131.9M
- Total operating expenses → Depreciation and amortization expenses: $361.6M
- Total operating expenses → General and administrative expenses: $598.8M
- Total operating expenses → Restructuring and impairments: $302.6M
- Total net revenues → Operating income/(loss): $901.8M
- Income from equity method investees → Operating income/(loss): $78.6M
- Operating income/(loss) → Interest expense: $134.6M
- Operating income/(loss) → Earnings before income taxes: $845.8M
- Net gain resulting from divestiture of certain operations → Earnings before income taxes: $536.3M
- Interest income and other, net → Earnings before income taxes: $37.2M
- Earnings before income taxes → Income tax expense: $374.4M
- Earnings before income taxes → Net earnings including noncontrolling interests: $1.0B
- Net earnings including noncontrolling interests → Net earnings attributable to Starbucks: $1.0B
- Net earnings/(loss) attributable to noncontrolling interests → Net earnings attributable to Starbucks: $400.0K

## Where the revenue comes from

### Products and services (Segment Reporting (Consolidated Revenue Mix by Product Type) (Details))

| Member | Value | Share |
|---|---:|---:|
| Beverage (1) | $5.4B | 58.4% |
| Other (3) | $2.0B | 21.6% |
| Food (2) | $1.9B | 20.0% |

The members sum to total revenue.

### Segments (Segment Reporting (Reconciliation Of Total Segment Operating Income To Consolidated Earnings Before Income Taxes) (Details))

| Member | Value | Share |
|---|---:|---:|
| North America | $7.4B | 79.3% |
| International | $1.3B | 14.2% |
| Channel Development | $587.9M | 6.3% |
| Corporate and Other | $17.1M | 0.2% |

The members sum to total revenue.

### FranchisorDisclosure (Condensed Consolidated Statements of Earnings)

| Member | Value | Share |
|---|---:|---:|
| Company-operated stores | $7.5B | 80.5% |
| Licensed stores | $1.2B | 12.9% |

The members do not sum to total revenue.

## Income statement, as filed

| Line | Q3 FY2026 | Of revenue |
|---|---:|---:|
| Total net revenues | $9.3B | 100% |
|   Company-operated stores | $7.5B | 80.5% |
|   Licensed stores | $1.2B | 12.9% |
|   Other | $615.8M | 6.6% |
| Product and distribution costs | $2.8B | 30.3% |
| Store operating expenses | $4.2B | 45.0% |
| Other operating expenses | $131.9M | 1.4% |
| Depreciation and amortization expenses | $361.6M | 3.9% |
| General and administrative expenses | $598.8M | 6.4% |
| Restructuring and impairments | $302.6M | 3.2% |
| **Total operating expenses** | $8.4B | 90.3% |
| Income from equity method investees | $78.6M | 0.8% |
| **Operating income/(loss)** | $980.4M | 10.5% |
| Net gain resulting from divestiture of certain operations | $536.3M | 5.8% |
| Interest income and other, net | $37.2M | 0.4% |
| Interest expense | ($134.6M) | 1.4% |
| **Earnings before income taxes** | $1.4B | 15.2% |
| Income tax expense | $374.4M | 4.0% |
| **Net earnings including noncontrolling interests** | $1.0B | 11.2% |
| Net earnings/(loss) attributable to noncontrolling interests | -$400.0K | 0.0% |
| **Net earnings attributable to Starbucks** | $1.0B | 11.2% |
| EPS — basic | $1 | 0.0% |
| EPS — diluted | $1 | 0.0% |
| Basic | 1,139,600,000 |  |
| Diluted | 1,143,800,000 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2007 | $9.4B | $1.1B | $672.6M | $1.3B | $1.1B | $250.9M |
| FY2008 | $10.4B | $503.9M | $315.5M | $1.3B | $984.5M | $274.2M |
| FY2009 | $9.8B | $562.0M | $390.8M | $1.4B | $445.6M | $943.4M |
| FY2010 | $10.7B | $1.4B | $945.6M | $1.7B | $445.8M | $1.3B |
| FY2011 | $11.7B | $1.7B | $1.2B | $1.6B | $531.9M | $1.1B |
| FY2012 | $13.3B | $2.0B | $1.4B | $1.8B | $856.2M | $894.1M |
| FY2013 | $14.9B | -$325.4M | $8.3M | $2.9B | $1.2B | $1.8B |
| FY2014 | $16.4B | $3.1B | $2.1B | $607.8M | $1.2B | -$553.1M |
| FY2015 | $19.2B | $3.6B | $2.8B | $3.7B | $1.3B | $2.4B |
| FY2016 | $21.3B | $4.2B | $2.8B | $4.7B | $1.4B | $3.3B |
| FY2017 | $22.4B | $4.1B | $2.9B | $4.3B | $1.5B | $2.7B |
| FY2018 | $24.7B | $3.9B | $4.5B | $11.9B | $2.0B | $10.0B |
| FY2019 | $26.5B | $4.1B | $3.6B | $5.0B | $1.8B | $3.2B |
| FY2020 | $23.5B | $1.6B | $928.3M | $1.6B | $1.5B | $114.2M |
| FY2021 | $29.1B | $4.9B | $4.2B | $6.0B | $1.5B | $4.5B |
| FY2022 | $32.3B | $4.6B | $3.3B | $4.4B | $1.8B | $2.6B |
| FY2023 | $36.0B | $5.9B | $4.1B | $6.0B | $2.3B | $3.7B |
| FY2024 | $36.2B | $5.4B | $3.8B | $6.1B | $2.8B | $3.3B |
| FY2025 | $37.2B | $2.9B | $1.9B | $4.7B | $2.3B | $2.4B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +2.8% (year before +0.6%): accelerating
- Operating income: -45.7% (year before -7.9%): slowing
- Net income: -50.6% (year before -8.8%): slowing
- Free cash flow: -26.4% (year before -9.7%): slowing

## Operating figures stated in the filing

- Global comparable store sales growth: 7.9% (as of 2026-06-28). "The decline in consolidated revenues was offset by a 7.9% increase in global comparable store sales, driven by a 7.9% increase in the U.S. market." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. comparable store sales growth: 7.9% (as of 2026-06-28). "The decline in consolidated revenues was offset by a 7.9% increase in global comparable store sales, driven by a 7.9% increase in the U.S. market." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. comparable transactions growth: 4.2% (as of 2026-06-28). "Specific to the U.S. market, the increase in comparable store sales was driven by a 4.2% increase in comparable transactions and a 3.6% increase in average ticket, primarily driven by higher delivery sales and strength in customer food attach and beverage modifications." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. average ticket growth: 3.6% (as of 2026-06-28). "Specific to the U.S. market, the increase in comparable store sales was driven by a 4.2% increase in comparable transactions and a 3.6% increase in average ticket, primarily driven by higher delivery sales and strength in customer food attach and beverage modifications." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- North America comparable store sales growth: 8.1% (as of 2026-06-28). "due to a 8.1% increase in comparable store sales ($486 million), driven by a 4.5% increase in comparable transactions and a 3.5% increase in average ticket" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Stores open (company-operated and licensed): 41,304 stores (as of 2026-06-28). "Total Company 175 308 314 898 41,304 41,097" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Stores open (company-operated and licensed): 41,097 stores (as of 2025-06-29). "Total Company 175 308 314 898 41,304 41,097" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Net stores opened in the quarter: 175 stores (as of 2026-06-28). "Total Company 175 308 314 898 41,304 41,097" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Net stores opened in the quarter: 308 stores (as of 2025-06-29). "Total Company 175 308 314 898 41,304 41,097" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- North America stores open: 18,371 stores (as of 2026-06-28). "Total North America (14) 107 60 310 18,371 18,734" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- North America stores open: 18,734 stores (as of 2025-06-29). "Total North America (14) 107 60 310 18,371 18,734" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- International stores open: 22,933 stores (as of 2026-06-28). "Total International 189 201 254 588 22,933 22,363" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- International stores open: 22,363 stores (as of 2025-06-29). "Total International 189 201 254 588 22,933 22,363" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Markets with a Starbucks presence: 90 markets (as of 2026-06-28). "Starbucks is the premier roaster, marketer, and retailer of specialty coffee globally, with a presence in 90 markets worldwide." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)

## Key insights

### A one-time China gain carried most of the profit jump

Net earnings rose 87.23% while operating income rose 4.79%: the $536.3M divestiture gain alone is 37.8% of pre-tax earnings of $1.42B.

Net earnings attributable to Starbucks were $1.05B, against $558.3M a year earlier, and diluted earnings per share $0.91 against $0.49. Operating income, the result of running the business, rose far less: to $980.4M from $935.6M. The gap opens below the operating line, where the filing books a $536.3M net gain on the divestiture of its China retail operations. That gain is equal to 54.7% of the quarter's operating income. _(from the filing)_
Income tax expense rose 43.78% to $374.4M, yet the effective rate fell to 26.4% from 31.8%. The filing attributes the lower rate mainly to lapping a discrete tax charge in the prior-year quarter, partly offset by tax on the China divestiture. _(from the filing)_
Net profit above operating profit is unusual for a retailer, and it is a reason to read this quarter from the operating line. Operating income and its 10.52% margin are the cleaner measure of how the business earns. The gain is a one-time conversion of the China stores into cash and a retained stake, not a recurring stream. _(analysis)_

### Packaged coffee earns nearly a third of operating profit

Channel Development brings 6.3% of revenue but 31.2% of operating income, at a 52.1% margin the filing partly credits to tariff refunds.

Channel Development, packaged coffee, tea and ready-to-drink sold outside the stores, mostly through the Global Coffee Alliance with Nestlé, booked $587.9M of revenue and $306.2M of operating income. That is a 52.1% margin, against 13.6% for North America and 10.52% for the company as a whole. Consolidated Other revenue rose 14.48% to $615.8M, which the filing ties mainly to the Global Coffee Alliance. _(from the filing)_
The filing attributes most of the segment's margin expansion to tariff impacts including refunds, partly offset by product mix and by lower income from the North American Coffee Partnership relative to segment revenue growth. Starbucks says it received substantially all the refunds it requested, and that they largely offset tariffs incurred earlier in the fiscal year. _(from the filing)_
The partner carries distribution, shelf space and retail relationships, so the segment needs little of Starbucks' own capital. That is why a line this small matters this much. The caveat: this quarter's margin includes refunds, so its share of profit is probably above the segment's normal run rate. _(analysis)_

### Margin widened even with restructuring at 30.9% of operating income

Operating margin rose 0.62 points to 10.52% although restructuring and impairments rose to $302.6M from $20.8M, a charge equal to 3.25% of revenue.

Restructuring and impairments took 3.25% of revenue, up 3.03 points from a year earlier. The filing ties the increase mainly to impairing Starbucks Reserve and Roastery locations and to severance. Even so, operating income rose 4.79% to $980.4M, because other lines fell faster than revenue's 1.41% decline: depreciation and amortization by 15.43% to $361.6M, general and administrative expense by 11.58% to $598.8M, and product and distribution costs by 4.29%. _(from the filing)_
The filing credits the margin gain mainly to sales leverage and lower inflation paired with tariff refunds, offset by higher restructuring costs and labor investments. It ties the lower depreciation to the China stores leaving the consolidated accounts, and the lower general and administrative expense partly to restructuring-related savings. _(from the filing)_
Restructuring charges are paid once, while the savings, if delivered, recur. The filing still estimates further charges before both plans finish in the first half of next fiscal year, so reported operating income is set to carry more of them. The test afterwards is whether the cost base stays lower once they stop. _(analysis)_

### Capital spending roughly halved as free cash flow tripled

Capital expenditure was $291.4M, 51.4% of a year earlier, lifting free cash flow to $1.35B, or 14.5% of revenue, from $434.3M.

Operating cash flow was $1.64B against $1.00B a year earlier, and capital expenditure $291.4M against $567.4M. Capital spending was 3.1% of revenue, against 6.0% a year earlier, and 17.7% of operating cash flow. The filing ties lower spending over the year to date to lower new store investments and retail renovations in North America and China. _(from the filing)_
Net new stores company-wide were 175 this quarter against 308 a year earlier, and North America stores fell to 18,371 from 18,734 as the company closed locations without a viable path to profitability. The filing says part of the China proceeds went to debt reduction, and interest expense fell to $134.6M from $142.3M. _(from the filing)_
Lower spending raises cash today but also slows new store openings, which the filing names as one of its growth drivers alongside comparable sales and margin. Whether this is a lasting shift to a lighter model or a pause during the restructuring would show in spending after the closures end. Quarterly cash flow also swings with the season and Starbucks Card loads, so single quarters are a rough guide. _(analysis)_

### Competitive edge

- **More visits, not only higher prices, drove U.S. growth** U.S. comparable store sales rose 7.9%, with transactions up 4.2% and average ticket up 3.6%, so growth came from customers returning as well as spending more.
- **A brand others pay to operate, in 90 markets** Licensed store revenue rose 8.61% to $1.20B and International earned a 19.1% margin, as more stores are run by partners who carry rent and staff.

### What to watch

- **North America earns more than the whole company** North America's $1,008.9M of operating income is 102.9% of the consolidated total, so the heavy reliance the filing names is visible in the numbers.
- **Added store labor still costs more than it returns** Store operating expenses were 55.9% of company-operated store revenue against 55.6% a year earlier, despite 7.9% comparable sales growth.
- **Part of this quarter's cost relief came from tariff refunds** The filing credits tariff refunds and lower inflation for part of the margin gain, and calls green coffee price volatility its primary market risk.

## Operating income by segment

- North America: $1.0B (102.9% of operating income)
- Channel Development: $306.2M (31.2% of operating income)
- International: $252.8M (25.8% of operating income)
- Corporate and Other: -$587.5M (-59.9% of operating income)

## Investor view

**Starbucks traded China store sales for royalties and a joint-venture stake: revenue fell 1.4% while operating income rose**

### How it makes money

Most revenue is still coffee sold across its own counters. Company-operated stores brought in $7.51B this quarter, 80.5% of total net revenues of $9.32B. Inside those stores, beverages were $5.44B, or 58.4% of total revenue, and food $1.86B, or 20.0%. The filing reports costs by nature rather than a cost-of-sales line, so there is no gross margin: the store business shows up as product and distribution costs at 30.3% of revenue and store operating expenses at 45.0%. _(from the filing)_
The second engine is licensing. Licensed stores earned $1.20B, 12.9% of revenue, from product sales to and royalties from licensees, now including the new China joint venture. Starbucks counts 41,304 company-operated and licensed stores in 90 markets. Here Starbucks sells the brand, the coffee and the know-how, and the partner carries the rent, the staff and the build-out. _(from the filing)_
The third is Channel Development: packaged coffee, tea and ready-to-drink sold outside the stores, mostly through the Global Coffee Alliance with Nestlé. It booked $587.9M of revenue, 6.3% of the total, and $306.2M of operating income, a 52.1% margin. That one small segment produced 31.2% of consolidated operating income of $980.4M. _(from the filing)_
Profit is concentrated. North America earned $1,008.9M of operating income on $7.40B of revenue, a 13.6% margin, which is 102.9% of the consolidated total. The segments together earn more than the company does because Corporate and Other, mostly unallocated head-office cost, lost $587.5M. The filing calls North America “our most mature business” and says it “has achieved significant scale.” _(from the filing)_
Read together, Starbucks is two businesses under one brand. In the U.S. and Canada it is an operator: it owns the labor, the leases and the service standard, and earns a retailer's margin on very large volume. Elsewhere, and in grocery aisles, it is increasingly a brand owner that collects a share of someone else's sales. The first business decides how much the company earns; the second decides how much capital it needs to earn it. _(analysis)_

### What shifted

Total net revenues fell 1.41% to $9.32B from $9.46B a year earlier. The cause is structural, not demand: China retail moved off the books into a licensed joint venture at the start of the quarter. Company-operated store revenue fell 3.92% to $7.51B and its share of revenue dropped 2.11 points to 80.5%. Licensed store revenue rose 8.61% to $1.20B from $1.11B, and Other revenue rose 14.48% to $615.8M, which the filing ties mainly to the Global Coffee Alliance. _(from the filing)_
Underneath the deconsolidation, demand in existing stores strengthened. Global comparable store sales rose 7.9%, and the U.S. rose 7.9%, built on a 4.2% increase in comparable transactions and a 3.6% increase in average ticket. The filing credits “higher delivery sales and strength in customer food attach and beverage modifications.” North America comparable sales rose 8.1%. More visits, not only higher prices, carried the gain. _(from the filing)_
Operating margin rose 0.62 points to 10.52%, and operating income rose 4.79% to $980.4M from $935.6M. Product and distribution costs fell 0.91 points of revenue, helped, the filing says, by the China conversion, lower inflation and tariff refunds. Depreciation fell 15.43% and general and administrative expense 11.58%. Restructuring and impairments of $302.6M, against $20.8M a year earlier, absorbed much of the gain, equal to 30.9% of operating income. _(from the filing)_
Net earnings attributable to Starbucks rose 87.23% to $1.05B from $558.3M, and diluted earnings per share to $0.91 from $0.49. Most of that jump sits below operating income: a one-time $536.3M gain on the China divestiture, which is 37.8% of pre-tax earnings of $1.42B. The effective tax rate fell to 26.4% from 31.8%. Income from equity investees rose 37.65% to $78.6M as the China stake began to report. _(from the filing)_
Cash generation improved. Operating cash flow was $1.64B and capital expenditure $291.4M, against $567.4M a year earlier, leaving free cash flow of $1.35B, 14.5% of revenue. Capital spending was 3.1% of revenue, against 6.0% a year earlier. The filing says part of the China proceeds went to debt reduction, and interest expense fell to $134.6M from $142.3M. _(from the filing)_

### Risks in the filing

The company names its “heavy reliance on the financial performance of our North America operating segment.” A weak stretch in the U.S. and Canada cannot easily be offset elsewhere, and it also says international growth depends on conditions distinct from North America, including local rules, trade policy and labor conditions. _(from the filing)_
Input costs. The filing names higher costs, lower quality or unavailability of coffee, dairy, cocoa, energy and packaging, along with tariffs, as risks, and calls green coffee price volatility its primary market risk. Weather, natural disasters and logistics costs can disrupt the supply chain. _(from the filing)_
People and execution. The company lists the availability and cost of labor, including union organizing efforts and its responses, the ability to retain executives and store staff, and the successful execution of its Back to Starbucks strategy and restructuring plans. It separately names the costs and risks of changes to its ownership and operating structure, including the China joint venture. _(from the filing)_
Demand and competition. Reduced discretionary spending, changing consumer preferences, and competitors' pricing actions, promotions and new entrants are named, as are food safety incidents, data breaches, IT failures and failure to meet market expectations or guidance. _(from the filing)_
Three of these named risks are already visible in the numbers rather than hypothetical: dependence on North America, which earns more than the whole company's operating income; labor cost, where store expense as a share of store sales edged up despite strong comparable sales; and execution of the restructuring, whose charges were the largest single drag on this quarter's operating line. _(analysis)_

## Founder view: mechanisms

### Turning stores you run into a brand you license

Starbucks sold control of its China stores to a partner, kept a minority stake and the brand, and now earns royalties, product sales and a share of profit instead of store revenue. Revenue shrinks because the partner books the sales. Margin rises because the partner also carries rent, wages and depreciation. The brand owner keeps the part of the economics that does not need its capital. _(analysis)_

### Growing through more visits on the same footprint

Comparable store sales measure growth from stores already open, so they show whether the existing base is getting more productive. Starbucks paid for more labor and a stricter service standard to bring visits back, betting that more transactions on the same rent and equipment would lift margins. Traffic-led growth is sturdier than price-led growth because it does not ask the same customer to pay more each time. _(analysis)_

### Renting the brand into grocery through a partner

Starbucks lets Nestlé distribute its packaged and single-serve coffee worldwide, and takes product sales and royalties without running a consumer goods sales force. The partner carries distribution, shelf placement and retail relationships. Starbucks supplies the brand and the coffee. The result is a small revenue line with a very high margin, because most of the costs sit with the partner. _(analysis)_

### Pruning the footprint and cutting capital

Starbucks closed stores without a path to profitability, slowed new openings and cut capital spending, while taking one-time charges for the closures, severance and the Reserve and Roastery impairments. The bet is that a smaller, better base earns more per store and frees cash, and that the charges are paid once while the savings recur. _(analysis)_

## Member research

Signed-in members read, on the page: what Starbucks's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Starbucks 10-Q for the period to 2026-06-28: https://www.sec.gov/Archives/edgar/data/829224/000082922426000130/ (2026-07-29)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02