Starbucks
SBUX · NasdaqA 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.
Q3 FY2026, the quarter to Jun 28, 2026 · 10-Q filed Jul 29, 2026
- Operating margin
- 10.5%
- Net income
- $1.0B
- Free cash flow, quarter
- $1.4B
Largest source of revenue: Company-operated stores, 80.5% of the total.
Where Starbucks's money goes
- 01
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.
Why it matters
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.1
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.1
AnalysisNet 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.
- 02
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.
Why it matters
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.1
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.1
AnalysisThe 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.
- 03
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.
Why it matters
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%.1
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.1
AnalysisRestructuring 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.
- 04
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.
Why it matters
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.1
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.1
AnalysisLower 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.
Sources
- 1.Starbucks 10-Q for the period to 2026-06-28 (the filing), Jul 29, 2026, read Nov 2, 2026
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Growth, profit and margin
Revenue went from $9.4B in FY2007 to $37.2B in FY2025, the operating margin from 11.2% to 7.9%, over 18 years.
- Revenue$37.2B
- Operating income$2.9B
- Operating margin7.9%
- Period
- Q3 FY2026
- Revenue
- $9.3B
- Operating income
- $980.4M
- Operating margin
- 10.5%
- Net income
- $1.0B
- Free cash flow
- $1.4B
Does the profit turn into cash?
Q3 FY2026: free cash flow of $1.4B against net income of $1.0B in the quarter.
- Operating cash flow$4.7B
- Capital expenditure$2.3B
- Free cash flow$2.4B
- Net income$1.9B
Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.
Financial data and sources
How the revenue mix has shifted
Each breakdown the filing reports, as shares of revenue, for every period it restates.
Segment Reporting (Consolidated Revenue Mix by Product Type) (Details). The filing restates this breakdown for 1 period.
Click a member to isolate it across the years shown.
The figures
Margins, cash and growth for the period, each with what it was computed from.
Not reported, or not derivable
- gross margin: the company reports expenses by nature: no cost of revenue or gross profit line exists
Where revenue comes from
Every breakdown the filing reports for the period, with each item's share.
Revenue streams
| Beverage (1) | $5.4B | 58.4% |
| Other (3) | $2.0B | 21.6% |
| Food (2) | $1.9B | 20.0% |
Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-07-29
Segments
| North America | $7.4B | 79.3% |
| International | $1.3B | 14.2% |
| Channel Development | $587.9M | 6.3% |
| Corporate and Other | $17.1M | 0.2% |
Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-07-29
FranchisorDisclosure
| Company-operated stores | $7.5B | 80.5% |
| Licensed stores | $1.2B | 12.9% |
These items do not sum to total revenue; the filing states them beside it. Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-07-29
What it costs
The cost lines beneath operating income, each as a share of revenue, then the operating result.
Costs are reported by nature: what they are (food, labor, occupancy, personnel, marketing), not what they were for, so there is no cost-of-revenue line and no gross profit.
| Cost line | Q3 FY2026 | Of revenue | Source |
|---|---|---|---|
| Total operating expenses | $8.4B | 90.3% | Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-07-29 |
| Operating income/(loss) | $980.4M | 10.5% | Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-07-29 |
Operating income by segment
Where the operating profit is earned, as the filing reports it.
Segments
| North America | $1.0B | 102.9% |
| Channel Development | $306.2M | 31.2% |
| International | $252.8M | 25.8% |
| Corporate and Other | -$587.5M | -59.9% |
Shares of operating income. Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-07-29
Operating figures the company states
From the text of the filing rather than its statements, each with the sentence that states it.
View source
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.
View source
Total International 189 201 254 588 22,933 22,363
View source
Starbucks is the premier roaster, marketer, and retailer of specialty coffee globally, with a presence in 90 markets worldwide.
View source
Total Company 175 308 314 898 41,304 41,097
View source
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
View source
Total North America (14) 107 60 310 18,371 18,734
View source
Total Company 175 308 314 898 41,304 41,097
View source
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.
View source
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.
View source
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.
The statements, as filed
The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.
Income statement25 lines, as presented in the 10-Q
Cash flow statement2 lines, as presented in the 10-Q
Year to date, as a quarterly filing reports it.
| Line | Q3 FY2026 | A year earlier | Change | Source |
|---|---|---|---|---|
| Operating activities: | ||||
| Net earnings including noncontrolling interests | $1.04B | $558.5M | +87% | Source10-Q, us-gaap:ProfitLoss, as reported in the 10-Q filed 2026-07-29 |
| Cash and cash equivalents: | ||||
| End of period | $3.45B | $4.17B | -17% | Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-07-29 |
Balance sheet38 lines, as presented in the 10-Q
About this data
- Source
- Starbucks 10-Q, accession 0000829224-26-000130, filed Jul 29, 2026, read on Nov 2, 2026.
- History
- From the SEC's XBRL company facts, the value from the latest filing that stated each period.
- Reading
- Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
- Version
- methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
What holds Starbucks's model up, and what could bend it
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.
The detail
North America comparable store sales rose 8.1%, and the segment earned $1,008.9M of operating income on $7.40B of revenue, a 13.6% margin. The filing ties the ticket gain to higher delivery sales and to customers adding food and beverage modifications. Food was $1.86B of revenue, 20.0% of the total, and beverages $5.44B, or 58.4%.1
AnalysisTraffic-led growth is the sturdier kind: it spreads rent, equipment and a fixed store base over more orders without asking each customer to pay more. Starbucks bought it with labor and a stricter service standard under Back to Starbucks, and the habit of a daily visit is hard for a competitor to copy at this scale.
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.
The detail
Starbucks counts 41,304 company-operated and licensed stores, against 41,097 a year earlier, and International stores rose to 22,933 from 22,363. Licensed store revenue comes from product sales to, and royalties from, licensees, now including the new China joint venture, in which Starbucks kept a minority stake and continues to own and license the brand.1
International earned $252.8M of operating income on $1.32B of revenue, a 19.1% margin, against 13.6% for the operated North America business. The filing attributes the segment's margin expansion primarily to the China conversion, and expects the licensed model to mean lower revenues and higher operating margin. Income from equity investees rose 37.65% to $78.6M.1
AnalysisThe advantage is that the brand travels without Starbucks' capital. A licensee pays for the name, the coffee and the operating know-how, which only works because customers seek the brand out. The trade-off is control: service quality in licensed stores sits with partners.
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.
The detail
The segments together earn more than the company because Corporate and Other, mostly unallocated head-office cost, lost $587.5M, equal to 59.9% of operating income. North America brought $7.40B of revenue, 79.3% of the total. The filing lists its heavy reliance on the financial performance of the North America segment among its risks.1
AnalysisWith profit this concentrated, a weak stretch in U.S. and Canadian stores flows almost directly into the consolidated result. International and Channel Development are profitable, but together they earn less than the head-office cost they help absorb.
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.
The detail
The filing attributes the rise in that ratio mainly to labor investments largely in support of Back to Starbucks and to higher reserves for self-insured claims, partly offset by sales leverage. Among its risks the company names the availability and cost of labor, including union organizing efforts and its responses to them.1
AnalysisThe service push is a bet that transactions keep compounding on a fully staffed base until the ratio turns down. If traffic growth slows first, the extra labor stays in the cost base. Total store operating expenses, down 3.39% to $4.20B, partly reflect the China stores leaving the accounts, so the ratio to store revenue is the better gauge.
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.
The detail
Product and distribution costs fell 0.91 points to 30.34% of revenue. The filing attributes the decline to the China conversion and to lower inflation paired with tariff refunds, partly offset by mix shift. Starbucks says it received substantially all the refunds it requested, and that they largely offset tariffs paid earlier in the fiscal year.1
The company names higher costs, lower quality or unavailability of coffee, dairy, cocoa, energy and packaging as risks, and expects commodity prices, particularly coffee, to continue to affect results. It also expects some macroeconomic pressures, including tariffs and elevated coffee pricing, to keep easing into the fourth quarter.1
AnalysisRefunds that catch up on tariffs paid across several quarters land in one quarter, so the margin in the periods ahead is the cleaner read on the underlying cost base. Channel Development, where refunds weigh most in the filing's explanation, is the line where that shows first.
Sources
- 1.Starbucks 10-Q for the period to 2026-06-28 (the filing), Jul 29, 2026, read Nov 2, 2026
Starbucks, further in
Member research, then your own questions on ChatGPT.
What could change the outlook
What Starbucks's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.
- What Starbucks' operating profit rests on after the China deal
Which segments carry the profit from here, what the licensed model changes in the cost base, and how much of this quarter's improvement rests on refunds and one-off items.
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Have a question about Starbucks?
Explore its profit drivers, competitive edge, risks, or your own investment and business questions with CXProWealth on ChatGPT.
- How much of Starbucks' Channel Development margin would remain once the tariff refunds booked this quarter no longer recur?
- What would the China joint venture need to deliver in royalties and equity income to replace the store profit Starbucks handed over?
- Can Starbucks' U.S. transaction growth outpace the added store labor enough to bring store costs below 55.9% of store revenue?
Business Lens describes Starbucks from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.