The Starbucks story

What drives the business

• Starbucks' Back to Starbucks strategy, launched in fiscal 2024, centers on customer service, the coffeehouse experience and store improvements, with North America contributing 74% of revenue in fiscal 2025.
• Beverages represented 73% of company-operated retail sales in fiscal 2025, while Starbucks Rewards and mobile ordering support repeat visits and convenience.
• The Global Coffee Alliance with Nestlé extends Starbucks into grocery and foodservice, while ready-to-drink partnerships include PepsiCo and Nestlé, and Channel Development revenue increased 22% to $587.9 million in the quarter to June 2026.
• The Boyu Capital joint venture closed in April 2026, moving approximately 8,000 China coffeehouses toward licensing while Starbucks retained a 40% interest and ownership of its brand and intellectual property, with a shared aspiration to reach as many as 20,000 locations over time.
• Licensed operators bear store operating costs and capital investments while Starbucks earns product margins and royalties, and the global portfolio ended the quarter to June 2026 with 41,304 stores, 67% licensed and 33% company-operated.

What the price assumes

At $95.27, the reverse DCF implies free cash flow after stock pay grows 14.5% a year for ten years, using a 10.2% discount rate.

Starbucks delivered 10.6% annual growth on that measure over the last 10 years, while the TenQ check sets a 7.3% bar by slowing the historical record halfway to 4%.

The implied pace also contrasts with revenue growth of 4.5% over the last twelve months, when free cash flow was $3.6 billion before $364 million of stock-based pay.

Value SBUX on your own assumptions

What could change the story

• Tariff refunds helped expand margins in the quarter to June 2026 and largely offset related tariffs incurred earlier in fiscal 2026, so the reported improvement does not isolate recurring operating progress.
• Higher labor investments, restructuring costs and product mix shifts partly offset North America's sales gains, leaving its operating margin at 13.6% versus 13.3% a year earlier.
• International's higher margin did not mean higher operating income, which decreased to $252.8 million from $272.7 million in the quarter to June 2026 as the China operating model changed.
• Total debt of $13.3 billion against $3.6 billion of cash and short-term investments, negative equity and a failed near-term liquidity check limit financial flexibility despite positive free cash flow.
• Further North America closure actions approved in September 2026 show that the store portfolio restructuring remains unfinished.

What to watch next

• Starbucks' July 2026 guidance calls for fourth quarter U.S. comparable store sales growth of 6.5% or greater, with full fiscal year 2026 U.S. growth slightly greater than 6.0% and global growth nearing 6.0%.
• Transaction growth and North America operating margin will indicate whether customer demand is translating into profits beyond tariff refunds.
• For fiscal year 2026, management expects consolidated revenue to be flat to show slight growth, non-GAAP operating margin greater than 11.0%, and non-GAAP earnings per share of $2.55 to $2.65.
• Net openings and closure costs will show how the September restructuring actions fit with July's plan for approximately 600 to 650 net new coffeehouses globally in fiscal year 2026.

Sources

• Starbucks's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The SBUX stock report, for every figure and check