SBUX Q2 FY26: revenue $9.53B, net income $510.9M. Revenue +8.8%, Operating Income +38% on Comp Recovery; China JV Closed Post-Quarter

The China joint venture transaction, announced in November and classified as held-for-sale in Q1 FY26, closed on March 30, 2026 (Q3 FY26). Starbucks now holds a 40% equity stake in a licensed model covering 7,991 stores, ending the company-operated model in China. This shifts the International segment from predominantly company-operated to licensed, reducing consolidated revenue but improving operating margin beginning Q3 FY26. The company plans to use proceeds for debt reduction and balance-sheet strengthening.

Management approved a new restructuring plan in Q2 FY26 to relocate certain support functions to a Nashville office, citing proximity to suppliers, technology talent, and expected coffeehouse growth in the Southeast. This is a separate initiative from the FY25 support-organization simplification and signals ongoing cost-structure optimization and geographic realignment of corporate resources.

A February 2026 Supreme Court ruling declared IEEPA tariffs unlawful, and U.S. Customs launched a refund platform in April 2026. Starbucks was subject to these tariffs and may recover prior payments, but the amount and timing are uncertain and not yet recognized. This is a potential one-time cash benefit, though the company has not quantified the exposure or recovery.

Q2 FY26 consolidated revenue growth accelerated to +9% (vs. +2% in Q2 FY25), driven by a 6.2% global comp increase (vs. -1% in Q2 FY25). U.S. comps turned positive at +7.1% (vs. -2% prior year), with transactions +4.3% (vs. -4% prior year) and ticket +2.7% (vs. +3% prior year). The shift from negative to positive comps, particularly the transaction recovery, reflects the "Back to Starbucks" initiatives gaining traction. International comps improved to +2.6% (vs. +2% prior year).

Q2 FY26 operating margin expanded 180bp to 8.7% (vs. 590bp contraction to 6.9% in Q2 FY25). The improvement reflects sales leverage from the comp recovery and reduced depreciation/store-operating costs after classifying China assets as held-for-sale. Labor investments for "Back to Starbucks" continued but were more than offset by topline growth, reversing the prior-year margin pressure.

North America Q2 FY26 operating margin contracted 170bp to 10% (vs. 640bp contraction to 11.6% in Q2 FY25). Labor investments (~260bp drag) and inflationary pressures (~90bp) continued, but sales leverage (+370bp) from the +7.1% U.S. comp partially offset the headwinds. The margin decline moderated significantly vs. prior year, though absolute operating income fell 9% due to the lower base.

International Q2 FY26 operating margin expanded 780bp to 19% (vs. 170bp contraction to 11.6% in Q2 FY25), driven by ~520bp from ceasing depreciation on China held-for-sale assets and 430bp from sales leverage. Operating income surged 84% to $399M. The margin expansion is largely a held-for-sale accounting effect; once the China JV closes in Q3, the segment will report lower revenue but higher margin under the licensed model.

The YTD FY26 effective tax rate spiked to 46.1% (vs. 23.6% in YTD FY25), driven by a $273M discrete charge (~1,830bp impact) from releasing indefinite reinvestment assertions on China earnings upon classifying the disposal group as held-for-sale. This is a one-time tax cost tied to the China JV transaction. The company disclosed in Q1 FY26 that it released all remaining indefinite reinvestment assertions, recording $266M in Q1 and an additional $8M in Q2.

Q2 FY26 restructuring charges fell $91M to $25M (vs. $116M in Q2 FY25), as the company lapped the prior-year support-organization simplification severance costs. The current-year charges relate to ongoing coffeehouse closures under the "Back to Starbucks" plan and the new Nashville office relocation plan approved in Q2 FY26.

FY26 capex guidance is now "moderately lower" than FY25 (vs. FY25 guidance of "reasonably consistent" with FY24). The reduction reflects lower new-store investments and retail renovations in North America, as well as reduced global non-retail facilities spend, consistent with the company's focus on disciplined growth and cost structure optimization.

Cash and investments fell to $2.0B at Q2 FY26 end (vs. $3.2B at Q2 FY25 end), a $1.2B decline. The company repaid $1.0B of long-term debt in the first half of FY26 and continued dividend payments. The China JV transaction proceeds (received in Q3 FY26 after the balance-sheet date) are earmarked for further debt reduction.

Starbucks released all remaining indefinite reinvestment assertions in Q1 FY26, recording a $266M discrete tax charge (increased by $8M in Q2). This one-time cost allows future repatriation of foreign earnings without incremental tax consequences. The decision was tied to the China JV transaction and the company's intent to use proceeds for debt reduction and balance-sheet strengthening.

The tone shifted from cautious ("challenges," "dynamic environment") in Q2 FY25 to more optimistic in Q2 FY26, with the company now expecting macroeconomic pressures to "alleviate" in the second half of FY26. The prior-year language emphasized active mitigation efforts; the current language suggests those efforts are working and headwinds are moderating.

Starbucks announced a joint venture with Boyu Capital in which Boyu acquired 60% of Starbucks retail operations in China (7,991 stores) for an enterprise value of ~$4 billion. Starbucks retained 40% and continues to own the brand. The disposal group met held-for-sale criteria in Q1 FY2026, with assets and liabilities classified accordingly on the balance sheet. The transaction closed March 30, 2026 (post-quarter) for $3.1 billion in cash consideration.

The China JV transaction closed on March 30, 2026 (the day after the Q2 FY2026 period end) for $3.1 billion. Starbucks will now record its 40% share of JV income under equity-method accounting plus product sales and royalty revenues, rather than consolidating China retail revenues and expenses. The 7,991 stores shift from company-operated to licensed in the International segment starting Q3 FY2026. Management expects to recognize a material pre-tax gain on the sale.

Held-for-sale classification required Starbucks to stop depreciating China PP&E and amortizing ROU assets, which reduced D&A and store operating expenses in Q2 FY2026. The company also changed its indefinite reinvestment assertion for China earnings, triggering an increase in income tax expense (the $273M discrete item disclosed in Note 13). No impairment was recorded at classification.

Starbucks approved a new restructuring plan in Q2 FY2026 to relocate certain support functions to a new Nashville office, part of the ongoing "Back to Starbucks" strategy. Charges under this plan were immaterial in Q2 FY2026. This is a new initiative not present in the baseline period.

The baseline Q2 FY2025 restructuring charge of $116.2M was entirely support-organization severance (no store closures). In Q2 FY2026, the $25.1M charge includes store closures (62 stores in Q2, 227 YTD), asset impairments, lease exit costs, and severance. The restructuring plan has expanded from support-org headcount reduction to include physical store portfolio rationalization under the "Back to Starbucks" strategy.

Starbucks estimates an additional ~$150M in restructuring charges for the remainder of FY2026, primarily lease exit costs and accelerated ROU amortization in North America. This forward estimate was not present in the baseline period, which only disclosed the initial $116.2M support-org severance charge.

Q2 FY2026 operating income was $828.1M vs. $601.0M in Q2 FY2025 (+38% YoY). The baseline Q2 FY2025 figure of $601.0M compared to $1,098.9M in Q2 FY2024, reflecting the prior-year decline. The current-period improvement is driven by revenue growth and the held-for-sale accounting benefit (reduced D&A and store operating expenses for China).

The Q2 FY2026 effective tax rate rose to 29.8% (vs. 23.5% in Q2 FY2025), driven by the China entity reorganization (~280 bps) and an $8M discrete increase from the held-for-sale indefinite reinvestment assertion change (~110 bps). For the YTD period, the ETR spiked to 46.1% (vs. 23.6% prior year), primarily due to the $273M discrete tax charge from the China held-for-sale classification (~1,830 bps impact).

Goodwill declined from $3,368.9M (Sep 2025) to $1,295.1M (Mar 2026), a reduction of ~$2.1B. The current filing's Note 2 shows $2,100.0M of goodwill classified as held for sale (China JV disposal group). The baseline period showed goodwill at $3,324.7M (Mar 2025) vs. $3,315.7M (Sep 2024), with a $106.2M addition from the UK acquisition.

Starbucks repaid $1.0B of long-term debt during the two quarters ended March 29, 2026 (no repayments in the prior-year period). The baseline two-quarter period (Mar 2025) showed no long-term debt repayments, while the prior-year period (Mar 2024) had $1,825.1M in repayments. Total long-term debt outstanding declined from $16.2B (Sep 2025) to $15.2B (Mar 2026).