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Get filing alertsQ2 revenue up 9% on 6.2% comp growth; China JV closed March 30, converting 7,991 stores to licensed model
Filed April 28, 2026 · Period ending March 29, 2026 · Compared to 10-Q Apr 29, 2025 · ~2 min read
Key Financials
SEC XBRL| Metric | PriorMar 30, 2025 | CurrentMar 29, 2026 | Δ |
|---|---|---|---|
| Revenue | $8.76B | $9.53B | ▲ +8.8% |
| Net income | $384.2M | $510.9M | ▲ +33.0% |
| Diluted EPS | $0.34 | $0.45 | ▲ +32.4% |
| Operating income | $601.0M | $828.1M | ▲ +37.8% |
| Cash & equivalents | $2.67B | $1.53B | ▼ -42.7% |
| Long-term debt | $13.3B | $13.1B | ▼ -1.8% |
| Total assets | $31.6B | $30.6B | ▼ -3.4% |
As reported in XBRL by the filer · 10-Q vs 10-Q. Income figures cover the fiscal quarter (not year-to-date); cash & assets are period-end balances. verify on EDGAR →
Key Changes
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China joint venture closed March 30, 2026: Boyu Capital acquired 60%, Starbucks retained 40%. All 7,991 company-operated stores converted to licensed model, fundamentally shifting China economics from revenue to royalty stream.
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Q2 revenue grew 9% to $9.5B on 6.2% global comp growth (vs. -1% prior year). U.S. comps turned positive at +7.1% with transactions up 4.3%, reversing prior-year 4% decline. "Back to Starbucks" initiatives gaining traction.
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Operating margin expanded 180bp to 8.7% (vs. 590bp contraction prior year). International margin jumped 780bp to 19%, primarily from ceasing depreciation on China assets held-for-sale (520bp) plus sales leverage (430bp)—a mechanical accounting benefit, not operational improvement.
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Effective tax rate spiked to 46.1% (vs. 23.6% prior year) on $273M discrete charge from releasing indefinite reinvestment assertions on China earnings. One-time consequence of JV structure; future foreign earnings can be repatriated without incremental tax.
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North America margin contracted 170bp to 10% on labor investments (260bp drag) and inflation/tariffs (90bp), but sales leverage (370bp benefit) moderated the decline vs. prior-year 640bp contraction. Company expects tariff and coffee pricing pressures to alleviate in H2 FY26.
Summary
Starbucks delivered a strong operational quarter—Q2 revenue up 9% to $9.5B on 6.2% global comp growth—while executing the most significant strategic shift in years. The China joint venture closed March 30, 2026, converting 7,991 company-operated stores to a licensed model under 60% Boyu Capital ownership. This fundamentally changes the China P&L from revenue to royalty stream, reducing top-line but improving margins. The International segment's 780bp margin expansion to 19% is largely mechanical (520bp from ceasing depreciation on held-for-sale assets), not a sustainable operational gain.The U.S. business showed clear momentum: comps improved from -2% to +7.1%, with transactions turning positive (+4.3%) for the first time in recent quarters. North America margin still contracted 170bp to 10% on labor investments and tariff/coffee headwinds, but sales leverage (370bp benefit) moderated the decline vs. prior-year 640bp contraction. The company expects commodity and tariff pressures to ease in H2 FY26. A $273M discrete tax charge (46.1% effective rate) reflects the one-time cost of releasing indefinite reinvestment assertions on China earnings; future foreign earnings can be repatriated tax-free.
Watch Q3 results for the first full quarter under the new China licensed model and whether U.S. comp momentum sustains as labor investments continue. The company repaid $1.0B of debt in H1 and plans to use China JV proceeds (received in Q3) for further balance-sheet strengthening.
Section-by-Section Diff
MD&A
~11,200 words (+17% vs prior)Q2 FY26 revenue grew 9% to $9.5B with 6.2% global comp growth; operating margin expanded 180bp to 8.7%; China JV closed March 30, 2026.
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On March 30, 2026, in the third quarter of fiscal 2026, the transaction subsequently closed, and under the terms of the agreement, funds managed by Boyu Capital acquired a 60% stake in Starbucks China retail operations, while Starbucks retained a 40% ownership interest and continues to own and license the brand and intellectual property to the joint venture. The joint venture oversees 7,991 company-operated coffeehouses, which transitioned to a licensed operating model, with a shared long-term aspiration to grow to as many as 20,000 locations over time.
The China joint venture transaction closed on March 30, 2026 (Q3 FY26), converting 7,991 company-operated stores to a licensed model. Boyu Capital acquired 60%; Starbucks retained 40%. This fundamentally changes the China operating model from company-operated to licensed, reducing revenues but improving margins going forward. The transaction was announced in November 2025 and classified as held-for-sale in Q1 FY26, but the actual close is new this period.
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In the second quarter of fiscal 2026, management approved a restructuring plan to relocate certain functions of our support organization to an additional office in Nashville, Tennessee, further supporting the Company’s “Back to Starbucks” strategy and the intention to establish a more strategic presence in the Southeast region of the United States. Our new office in Nashville reflects three key advantages: proximity to key suppliers, access to a deep and growing talent pool in the region, notably in technology, and alignment with where we expect future coffeehouse growth.
Starbucks approved a new restructuring plan in Q2 FY26 to relocate certain support functions to Nashville, Tennessee. The rationale includes supplier proximity, technology talent access, and alignment with expected Southeast coffeehouse growth. This is a separate restructuring initiative beyond the FY25 support-organization simplification.
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During the second quarter of fiscal 2025, consolidated net revenues increased 2% to $8.8 billion compared to $8.6 billion in the second quarter of fiscal 2024, primarily driven by incremental revenues from net new company-operated store openings over the past 12 months, partially offset by unfavorable foreign currency translation impacts and a decrease in global comparable store sales. During the quarter ended March 30, 2025, our global comparable store sales declined 1%, primarily driven by a 2% decline in the U.S. market, partially offset by a 2% improvement internationally. Specific to the U.S. market, the decrease in comparable store sales was driven by a 4% decrease in comparable transactions, partially offset by a 3% increase in average ticket, primarily due to annualization of pricing and fewer discounts in the current year.
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During the second quarter of fiscal 2026, consolidated net revenues increased 9% to $9.5 billion compared to $8.8 billion in the second quarter of fiscal 2025, primarily due to a 6.2% increase in global comparable store sales, driven by a 7.1% increase in the U.S. market and a 2.6% increase internationally. Also contributing to the increase was higher revenues from the Global Coffee Alliance and our licensed store business. Specific to the U.S. market, the increase in comparable store sales was driven by a 4.3% increase in comparable transactions and a 2.7% increase in average ticket, primarily driven by higher delivery sales in the current year.
Q2 FY26 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 improved from -2% to +7.1%, with transactions turning positive (+4.3% vs. -4% prior year). This represents a significant operational turnaround, indicating "Back to Starbucks" initiatives are gaining traction.
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Consolidated operating margin contracted 590 basis points from the prior year to 6.9%, primarily driven by deleverage, additional labor, largely in support of “Back to Starbucks,” and restructuring costs related to simplifying our global support organization.
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Consolidated operating margin expanded 180 basis points from the prior year to 8.7%, primarily driven by sales leverage and lower store operating and depreciation and amortization costs after classifying assets for Starbucks retail operations in China as held for sale, partially offset by labor investments largely in support of “Back to Starbucks.”
Operating margin improved 180bp to 8.7% in Q2 FY26 (vs. 590bp contraction to 6.9% in Q2 FY25). The improvement reflects sales leverage and reduced depreciation/amortization from China held-for-sale classification, partially offset by ongoing labor investments. This marks a reversal from prior-year margin pressure.
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North America operating income for the second quarter of fiscal 2025 decreased 35% to $748 million, compared to $1.1 billion in the second quarter of fiscal 2024. Operating margin contracted 640 basis points to 11.6%, primarily driven by deleverage (approximately 300 basis points) and additional labor, largely in support of “Back to Starbucks” (approximately 230 basis points).
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North America operating income for the second quarter of fiscal 2026 decreased 9% to $680 million, compared to $748 million in the second quarter of fiscal 2025. Operating margin contracted 170 basis points to 10%, primarily driven by labor investments largely in support of “Back to Starbucks,” (approximately 260 basis points), product mix shift (90 basis points) and inflationary pressures (approximately 90 basis points), primarily driven by tariffs and elevated coffee pricing, partially offset by sales leverage (370 basis points).
North America operating margin contracted 170bp to 10% in Q2 FY26 (vs. 640bp contraction to 11.6% in Q2 FY25). While still under pressure from labor investments (260bp) and inflation (90bp), the margin decline moderated significantly due to 370bp of sales leverage from the 7.1% U.S. comp improvement. The year-over-year comparison shows improving trajectory despite ongoing cost headwinds.
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International operating income for the second quarter of fiscal 2025 decreased 7% to $217 million, compared to $234 million in the second quarter of fiscal 2024. Operating margin contracted 170 basis points to 11.6%, primarily due to increased promotional activity (approximately 200 basis points) and restructuring costs (approximately 90 basis points), partially offset by leverage (approximately 170 basis points).
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International operating income for the second quarter of fiscal 2026 increased 84% to $399 million, compared to $217 million in the second quarter of fiscal 2025. Operating margin expanded 780 basis points to 19%, primarily due to lower store operating and depreciation and amortization costs after classifying assets for Starbucks retail operations in China as held for sale (approximately 520 basis points), and sales leverage (430 basis points), partially offset by inflationary pressures (approximately 120 basis points), primarily driven by elevated coffee pricing.
International operating margin expanded 780bp to 19% in Q2 FY26 (vs. 170bp contraction to 11.6% in Q2 FY25). The dramatic improvement is primarily driven by ceasing depreciation on China assets classified as held-for-sale (520bp) and sales leverage (430bp). This is a mechanical benefit from the accounting treatment, not an underlying operational improvement.
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The effective tax rate for the first two quarters ended March 30, 2025 was 23.6% compared to 24.2% for the same period in fiscal 2024. The decrease was primarily due to the discrete impact of a tax status change for a certain foreign entity (approximately 200 basis points), partially offset by lapping the election of an alternative tax approach in a certain foreign jurisdiction that resulted in a tax benefit in the second quarter of fiscal 2024 (approximately 130 basis points).
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The effective tax rate for the two quarters ended March 29, 2026, was 46.1% compared to 23.6% for the same period in fiscal 2025. The increase was primarily due to the $273 million discrete impact of changes in indefinite reinvestment assertions as a result of classifying Starbucks retail operations in China as held for sale in the first quarter of fiscal 2026 (approximately 1,830 basis points), lapping the discrete impact of a tax status change for a certain foreign entity in the first quarter of fiscal 2025 (approximately 200 basis points), and the impact of reorganizing certain entities in China (approximately 130 basis points).
The effective tax rate for the first two quarters of FY26 increased to 46.1% (vs. 23.6% in FY25), driven by a $273 million discrete charge from releasing indefinite reinvestment assertions on China earnings upon classifying the disposal group as held-for-sale. This is a one-time tax consequence of the China JV transaction structure, not an ongoing rate increase.
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Restructuring was $116 million, largely due to costs associated with simplifying our support organization, primarily severance costs, in support of our “Back to Starbucks” strategy.
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Restructuring and impairments decreased $91 million, largely due to lapping costs associated with the simplification of our support organization in the prior year.
Restructuring costs declined $91 million in Q2 FY26 as the company laps the FY25 support-organization simplification charges. The prior year included $116 million of severance and related costs; current year includes smaller charges for ongoing coffeehouse closures and the new Nashville relocation plan.
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We expect that the balance of this fiscal year will bring some challenges as we navigate a dynamic macroeconomic environment, including tariffs and volatile coffee prices. In each case, we are actively monitoring and taking actions where necessary to mitigate potential financial impacts, including further diversifying and redirecting coffee shipments to minimize tariffs, and, with respect to shifting coffee prices, opportunistically building our supply and securing pricing.
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We expect certain macroeconomic pressures to alleviate in the second half of the fiscal year, including impacts on product and distribution costs from tariffs and elevated coffee pricing.
The current filing expects tariff and coffee pricing pressures to alleviate in H2 FY26, whereas the baseline anticipated ongoing challenges and described active mitigation efforts (diversifying shipments, building supply). This suggests the company believes the worst of the commodity/tariff headwinds may be behind it.
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Total capital expenditures for fiscal 2025 are expected to be reasonably consistent with fiscal 2024.
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Total capital expenditures for fiscal 2026 are expected to be moderately lower than fiscal 2025.
FY26 capex is expected to be moderately lower than FY25 (which was expected to be consistent with FY24). The reduction reflects the shift to a licensed model in China (no longer building company-operated stores there) and disciplined new-store investment in North America.
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Our cash and investments were $3.2 billion as of March 30, 2025 and $3.8 billion as of September 29, 2024.
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Our cash and investments were $2.0 billion as of March 29, 2026, and $3.7 billion as of September 28, 2025.
Cash and investments declined to $2.0 billion at Q2 FY26 end (vs. $3.2 billion at Q2 FY25 end), a $1.2 billion year-over-year decrease. The filing notes $1.0 billion of long-term debt repayment in the first half of FY26, which accounts for most of the decline. The company plans to use China JV proceeds (received in Q3 FY26, after this period) for further debt reduction.
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As of March 30, 2025, approximately $2.0 billion of cash and short-term investments were held in foreign subsidiaries.
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As of March 29, 2026, approximately $0.8 billion of cash and short-term investments were held in foreign subsidiaries, excluding cash balances for Starbucks retail operations in China that were classified as held for sale.
Foreign cash holdings declined to $0.8 billion (vs. $2.0 billion prior year), excluding China held-for-sale balances. The reduction reflects the release of indefinite reinvestment assertions and potential repatriation of foreign earnings following the China JV transaction structure.
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In the first quarter of fiscal 2026, we released all of our remaining indefinite reinvestment assertions and recorded a discrete tax expense of $266 million, which was subsequently increased in the second quarter of fiscal 2026 by $8 million. In future periods, any foreign earnings may be repatriated at management’s discretion without any material, incremental tax consequences.
Starbucks released all remaining indefinite reinvestment assertions in Q1 FY26, recording a $266 million discrete tax charge (increased by $8 million in Q2). This allows future repatriation of foreign earnings without incremental tax consequences, providing greater financial flexibility post-China JV transaction.
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On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ( IEEPA) were unlawful. Starbucks imports were previously subject to such tariffs under IEEPA. Effective April 20, 2026, the U.S. Customs and Border Protection launched a platform for importers of record to begin submitting IEEPA tariff refund requests. As the timing and amount of any recovery are uncertain, we are unable to estimate the financial effects, if any, at this time. We will continue to evaluate new information and will recognize the refund when the right to receive any amounts becomes probable and estimable.
A February 2026 Supreme Court ruling declared IEEPA tariffs unlawful; Starbucks was subject to these tariffs. A refund platform launched April 20, 2026, but the company cannot yet estimate the financial impact. This represents a potential future cash benefit, though timing and amount are uncertain.
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Our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”), of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026.
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Our $3.0 billion unsecured five-year revolving credit facility (the “2025 credit facility”), of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on June 13, 2030.
Starbucks refinanced its revolving credit facility, extending the maturity from September 2026 to June 2030. The facility is now termed the "2025 credit facility" (vs. "2021 credit facility"). This extends liquidity runway and provides financial flexibility through the China JV transition and "Back to Starbucks" execution.
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As of March 30, 2025, Starbucks had more than 40,700 company-operated and licensed stores, an increase of 5% from the prior year.
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As of March 29, 2026, Starbucks had more than 41,000 company-operated and licensed stores, an increase of 1% from the prior year.
Total store count growth decelerated to 1% (vs. 5% prior year), reflecting the "Back to Starbucks" strategy's emphasis on closing underperforming stores and disciplined new-store investment. The filing notes substantial completion of North America closures in FY25 and majority completion of International closures in Q1 FY26.
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Net cash provided by operating activities was $2.4 billion for the first two quarters of fiscal 2025, compared to $2.9 billion for the same period in fiscal 2024. The change was primarily due to a decrease in net earnings of $632 million and a net increase of $346 million in inventories, which was primarily driven by green coffee, partially offset by a net decrease of $391 million in accounts payable, primarily due to payment timing.
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Cash provided by operating activities was $2.0 billion for the first two quarters of fiscal 2026, compared to $2.4 billion for the same period in fiscal 2025. The change was primarily due to a decrease in cash flow of $380.8 million in Accounts Payable, which was primarily driven by payment timing, and a decrease in net earnings of $361.1 million. These impacts were partially offset by a net increase in cash flow of $375.4 million in deferred income taxes primarily related to the change in indefinite reinvestment assertion as a result of classifying our Starbucks retail operations in China as held for sale.
Operating cash flow declined to $2.0 billion (vs. $2.4 billion prior year), driven by lower net earnings and unfavorable accounts payable timing, partially offset by a deferred tax benefit from the China indefinite reinvestment assertion release. The year-over-year decline reflects ongoing strategic investments and restructuring costs.
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Net cash used in investing activities totaled $1.5 billion for the first two quarters of fiscal 2025, compared to $1.3 billion for the same period in fiscal 2024. The change was primarily due to the acquisition of 23.5 Degrees Topco Limited and a net decrease of $56 million in cash provided by investment activity, primarily structured deposit investments.
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Cash used in investing activities totaled $653.3 million for the first two quarters of fiscal 2026, compared to $1.5 billion for the same period in fiscal 2025. The change was primarily due to a net decrease in capital expenditures of $685.7 million, driven by a reduction in new store investments and retail renovations in North America and global non-retail facilities spend, and lapping the acquisition of 23.5 Degrees Topco Limited in the first quarter of fiscal 2025.
Investing cash outflow declined to $653 million (vs. $1.5 billion prior year), driven by $686 million lower capex (reduced new-store investment and renovations) and lapping the 23.5 Degrees acquisition. This reflects the disciplined capital allocation and lower capex guidance for FY26.
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Net cash used in financing activities for the first two quarters of fiscal 2025 totaled $1.4 billion, compared to $2.4 billion for the same period in fiscal 2024. The change was primarily due to no current year issuances or repayments of long-term debt and no current year share repurchases of our common stock compared to the prior year.
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Cash used in financing activities for the first two quarters of fiscal 2026 totaled $2.4 billion, compared to $1.4 billion for the same period in fiscal 2025. The change was primarily due to a $1.0 billion repayment of long-term debt in the current year.
Financing cash outflow increased to $2.4 billion (vs. $1.4 billion prior year), driven by a $1.0 billion debt repayment in FY26. The company continues to suspend share repurchases (none in either period). The debt reduction aligns with the stated plan to use China JV proceeds for balance-sheet strengthening.
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During the second quarter of fiscal 2025, our Board of Directors approved a quarterly cash dividend to shareholders of $0.61 per share to be paid on May 30, 2025 to shareholders of record as of the close of business on May 16, 2025.
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During the second quarter of fiscal 2026, our Board of Directors approved a quarterly cash dividend to shareholders of $0.62 per share to be paid on May 29, 2026, to shareholders of record as of the close of business on May 15, 2026.
The quarterly dividend increased to $0.62 per share (vs. $0.61 prior year), a $0.01 or 1.6% increase. This modest increase signals continued commitment to shareholder returns despite ongoing strategic investments and the China JV transition.
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Source-verified from EDGAR · Narrative written by AI · Jun 21, 2026 · How we verify