Coffeehouse chain Starbucks (NASDAQ:SBUX) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 3.8% year on year to $9.46 billion. Its non-GAAP profit of $0.50 per share was 22.6% below analysts’ consensus estimates.
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Starbucks (SBUX) Q2 CY2025 Highlights:
- Revenue: $9.46 billion vs analyst estimates of $9.30 billion (3.8% year-on-year growth, 1.7% beat)
- Adjusted EPS: $0.50 vs analyst expectations of $0.65 (22.6% miss)
- Adjusted EBITDA: $1.38 billion vs analyst estimates of $1.51 billion (14.6% margin, 8.4% miss)
- Operating Margin: 9.9%, down from 16.7% in the same quarter last year
- Locations: 41,097 at quarter end, up from 39,477 in the same quarter last year
- Same-Store Sales fell 2% year on year, in line with the same quarter last year
- Market Capitalization: $104.3 billion
StockStory’s Take
Starbucks’ second quarter results showed a mix of progress and ongoing challenges, as revenue growth exceeded Wall Street’s expectations but profit margins remained under pressure. Management attributed the quarter’s performance to investments in its “Back to Starbucks” plan, adding labor hours, and rolling out new operational standards. CEO Brian Niccol described these efforts as foundational, stating, “We’re fixing the operational foundations of the business and building a platform for innovation in 2026.” While international markets delivered solid gains, U.S. comparable sales remained subdued, with management emphasizing that early turnaround efforts are only just beginning to show results.
Looking forward, Starbucks is focusing on scaling its Green Apron Service operating model across all U.S. company-operated stores and enhancing its product pipeline to drive future growth. Management expects these operational changes and a reimagined loyalty program to improve customer experience and build loyalty, but CFO Cathy Smith noted that margin recovery will take time, as the company balances critical investments with cost discipline. Management remains cautious about near-term consumer trends, but believes its turnaround actions will yield healthier margins and stronger sales over the next several years.
Key Insights from Management’s Remarks
Management cited operational changes, investments in partner experience, and international expansion as primary factors shaping the latest quarter and the company’s forward strategy.
- Green Apron Service rollout: Starbucks accelerated the rollout of its new Green Apron Service model, which standardizes operating procedures and aims to enhance customer service. Early pilot stores reported improvements in transaction growth and service speed, with CEO Brian Niccol noting, “Coffeehouses using Green Apron Service have driven improvements in transactions, sales, and customer service times.”
- Labor investments and partner engagement: The company invested over $0.5 billion in additional labor hours, resulting in higher partner engagement and lower turnover. Management pointed out that 49.1% hourly partner turnover and record 98.2% shift completion rates reflect increased stability and morale among employees.
- Menu and digital innovation pipeline: Starbucks is building a pipeline for 2026 that includes new beverage offerings like protein cold foam, reimagined artisanal baked goods, and enhanced digital features. The company is also redesigning its loyalty program to better reward high-frequency and occasional customers.
- International growth momentum: International operations, particularly in China and Latin America, contributed positively, with China achieving three consecutive quarters of revenue growth and the U.K. and Mexico showing strong sales trends. Management is actively seeking a strategic partner to accelerate growth in China and reinforce its local market presence.
- Store portfolio and format optimization: Starbucks is reviewing its North American store portfolio, slowing new builds and prioritizing “coffeehouse uplifts” to refresh seating and ambiance quickly. The company is discontinuing its mobile order and pickup-only stores, citing a need to focus on formats that foster customer connection and in-store experience.
Drivers of Future Performance
Starbucks’ outlook centers on scaling operational changes, driving menu innovation, and maintaining cost discipline amid evolving consumer and competitive dynamics.
- Operational transformation scaling: Management expects the full rollout of Green Apron Service and SmartQ technology to improve transaction growth and consistency in store operations. These initiatives are designed to reduce reliance on discounts and drive sales by enhancing the customer experience.
- Margin recovery and cost discipline: While Starbucks is investing heavily in labor and store upgrades, CFO Cathy Smith emphasized ongoing efforts to reset the cost structure across the business. The company aims to balance these investments with efficiency improvements, but reiterated that margin expansion will be gradual and dependent on top-line growth.
- Menu innovation and loyalty enhancements: New product introductions and a revamped rewards program are intended to address afternoon sales and attract both high-frequency and occasional customers. Management believes that tailoring the loyalty program and introducing new menu options will help establish Starbucks as “the defining customer service company.”
Catalysts in Upcoming Quarters
In the quarters ahead, our analysts will be watching (1) the effectiveness of the Green Apron Service rollout in driving transaction growth and customer satisfaction, (2) early signs of margin stabilization as cost-saving measures are implemented, and (3) progress in international markets, especially the development of a strategic partnership in China. New menu launches and updates to the loyalty program will also be key indicators of Starbucks’ ability to regain momentum.
Starbucks currently trades at $91.63, down from $92.95 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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