Starbucks' Revenue Grows, But Earnings Still Fade

Forward-Looking Analysis

Analysts project Starbucks’ 2026Q1 earnings will show a 15.9% year-over-year decline in EPS to $0.59, despite a modest 2.5% revenue increase to $9.62 billion. Key risks include weak same-store sales in the U.S., rising labor and commodity costs, and intensifying competition from value-driven rivals like McDonald’s and Dunkin’. China, once a growth engine, remains a drag, with store closures and margin pressures persisting. Sara Senatore of BofA raised her price target to $114 (from $106), but 17 of 19 analysts have downgraded EPS estimates in the past three months. CEO Brian Niccol has warned of near-term challenges, citing soft consumer traffic and cost inflation. The stock’s implied volatility suggests a potential 6.4% post-earnings move, with downside risks dominating if results miss expectations.

Historical Performance Review

Starbucks reported $8.96 billion in revenue for 2025Q4, up from prior quarters, but net income fell to $133.10 million ($0.12 EPS), a sharp decline from previous performance. Gross profit stood at $2.16 billion, reflecting margin pressures despite revenue growth. The quarter marked a rare sequential improvement in same-store sales, though underlying trends remain fragile amid ongoing operational challenges.

Additional News

Starbucks’ CEO Brian Niccol emphasized the “Back to Starbucks” strategy in recent commentary, focusing on menu simplification, store closures, and cost optimization. BofA’s Sara Senatore upgraded the price target to $114, citing potential margin recovery. However, the company faces affordability headwinds as competitors like McDonald’s lower prices. No major M&A or product launches were announced in the provided data.

Summary & Outlook

Starbucks’ 2026Q1 results are expected to reflect continued margin compression and operational headwinds, with EPS declining despite modest revenue growth. Key risks include China’s underperformance, rising costs, and competitive pricing pressures. While long-term tailwinds like store optimization and the China deal may support margins, near-term challenges suggest a bearish outlook. Investors should monitor guidance for clarity on the pace of the turnaround, with gross profit and revenue trends indicating mixed signals for growth.