Starbucks shares SBUX climbed about 6% in premarket trading on Thursday after the coffee chain raised its full-year outlook and delivered stronger-than-expected quarterly earnings, reinforcing investor confidence that Chief Executive Brian Niccol’s turnaround strategy is beginning to deliver measurable results.
The company reported its fourth consecutive quarter of comparable sales growth, extending the momentum built under Niccol’s “Back to Starbucks” plan, which has focused on simplifying operations, reducing wait times and improving the customer experience.
The latest results also exceeded Wall Street expectations on both revenue and earnings, prompting several brokerages to raise their price targets for the stock.
Sales growth exceeds expectations
Starbucks reported global comparable sales growth of 7.9% during its fiscal third quarter, comfortably ahead of the 5.7% increase analysts had expected, according to Bloomberg data.
The performance also improved on the 6.2% growth recorded in the previous quarter.
The result marked a sharp turnaround from the same period last year, when the company posted a 2% decline in comparable sales.
For the full fiscal year, Starbucks now expects adjusted earnings per share between $2.55 and $2.65, compared with previous guidance of $2.25 to $2.45.
The company also raised its outlook for comparable sales, forecasting global and US same-store sales growth of nearly 6%, compared with its earlier expectation of at least 5%.
“This was the quarter our momentum became truly measurable,” Niccol said in a video released alongside the company’s earnings announcement.
“It’s clear proof that our Back to Starbucks plan is working,” he added during the earnings call.
Earnings and revenue beat forecasts
Starbucks reported adjusted earnings per share of 85 cents, comfortably ahead of analysts’ expectations of 66 cents.
Quarterly revenue reached $9.3 billion, exceeding the consensus estimate of $9.2 billion.
The stronger-than-expected results were supported by improvements in both customer traffic and spending.
The company said customers visited its stores more frequently while also spending more per transaction by customizing drinks and adding food items to their orders.
North American comparable sales increased 8.1% during the quarter, driven by a 4.5% increase in transactions and a 3.5% rise in average ticket size.
Turnaround strategy continues to gain traction
Since taking over as chief executive, Niccol has focused on rebuilding Starbucks’ core business after slowing growth and operational challenges weighed on performance.
The company’s strategy has included simplifying its menu, improving staffing levels, reducing customer wait times and investing in store operations.
Those investments initially pressured profitability, but Starbucks has simultaneously pursued cost reductions through layoffs, office consolidation and operational streamlining.
Consumer Edge analyst Michael Gunther said Starbucks is beginning to regain market share, particularly among younger consumers.
“Starbucks has begun to experience market share stabilization in recent months, most notably with younger diners,” Gunther said.
He added that while consumers remain cautious about discretionary spending, many continue to prioritise affordable daily indulgences.
“Consumers may be shifting dining dollars toward in-home eating but are leaving room in the budget for daily drink habits.”
Product innovation supports customer demand
Menu changes have also contributed to improving sales.
Starbucks has removed slower-selling products while introducing new beverages to attract customers throughout the day.
Niccol said the company plans to test sparkling versions of its Refreshers, branded as “spritzers,” in selected markets.
Refreshers have become one of Starbucks’ fastest-growing beverage platforms, generating approximately $2 billion in annual sales.
Executives said revenue from the drinks increased by a double-digit percentage during the latest quarter, helping drive afternoon customer traffic beyond the traditional morning coffee rush.
The company also reported continued growth across its juice, dairy and other beverage offerings.
International business adopts lighter operating model
Outside North America, comparable sales increased 5.7%.
Starbucks said the formation of its China joint venture means roughly 90% of its international stores now operate under licensed arrangements rather than company ownership.
The asset-light approach generally appeals to investors because it requires lower capital investment while supporting stronger long-term profitability.
Store expansion also continued.
Starbucks opened 175 net new stores during the quarter and completed more than 1,000 café renovations, achieving its fiscal 2026 target ahead of schedule.
Management now plans to complete at least 1,500 store upgrades before the end of fiscal 2026 while accelerating additional renovations next year.
Analysts remain optimistic despite valuation concerns
The strong quarterly performance prompted several Wall Street firms, including RBC Capital Markets, Morgan Stanley and Jefferies, to raise their price targets on Starbucks shares.
Morgan Stanley raised its price target on Starbucks to $115 from $111 while reiterating its Overweight rating, saying the latest results showed both temporary and structural drivers behind the company’s improving sales performance.
The stock currently trades at $104.
The brokerage noted that factors such as store closures, sales transfers and delivery contributed to quarterly growth, but said longer-term catalysts including renovated stores, product innovation and stronger afternoon demand should continue supporting sales into next year.
Morgan Stanley also said the Green Apron Service initiative will begin to cycle through comparisons next quarter, providing investors with a clearer picture of margin recovery.
BMO Capital Markets also lifted its price target on Starbucks to $130 while maintaining an Outperform rating, citing continued progress in the company’s turnaround strategy under CEO Brian Niccol.
Morningstar analyst Ari Felhandler said broader economic uncertainty has not significantly disrupted the company’s recovery.
“Broader macro uncertainty hasn’t thrown a wrench in Starbucks’ turnaround,” he wrote in a research note.
However, Felhandler also cautioned that investor optimism may already be reflected in the stock price.
“We surmise investors are baking in near-term turnaround growth far into the future despite a highly competitive landscape.”
According to LSEG data, Starbucks trades at a forward price-to-earnings ratio of 35.11, substantially above the industry median of 15.37.
Even so, investors have continued to reward the company as confidence in Niccol’s strategy has strengthened.
Including Thursday’s premarket gains, Starbucks shares have risen roughly 23% so far this year, reflecting growing optimism that the company’s operational improvements and renewed customer demand can sustain its recovery into the next fiscal year.
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