Starbucks Delivers Surprise Revenue and China Sales Gains: Is the Turnaround Here?

TradingKey - Starbucks reported fiscal Q3 2025 earnings, with a 3.8% revenue increase that exceeded expectations, and a crucial 2% rise in same-store sales in China—the first uptick since late 2023. This positive shift sent the company's stock climbing 4.6% in after-hours trading.

China, Starbucks' second-largest market, plays a crucial supportive role for the company. To counter prolonged sluggishness, Starbucks reduced prices on select tea drinks and introduced more sugar-free options. These strategic moves resulted in a 6% growth in total transactions and a 2% rise in same-store sales, effectively counterbalancing a slowdown in U.S. consumer spending.

Starbucks 2025Q3 financial report, Source: Starbucks

Dave Wagner, portfolio manager at Aptus Capital Advisors, noted that China's robust performance was a major factor in surpassing expectations.

The earnings boost is also linked to reforms spearheaded by CEO Brian Niccol, who assumed his role in fall 2024. His "Back to Starbucks" plan seeks to revive the chain's cozy "third place" atmosphere, with wide-ranging reforms in operations, marketing, products, and customer experience, including quicker order processing times.

Niccol, who joined Starbucks from Chipotle, was hired at a premium to lead Starbucks. He previously turned around Chipotle’s fortunes and rejuvenated its brand. UBS had earlier highlighted that Niccol's strategies are expected to support a gradual sales recovery.

Despite a 2% decline in same-store sales in Q3, which exceeded earlier expectations, UBS consumer research indicates increased consumer willingness to visit Starbucks in 2024-2025, bolstering confidence in long-term recovery prospects.

Niccol expressed optimism, stating that Starbucks "fixed a lot and done the hard work on the hard things to build a strong operating foundation and based on my experience of turnarounds, we are ahead of schedule." He pledged a "wave of innovation" in 2026. The company has already cut store construction costs by 30% and is set to boost human resource investments to improve customer service.

Bloomberg cautions that while analysts and investors generally view the reforms positively, the timeline and costs involved warrant consideration.

Cathy Smith, Starbucks' CFO, remains cautious, highlighting that while transaction volumes are improving, their future level remains uncertain due to the transformation plan’s impact and the volatile consumer environment. Wagner advises that investors should consider whether Starbucks is at the beginning of a rebound from its previous weak performance.