How SBUX (Starbucks) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a global coffeehouse chain like Starbucks (SBUX) makes money is essential for investors and anyone interested in the business of food and beverage retail. In this post, we break down Starbucks's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Starbucks Overview

Starbucks operates the world’s largest chain of coffeehouses, offering premium coffee beverages, food items, and branded merchandise. Revenue comes primarily from company-operated stores, licensed stores, and sales of packaged coffee and tea products. The company’s business segments focus on retail store operations, product sales, and licensing arrangements across global markets.

Revenue Breakdown

• Total Revenue (Q3 2025): $9.57B (+5.5% YoY)
  • Other Revenue by Product 1: $9.57B (100% of total)
  • Beverage Revenue: $0.0B 0%
  • Food Revenue: $0.0B 0%
  • Growth is powered by continued global store expansion and strong brand loyalty, though segment reporting is consolidated this quarter.

Gross Profit and Margins

• Gross Profit: $2.21B (23.1% gross margin)
  • Cost of Revenue: $7.36B (+9.9% YoY)
  • Starbucks maintains moderate margins due to its scale, premium pricing, and efficient supply chain management.
• Most costs come from store operating expenses, including labor, raw materials (coffee, milk, food), and occupancy costs.

Operating Income and Expenses

• Operating Income: $948M (-27.5% YoY, 9.9% margin)
• Operating Expenses: $1.26B (+17.6% YoY)
  • R&D: Not separately disclosed for this quarter
  • SG&A: $642M (-0.4% YoY, 6.7% of revenue) — Includes corporate overhead, marketing, and administrative costs
  • Starbucks continues to invest in digital platforms and international expansion while maintaining efficiency in core operations.

Net Income

• Pre-Tax Income: $834M (-30.2% YoY, 8.7% margin)
• Income Tax: $701M (84.0% effective tax rate)
• Net Income: $133M (-85.4% YoY, 1.4% net margin)
• Starbucks converts a modest portion of sales into profit this quarter, with profitability pressured by higher costs and an unusually high tax rate.

What Drives Starbucks's Money Machine?

• Retail store sales: Nearly all revenue is generated from company-operated and licensed stores, reflecting Starbucks’s core retail focus.
• Same-store sales: Growth is driven by increased customer traffic and higher average ticket size.
• Digital and loyalty investments: Starbucks invests heavily in its mobile app, rewards program, and digital ordering, which drive customer engagement and repeat business.
• International expansion: New store openings in emerging markets are a key future growth area, though not yet as profitable as mature U.S. operations.

Visualizing Starbucks's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially store operating costs and SG&A) taking the largest chunk.
• Even after significant costs, only 1.4% of revenue drops to the bottom line this quarter, reflecting margin pressure from rising expenses and taxes.

Key Takeaways

• Starbucks's money comes overwhelmingly from its global retail store network
• High gross but low net margins this quarter illustrate the impact of rising costs and a one-time tax spike
• Heavy investment in digital and international growth, balanced by efficiency in U.S. operations
• Ongoing growth is driven by store expansion, digital engagement, and brand strength

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FAQ About Starbucks's Income Statement

1. What is the main source of Starbucks's revenue in 2025?

Starbucks generates over 100% of its revenue from consolidated store and product sales, with the vast majority coming from its global retail store network. Other revenue streams, such as licensing and packaged goods, are included in the consolidated figure this quarter.

2. How profitable is Starbucks in Q3 2025?

Starbucks reported net income of $133M in Q3 2025, with a net margin of approximately 1.4%, reflecting moderate profitability pressured by higher costs and an unusually high effective tax rate.

3. What are the largest expense categories for Starbucks?

The biggest expenses on Starbucks's income statement are cost of revenue (store operating costs, raw materials, and occupancy) and operating expenses, particularly Sales, General & Administrative (SG&A) costs. SG&A reached $642M in Q3 2025, as Starbucks prioritizes digital investments and international expansion.

4. Why does international expansion operate at a loss?

International expansion, despite generating significant revenue, posted lower profitability in Q3 2025. This is because Starbucks aggressively invests in new store openings, local market adaptation, and digital infrastructure, believing these will drive long-term growth—even if the division is less profitable today.

5. How does Starbucks's effective tax rate compare to previous years?

Starbucks's effective tax rate in Q3 2025 was 84.0%, significantly higher than previous years. This high rate is primarily due to one-time tax adjustments and changes in international tax structuring.