Starbucks spilled the beans, and they finally tasted good.

The coffee goliath reported fiscal first-quarter earnings yesterday, serving a mixed cup. Revenue topped expectations, but profits came in light.

Still, investors zeroed in on a long-awaited bright spot: customer traffic. Transactions rose 3%, the first increase in two years, helping US same-store sales climb 4%. That marked a sharp reversal from the same quarter last year, when comparable sales fell 4%.

Behind the counter

The results reflect a company deep into a reset under CEO Brian Niccol, who took the helm in 2024. His “back to Starbucks” strategy centers on restoring the in-store experience, shifting focus away from mobile orders, automation, and efficiency.

Management has leaned into a “retail is detail” mindset, prioritizing human touches and store culture, with changes ranging from added barista staffing and redesigned cafes, to small, symbolic touches like handwritten cup messages and tighter restroom access.

That approach, however, comes with a price tag. Higher labor costs and reinvestment in stores weighed on profitability, contributing to the earnings miss. North American operating margins fell to 11.9%, down from 16.7% a year earlier. External pressures, including higher input costs tied to tariffs, have added another layer of strain.

The turnaround comes as competition gets tougher. In China, Luckin Coffee has overtaken the Seattle-based chain, with Starbucks’ Chinese market share falling from 40% in 2017 to 14% last year. Luckin’s US entry, the growth of domestic rivals like Dutch Bros, and better at-home coffee options are adding pressure.

Even so, Starbucks’ brand remains a powerful asset. “One in three consumers say that Starbucks is their first choice for coffee or tea away from home,” Chief Brand Officer Tressie Lieberman said at the company’s investor presentation today.

Just getting started

“In fiscal 2026, we’re going to be shifting to play offense and to innovate,” Niccol said during the presentation.

For the fiscal year ending September 2026, Starbucks is targeting at least 3% same-store sales growth and plans to open 600 to 650 new stores globally, including 150 to 175 in the US.

Looking further ahead, the company expects to deliver at least 3% comparable sales growth by fiscal 2028, revenue growth of 5% or more, and earnings per share between $3.35 and $4, signaling confidence the turnaround can gain momentum.

The comeback is still brewing, but investors finally have something concrete to watch.—SY

Today, armed with caffeine, I went to the Starbucks investor day event in Manhattan, where the company unveiled its future look and feel. Gleaming Milan-inspired Mastrena machines showed that faster espresso can still look beautiful, alongside “smart” point-of-sale systems that predict orders and AI tablets guiding in-store staff.

The push for a more elevated experience is driven by the fact that 60% of customers still walk into Starbucks stores, excluding mobile order and pickup. Starbucks wants them coming back more often, especially with 60% of 2025 revenue tied to Rewards members, with new loyalty tiers launching in March.

The presentations sounded great, but as the morning went on, I watched the share price tick lower.

Tune in to today’s episode of Brew Markets to learn why the market remains skeptical.—AB

🟢 What’s up

• Software solutions provider TechCreate Group exploded 941.24% for no reason whatsoever.
• Royal Caribbean jumped 18.53% after beating Q4 estimates and issuing 2026 earnings guidance that blew past forecasts, with bookings hitting a record seven-week stretch.
• Caterpillar rose 3.41% as Q4 profits topped estimates, fueled by surging demand for power-generation equipment tied to AI data centers.
• IBM climbed 5.13% after beating Q4 estimates and forecasting full-year revenue growth above 5%.
• Southwest Airlines gained 18.7% after projecting a sharp jump in 2026 profits.
• Honeywell advanced 4.89% following a Q4 earnings beat.
• Lockheed Martin added 4.23% despite a Q4 earnings miss, after topping sales forecasts, issuing strong 2026 guidance, and announcing a new missile deal.

What’s down

• Tesla shares rose at the open then fell 3.45% by day’s end as traders digested the company’s transition from EV maker to robot manufacturer.
• ServiceNow fell 9.94% as AI disruption fears overshadowed a Q4 beat. Software stocks slid across the board due to similar concerns: Atlassian sank 10.67%, Datadog dropped 8.81%, Salesforce fell 6.09%, and Workday lost 7.65%.
• Las Vegas Sands dropped 13.96% after disappointing Q4 results in Macau, where EBITDA came in at $608 million, below management’s expectations.
• United Rentals sank 12.86% after missing estimates on both Q4 revenue and earnings.
• International Paper fell 6% on the news that it will split into two publicly traded companies.
• Chemical company Dow slipped 2.23% after announcing a restructuring plan alongside a deeper net loss.

Meta Platforms poured $22.1 billion into capex in its fiscal fourth quarter, 49% more than the same quarter last year. It also revealed plans to spend up to $135 billion on AI this year, an 87% increase from 2025.

Microsoft poured $37.5 billion into capex in its fiscal second quarter, 66% more than the same quarter last year. But it’s expected to spend about $94 billion on AI this year, just a 15% increase from 2025.

Meta is spending more than ever on AI this year, but the social media company’s shares are up 10.4% today, while Microsoft tumbled 9.99% despite doing the same thing. Why did investors punish Microsoft but praise Meta?

First, one of Microsoft’s biggest customers is OpenAI, which accounts for 45% of the company’s remaining performance obligations. That’s a lot of eggs in one basket, and questions continue to arise about OpenAI’s ability to actually pay for all of its recent deals. In addition, growth for Microsoft’s Azure cloud business is expected to remain flat, despite the company’s higher spending on AI.

While massive capex figures capture the spotlight every quarter, the lesson here is to not get too focused on them—instead, look under the hood for details about what companies are getting in exchange for all of that money. To that end, analysts at Bank of America recommend keeping a close eye on a unique metric: return on incremental invested capital (ROIIC) versus weighted average cost of capital (WACC).

It’s a mouthful, but the higher that ROIIC is after subtracting WACC, the more efficiently a hyperscaler is using its money, and the more alpha that company can generate. For now, Bank of America says Meta is getting more bang for its buck than Microsoft. As the diverging stock prices revealed today, clearly investors are beginning to notice.—MR

If you’re currently job searching, you probably don’t need us to tell you that the vibes are off.

The data backs that feeling up: 2025 was the weakest year for job growth since the Covid-19 pandemic, and saw the most layoff announcements since 2020.

Despite corporate America reporting broadly healthy earnings, a slew of huge companies across industries are doubling down on massive layoffs this week:

• Amazon announced yesterday it was cutting 16,000 corporate positions, in addition to the 14,000 jobs it slashed in the fall
• UPS is laying off 30,000 employees, on top of the 48,000 it cut last year
• Pinterest is slashing roughly 15% of its workforce
• Home Depot’s CEO said the home improvement giant would cut 800 corporate roles and bring employees into the office five days a week

Is bad news good news?

None of that sounds very good for the economy, but what does it mean for a stock when a company lays off employees en masse? The short answer: it’s complicated.

On one hand, cutting positions fundamentally reduces costs, which lets a company keep more of its revenue, which helps its bottom line. That’s why, at least in the short term, it can be a boon for a company’s shares. But when a company goes through a restructuring, it’s often a sign that business is struggling, and layoffs are no guarantee that a solution is right around the corner.

On the flip side, a hiring spree can actually signal a potential stock boom, according to some research. After all, when companies are expanding their headcount, it means they have the demand and budget for it, which is an obvious sign of growth.

Then again, hiring new employees is costly—posting jobs, interviewing, training, all take time and money—and researchers have found that the expenses associated with bringing new people aboard can cut into profits. That means it can actually lead to negative returns for a stock.

The long answer: It’s still complicated.—LB

• Here’s why SpaceX’s IPO could hurt Tesla.
• Total demand for gold rose 45% year over year to a new all-time high of $555 billion.
• Toyota managed to break its sales record in 2025, despite President Trump’s auto tariffs.
• The world’s largest sovereign wealth fund made $247 billion last year.
• The founders of defunct auto-parts giant First Brands were indicted on fraud charges.
• The US trade deficit widened by the most since 1992 thanks to the AI investment boom.
• Speaking of: Nvidia, Amazon, and Microsoft are reportedly in talks to invest $60 billion in OpenAI.

Economic announcements: The delayed December PPI report, plus a speech from Fed Vice Chair for Supervision Michelle Bowman

Earnings reports: ExxonMobil, Chevron, American Express, Verizon, Charter Communications, SoFi Technologies, Regeneron, and Colgate-Palmolive