Starbucks and Dutch Bros both cleared earnings hurdles this earnings season, yet Wall Street treated the two coffee chains very differently. Starbucks (NASDAQ: SBUX) reported on July 29, and Dutch Bros (NYSE: BROS) followed on Aug. 5. Both companies posted a double beat on the top and bottom lines relative to expectations.
But a closer read shows Dutch Bros grew both revenue and adjusted earnings per share (EPS) year-over-year (YOY), while Starbucks only posted a higher YOY jump in adjusted EPS.
To be fair, earnings are more important. Which is why investors may initially have given Starbucks a pass. The market seems to believe CEO Brian Niccol’s “Back to Starbucks” turnaround is finally working. The company’s decision to hand over operational control of its China business also drew a favorable reaction. It removes a chunk of geopolitical and competitive risk from the balance sheet.
Dutch Bros, meanwhile, delivered a genuinely strong quarter but paired it with cautious guidance. Investors punished the stock hard, sending shares down more than 20% since the report. That reaction looks disproportionate given the underlying numbers.
It sets up an interesting valuation gap heading into the back half of the year. Coffee input costs are expected to ease over the coming months, which should help margins across the sector. That backdrop matters more for one of these stocks than the other. Here’s a side-by-side look at both companies and why one now looks like the better buy for investors chasing value in coffee stocks.
Starbucks Gets Credit for a Turnaround Story
Starbucks reported fiscal Q3 revenue of $9.32 billion, down 1.4% year-over-year. That decline reflects the transfer of its China retail operations to a licensed joint venture. Adjusted earnings per share came in at 85 cents, up 70% from a year ago. Global comparable store sales rose 7.9%, driven mostly by transaction growth rather than price hikes. That’s a meaningful signal that customers are returning to stores.
Investors appear to be buying the narrative that Niccol’s “Back to Starbucks” plan is taking hold. The China deal also removed a complicated, lower-margin business from the income statement. Management raised full-year guidance on the back of the results.
Yet the stock reaction has been muted. Shares are up only slightly since the report, suggesting the good news was already priced in. Starbucks trades near the top of its 52-week range. The stock’s valuation remains rich relative to its growth rate. A 2.28% dividend yield, backed by 15 straight years of increases, offers some downside cushion. But it’s not the kind of setup that screams “undervalued.”
North America remains the core of the story, with segment revenue up 7% and operating margin expanding to 13.6%. Labor investments tied to the turnaround are still weighing on costs, though. Investors are betting those investments pay off over time. For now, that bet looks more like faith than fundamentals-driven conviction.
Dutch Bros Delivers Real Growth, Gets Punished Anyway
Dutch Bros posted second-quarter revenue of $550.9 million, up nearly 33% year-over-year. Adjusted EBITDA jumped to $113.7 million from $89 million a year earlier. Unlike Starbucks, Dutch Bros beat expectations on both revenue and earnings compared to the same quarter last year. That’s a genuine double beat, not one propped up by a divestiture or cost cuts.
Same shop sales climbed 5.8% systemwide, with company-operated locations up 8.3%. The chain added new units at a steady clip, ending the quarter with 1,225 total shops. The business is executing well on nearly every operational metric that matters.
The catch was guidance. Management’s outlook for the rest of 2026 came in more conservative than some investors wanted. That was enough to trigger a brutal selloff. BROS shares have fallen more than 20% since the report, an outsized reaction to what was otherwise a strong quarter of actual growth.
Full-year guidance still calls for revenue between $2.1 billion and $2.13 billion. Adjusted EBITDA is expected to land between $385 million and $390 million. Same shop sales growth is guided at 5% to 6%, right in line with what the company just delivered. None of that guidance signals a business falling apart. It signals that a company is simply managing expectations amid a choppy consumer environment.
And the Winner Is… Dutch Bros
The market’s reaction to these two coffee stocks doesn’t match the underlying fundamentals. Starbucks missed on revenue and got rewarded. Dutch Bros beat on both lines and got punished for cautious guidance. That’s a classic case of perception diverging from reality, and it’s created an opportunity.
Dutch Bros now trades near the bottom of its 52-week range, while Starbucks sits near the top of its own. One stock is priced in near-perfection. The other is pricing in a growth slowdown that hasn’t yet shown up in the numbers. Coffee costs are expected to soften in the second half. Dutch Bros stands to benefit more, given its smaller size and faster unit growth trajectory.
Lower green coffee prices flow straight into margins for a company still scaling its store base. Starbucks will benefit too, but the impact is proportionally smaller across a 41,000-store global footprint. For investors weighing risk against reward, Dutch Bros offers more room to run from a lower starting valuation.
Weighing Both Coffee Stocks Before Q4
Neither Starbucks nor Dutch Bros is a bad business right now. Both are executing on their respective strategies, and both just posted quarters with real bright spots. The difference is in how each stock is priced relative to its own results. Starbucks trades near 52-week highs on a story that’s still unfolding. Dutch Bros trades near 52-week lows despite delivering a stronger quarter on paper.
That gap between perception and fundamentals is exactly where opportunity tends to show up. Investors willing to look past one cautious guidance print may find Dutch Bros offers the better setup heading into the fall. Cheaper coffee costs on the horizon should help the whole industry, but especially a growth story still scaling its footprint.
