Starbucks (SBUX) Stock: Coffee Giant Builds AI Tools to Replace IBM and Microsoft Software

TLDR

• Starbucks is developing in-house AI software to replace tools from IBM and Microsoft
• The company spends around $400 million a year on software and wants to cut costs
• Some new internal systems could roll out by end of next year, pending testing
• The enterprise tech team is on track to cut its budget by about $30 million this fiscal year
• IBM fell ~3%, ServiceNow ~3.5%, and Salesforce ~4% in premarket trading on the news

Starbucks is building its own AI-powered software to replace enterprise tools it currently buys from vendors including IBM and Microsoft. The move sent software stocks lower Thursday morning.

Starbucks Corporation, SBUX

IBM dropped around 3% in premarket trading. ServiceNow fell roughly 3.5% and Salesforce declined about 4% ahead of the open. SBUX was up nearly 3% on the day at $106.93.

The coffee chain is developing replacements for a Microsoft system that tracks inventory and an IBM tool that manages maintenance operations. Some of those internally built systems could be deployed by the end of next year, subject to successful testing, according to a Bloomberg report citing an internal company presentation.

Chief Technology Officer Anand Varadarajan told employees earlier this year that the company spends roughly $400 million annually on software. He said there are “clear opportunities to reduce the spend in software.”

Starbucks is reviewing “every contract and service” across its technology operations as part of a broader push to cut $2 billion in overall costs.

AI-assisted development has reportedly played a central role in building the platform designed to replace IBM’s maintenance management system. The company has also been encouraging its technology employees to increase their use of AI tools — with AI adoption now factoring into bonus evaluations.

Budget Cuts and Headcount Changes

The enterprise technology division is expected to reduce its annual budget by around $30 million during the fiscal year ending in late September. That includes roughly $10 million in software savings and about $13 million from reduced reliance on outside contractors.

Starbucks has also been working for several years on an in-house point-of-sale system to replace Oracle Simphony, according to Bloomberg sources.

Since February of last year, the company has cut around 2,300 positions, including a large number of technology-related roles.

New Offices, Shifting Footprint

Even as it trims headcount, Starbucks is expanding its technology presence by opening new offices in Nashville and India, while keeping its headquarters in Seattle.

The company spends about $400 million per year on software overall. The internal presentation reviewed by Bloomberg showed the enterprise tech team is on pace to hit its cost reduction targets for this fiscal year.

Starbucks’ GF Score stands at 81 out of 100. Its profitability is rated 8 out of 10, though financial strength sits at just 4 out of 10. The stock carries a P/E ratio of 78.87.

Insider activity over the past three months shows $0.9 million in stock sold, with no purchases reported.

The Bloomberg report also noted that AI adoption has become a formal metric in how some employee bonuses are calculated within the technology division.

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