Tech stocks sink after Starbucks pivots to in-house AI to replace Microsoft, IBM tools

Starbucks is building AI software to replace Microsoft and IBM tools, raising concerns over software demand as IBM, Salesforce and ServiceNow shares fell.

Published on: Jul 9, 2026, 21:53:30 IST

By Durva More

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Software company shares fell before the US stock market opened on Thursday after a report said Starbucks is making its own AI-powered software instead of buying some tools from other companies. IBM shares dropped around 3%, ServiceNow fell about 3.5%, and Salesforce declined nearly 4% in premarket trading after the report.

Starbucks is building AI software to replace Microsoft and IBM tools (Pexel/Representative image) (Pexel)

Starbucks is building an alternative to Microsoft's inventory management system, according to an internal presentation. Starbucks is also creating its own replacement for an IBM software tool that helps manage equipment maintenance.

Some of these AI-built software tools could start rolling out by the end of next year if testing goes well. The move shows that Starbucks wants to rely less on software made by other companies and build more technology in-house. Artificial intelligence is making it much easier and faster for companies like Starbucks to build their own business software from scratch.

Why Starbucks is building its own AI software

In the past, companies avoided replacing software because it was expensive, difficult and could disrupt daily operations. AI is now changing that because it helps developers create software much faster than before. Starbucks spends around $400 million every year on software, according to Chief Technology Officer Anand Varadarajan, cited by Bloomberg.

Varadarajan told employees there are "clear opportunities to reduce the spend in software," according to a recording of an internal meeting via Bloomberg. The company is reviewing every software contract and service it currently pays for. This software review is part of Starbucks' larger plan to cut $2 billion in costs during its turnaround strategy.

Also read: Microsoft layoffs: What severance package is being offered to US employees? All we know as company cuts 4,800 jobs

How Starbucks plans to cut software costs

In some cases, Starbucks believes it is better to build its own software because its engineers already spend a lot of time customizing third-party products. Starbucks has also been working for several years on its own point-of-sale (POS) system that could replace Oracle Simphony, according to people familiar with the matter told Bloomberg. Earlier this year, Starbucks said in a blog post that AI and other technology improvements will support its long-term growth and allow baristas to spend more time serving customers.

AI-assisted coding played an important role in developing the software that could replace IBM's maintenance tool. Starbucks has been encouraging its technology employees to use AI in their work, according to Bloomberg. The company even considers employees' AI usage when deciding bonuses. However, not every AI project has been successful at Starbucks. The company recently stopped using an AI-powered inventory tracking system in stores and returned to manual inventory counting.

How AI is changing Starbucks' technology

Despite developing its own software, Starbucks still continues to use many third-party software products, including software from Microsoft. Starbucks' enterprise technology team is expected to reduce its budget by about $30 million in the fiscal year ending in late September. About $10 million of those savings will come from reducing software spending. Another $13 million will come mainly from hiring fewer outside contractors and using more in-house employees instead.

Starbucks is also opening technology offices in Nashville and India while continuing to keep part of its tech workforce at its Seattle headquarters. The company has cut around 2,300 jobs since February last year, including many technology roles. The report has raised concerns among investors that AI could reduce demand for software sold by major technology companies. After the report, IBM shares fell about 3% in premarket trading, ServiceNow dropped about 3.5%, and Salesforce declined around 4%, according to Investing.com.

The report adds to growing worries that companies may increasingly replace expensive software from big vendors with AI-built tools created by themselves or by smaller competitors. These concerns have already weighed on software company stocks this year, with Microsoft and IBM both underperforming the S&P 500.

ABOUT THE AUTHOR
Durva More
Durva More is a Senior Content Producer at Hindustan Times, where she covers finance, and global news. She brings experience across digital and television journalism, with a strong focus on breaking news, business reporting, and international affairs. Before joining Hindustan Times, Durva worked as an International News Writer at The Economic Times, covering a diverse range of subjects including global politics, business, sports, entertainment, and major world events. She also worked as a Business Reporter with NDTV Profit. A postgraduate diploma holder in Journalism from the Asian College of Journalism, Durva is passionate about field reporting and storytelling. She thrives on the adrenaline of chasing stories, speaking with people from different walks of life, and amplifying voices that deserve to be heard. Her reporting is driven by curiosity, accuracy, and a commitment to making complex subjects accessible to readers. When she is not chasing stories or covering breaking news, Durva enjoys reading books and painting. She loves exploring new ideas, meeting people, and learning about different perspectives. For her, both journalism and art are ways to understand the world and tell stories that matter.Read More

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