Currys 23% profit|chip warning sends shares -4% on results day

The strongest profit in years — and the shares fell

Currys reported its best annual results in years on Thursday, yet investors sent the stock down 4.3% to 156.6p before the session was done. Adjusted pre-tax profit rose 18% to £191 million, revenue climbed 6.3% to £9.25 billion, the dividend doubled to 3.0p per share, and a fresh £50 million buyback was launched. The provisional answer lies in a single sentence from departing chief executive Alex Baldock: AI and data centres are eating up the world's supply of silicon.

That warning pulled focus away from the financial scorecard and planted a forward risk the market has not yet been able to price. Baldock told reporters that less silicon left for laptops and mobile phones would create availability challenges and cost-price inflation coming through later this year. He could not say how large the price rises would be, only that they were coming.

The reaction was immediate and lopsided. Peel Hunt described the results as a clean handover but said the £50 million buyback size feels conservative given the group's £176 million net cash position and expected strong cash generation. On the other side, Panmure Liberum called the picture one of clear tailwinds from rising recurring revenues and rapid growth at iD Mobile — and said the shares should continue to perform well. Two analysts, the same set of numbers, opposite reads on what the buyback size signals about the board's conviction. That conflict is what the sell-off is pricing: not the profit that was reported, but the cash allocation the board chose not to make.

Hardware warning hits the segment Currys has been leaving behind

The chip-cost warning lands on hardware — computing, mobile handsets, televisions. That is where the shortage bites and where price rises would flow through. But hardware is the segment Currys has spent eight years deliberately reducing its earnings dependence on, and the FY26 numbers make that shift legible.

Services, consumer credit, and iD Mobile subscriptions delivered the durable margin in this result. Adjusted EBIT in the UK and Ireland increased to £158 million, driven by growth in higher-margin services and a 10% rise in credit sales to £1.2 billion. iD Mobile subscribers jumped 18% to 2.6 million — a recurring-revenue stream that does not move with chip availability. Free cash flow reached £157 million, and the company ended the year with £176 million net cash.

The buried assumption the market is importing from the chip warning is that Currys earns the way it did five years ago — through hardware unit margin. It does not. Currys held 75% of the UK market share for AI-enabled laptops and made nearly a quarter of its laptop sales in that category, but the structural leverage is no longer unit volume in boxes. It is the repair contract, the iD Mobile subscription, and the credit plan attached to the box. Baldock confirmed Currys carried out 1.6 million repairs in the financial year and secured 11.6 million warranty plans. Higher device prices, if they materialise, compress hardware volume at the margin — but they do not erode the services attach rate. They may even support it, as customers delay replacement cycles and extend warranties on existing devices.

This is the reversal the surface reading misses: a chip-driven price rise across the sector pressures Currys' competitors more than Currys, because Currys already earns most of its margin on what happens after the purchase.

The CEO transition and the capital signal that resolves it

Fredrik Tønnesen takes over as group chief executive from August, succeeding Baldock after eight years. Tønnesen built the Nordics business, which delivered 6% like-for-like growth and a 26% adjusted EBIT increase in FY26 — the clearest proof of concept for the services-led model in a market where it was applied without the UK's legacy overhead. That operational track record is not nothing. But he has not run a £9 billion group, and Baldock's departure removes the architect of the turnaround at the same moment the chip-cost headwind arrives.

The verification variable is not the next quarterly earnings print. It is the iD Mobile subscriber count at the August 2026 interims — the target is at least 2.8 million — and whether Tønnesen reloads the buyback at that point. Peel Hunt said the programme could be reloaded at the interims, and the strong balance sheet brings optionality. A buyback reload at the interims, combined with subscriber growth through the 2.8 million target, would confirm that the recurring-revenue cash engine holds under new leadership and that the board's capital confidence has not changed with the CEO.

The counter-evidence in the pool is the chip warning itself: Baldock said price rises are coming later this year, with availability challenges in computing and mobile phones after September. If inventory builds prove insufficient and price rises suppress volumes sharply in Q2 of the new year, the recurring attach rate loses its anchor — customers who delay hardware purchases cannot attach a service plan. That is the invalidation condition.

The holder watches one metric before acting: iD Mobile subscribers at August interims, alongside any buyback announcement. If subscriptions hit 2.8 million and Tønnesen reloads capital return, the FY27 consensus of £198 million adjusted PBT looks well-grounded and the results-day sell-off reads as the entry. If subscriber growth stalls below target and no buyback reload appears, the board is signalling that the chip headwind is larger than disclosed — and the 25% YTD gain has already run ahead of a re-rating the recurring-revenue model has not yet earned under new management.