Tesco is doubling down on AI – and it just signed a deal with Mistral to build a joint lab
Tesco delivered another year of steady growth and market-share gains in its preliminary full-year results for 2025/26, but the standout message from the UK supermarket giant was its accelerating push into AI.
The retailer announced it has signed an agreement with French AI company Mistral to establish a joint “AI lab” focused on co-creating generative AI solutions. The move is the latest sign that Tesco is treating AI as a core strategic priority rather than a side project.
Solid results, highest market share in over a decade
On a 52-week comparable basis, Tesco reported:
- Sales (ex-VAT, ex-fuel): £66.6 billion, up 4.6% at actual rates (4.3% at constant rates)
- Adjusted operating profit: £3.15 billion, up 0.8%
- Free cash flow: £1.96 billion, up 11.8%
- Adjusted diluted EPS: 29.0p, up 6.0%
- Dividend per share: 14.5p, up 5.8%
The group also completed a £1.45 billion share buyback and announced a new £750 million buyback programme to run through April 2027. Statutory operating profit for the 53-week period rose 10.1% to £2.99 billion.
UK market share reached 28.5%, up 24 basis points year-on-year and the highest in more than a decade. Like-for-like sales grew 4.2% in the UK and ROI, 0.2% at Booker, and 2.2% in Central Europe. Customer satisfaction hit a record high.
Chief executive Ken Murphy said the performance was driven by heavy investment in price, quality, and service, funded in part by the group’s long-running “Save to Invest” programme, which delivered £535 million in savings this year and is now targeting another £500 million in FY 26/27.
AI now central to Tesco’s five-year strategy
Tesco has reorganised its strategic ambitions around five mutually reinforcing goals. The fifth, long-term business sustainability, explicitly includes technology and AI as a key enabler.
The company said it has consolidated around 250 separate AI workstreams into a single cohesive strategy spanning four domains: customers, colleagues, supplier partners, and operational efficiency.
Highlights from the year include:
- A large-scale trial of a new AI assistant for roughly 280,000 colleagues that provides inspiration, meal-planning support, and basket-building help. The tool will be rolled out to customers later in 2026.
- 100% of active Clubcard customers’ grocery home-shopping journeys are now personalised on a one-to-one basis.
- New AI-powered tools at Tesco Media for audience prediction and at dunnhumby (Tesco’s data-science arm) for adapting ranges to local tastes.
- AI applications in the supply chain to spot external risks earlier, optimise markdowns and waste, and support faster finance decision-making.
The Mistral partnership is the clearest signal yet of Tesco’s ambition to move beyond off-the-shelf AI tools and build proprietary generative-AI capabilities in-house.
Tesco has also doubled its technology team to more than 6,000 experts over the past six years and opened a new Tesco x Adobe Innovation Lab to accelerate real-time personalised content and offers.
Outlook cautious amid geopolitical uncertainty
Tesco widened its guidance for the current year because of the conflict in the Middle East and its potential impact on UK households and the broader economy.
It expects adjusted operating profit for FY 26/27 to land between £3.0 billion and £3.3 billion. Free cash flow guidance remains £1.5 billion to £2.0 billion, in line with the upgraded medium-term range set out last year.
Murphy reiterated the group’s focus on value. “We are committed to doing whatever we can to help keep down the cost of the weekly shop… that commitment matters more than ever,” he said.
