Costa Coffee's core operating business has returned to profitability after several difficult years of rising costs and intense competition.
The supplied source says Costa Ltd generated an operating profit of £20 million in the year ended December 31, 2025, compared with a £13.5 million loss in 2024 and a £5.8 million loss the year before.
Revenue increased 5% to nearly £1.3 billion, up from just 1% growth in 2024.
The recovery is being supported by product mix, store upgrades and expansion.
Costa has broadened its menu with iced drinks, matcha, decaffeinated options and fresher pastries in an effort to increase traffic outside the traditional morning coffee occasion.
The company says it is now the largest café seller of matcha in the UK.
Costa also opened a net 50 new UK outlets last year, its first net increase in several years, and plans another 50 this year.
The chain is remodeling roughly 250 stores annually after already updating more than 1,200 of its 1,700 company-owned locations.
Digital ordering is becoming a larger part of the format, with self-service kiosks in 200 UK stores.
The company is also expanding outside cafés through Podio office coffee machines and home-coffee products.
For owner Coca-Cola, the recovery matters because the company abandoned plans to sell Costa after bids failed to meet expectations.
Coca-Cola bought the chain for £3.9 billion in 2018.
The biggest risk remains input costs. Coffee-bean prices are elevated and management warned that El Niño could continue affecting production in Latin and South America.
What investors should watch: Costa revenue growth, store traffic, operating margins, coffee-bean inflation, outlet expansion, digital kiosk adoption and whether Coca-Cola keeps Costa as a long-term asset.
BTI's bottom line: Costa's return to profit suggests the operating turnaround is gaining traction. The next test is whether the business can sustain margin improvement while expanding stores and absorbing volatile coffee costs.