Both are happening at the same time. We know that as the sun burns, it must lose mass and shrink, just like a match gets smaller as it burns. However, as the sun loses molecules, the gravity, which is what holds it together gets reduced, so that makes it expand. We see the sun getting slowly brighter as it expands.
Overall it is slowly expanding, but it will take about 5 billion years for it to get big enough to swallow the earth (see image below). It will stay very big after that time for a few more million years and then start to cool down and just disappear.