To prepare the churro dough, combine the water, butter, granulated sugar, and salt in a medium saucepan. Bring to a boil over medium heat.
Once the mixture starts to boil, reduce the heat to low. Add the flour all at once and stir vigorously with a wooden spoon for 1–2 minutes, until the dough forms a smooth ball and pulls away from the sides of the pan. Remove from the heat and let the dough cool for a few minutes.
Once slightly cooled, add the egg and vanilla extract. Stir until the egg is fully incorporated and the dough is smooth and sticky.
Heat about 2 inches (5 cm) of oil in a heavy-bottomed pot over medium heat until it reaches 350°F (175°C). Meanwhile, transfer the dough to a piping bag fitted with a large star tip.
Pipe 4- to 5-inch (10–13 cm) strips of dough into the hot oil, using scissors to cut off each piece. Fry a few churros at a time, ensuring the pan is not overcrowded. Fry for 3–4 minutes per churro, turning occasionally, until golden brown.
While the churros are cooking, combine the sugar and cinnamon in a bowl or shallow baking dish. Set aside until ready to coat.
Remove the churros with a slotted spoon and place them on a paper towel-lined plate to drain excess oil. Immediately toss the warm churros in the cinnamon-sugar mixture until well coated.
To make the chocolate sauce, place the chocolate chips and heavy cream in a small microwave-safe bowl. Microwave in 20-second intervals, stirring between each, until smooth and fully melted.
Serve the churros warm with the chocolate sauce. Enjoy!