American Express Faces Profitability Questions as Rising Card Costs Overshadow Strong Earnings

Strong Cardholder Spending Meets Growing Cost Pressures

American Express (AXP) shares fell nearly 3% on Friday, October 23, after the company reported record third-quarter revenue and raised the lower end of its annual earnings outlook. Despite better-than-expected profits, investors focused on rising expenses, slower spending growth, and plans to eliminate approximately 5% of its global workforce.

The results highlight a growing challenge for the credit-card company. Its affluent customers continue spending, and demand for premium cards remains healthy. But the increasingly generous benefits used to attract and retain those customers are becoming more expensive, raising questions about how much of that growth translates into stronger profitability.

Key Points

• Strong earnings, weaker stock reaction: American Express reported record quarterly revenue and raised its adjusted earnings outlook, but a slight revenue miss and rising expenses weighed on shares.
• Premium-card demand remains resilient: Affluent customers continued spending, card fees increased, and credit quality remained healthy despite inflation and elevated interest rates.
• Profitability faces a new test: Higher rewards costs and plans to reduce the workforce are drawing attention to how efficiently American Express converts customer growth into earnings.

American Express Reports Record Revenue as Premium Demand Holds Up

American Express delivered another quarter of revenue growth, supported by continued spending among its largely affluent customer base.

Third-quarter revenue reached approximately $20.1 billion, up 9% from a year earlier, although it fell slightly short of Wall Street expectations.

Adjusted earnings increased to $4.68 per share, exceeding analysts' forecasts of approximately $4.50. Reported earnings were higher at $5.42 per share, reflecting a gain from the sale of the company's investment in Global Business Travel Group, partly offset by restructuring costs.

The distinction matters because adjusted earnings provide a clearer view of the company's recurring business performance, although tax benefits and other items also supported the quarterly results.

American Express raised the lower end of its full-year adjusted earnings forecast to $17.60 per share while maintaining the upper end at $17.90. Management also reaffirmed its expectation for approximately 10% annual revenue growth.

Affluent Consumers Continue Spending

One of the most encouraging developments was the continued resilience of American Express cardholders.

Total billed business, which measures purchases made using American Express cards, increased 8% to $454 billion.

Travel and entertainment spending remained particularly strong, reflecting continued demand among higher-income consumers.

However, overall spending growth moderated slightly from the previous quarter, suggesting that even affluent customers are not entirely insulated from broader economic pressures.

Higher prices may also be contributing to increased spending totals. Management noted that inflation, including rising travel costs, has influenced cardholder activity.

Nevertheless, transaction volumes also increased, indicating that growth was not driven solely by higher prices.

Higher Platinum Fees Support Revenue Growth

American Express has continued investing in its premium-card strategy, particularly its Platinum Card.

The company previously increased the card's annual fee from $695 to $895 while introducing additional benefits.

A central concern was whether customers would accept the higher price.

So far, retention has remained strong, with nearly all customers transitioned to the higher-fee product choosing to keep their cards.

Net card fees increased 17% on a foreign-exchange-adjusted basis, reflecting the appeal of premium products and continued customer acquisition.

American Express added approximately 3.1 million new cards during the quarter, with younger consumers representing a substantial share of new consumer accounts.

These trends support the company's strategy of attracting customers who value travel benefits, rewards, and premium services.

Why Did American Express Stock Fall Despite Higher Earnings?

The negative stock reaction reflected concerns about the quality and sustainability of earnings growth rather than an immediate deterioration in customer spending.

American Express continues to generate higher revenue from card fees, purchases, and interest income. However, the costs associated with maintaining its premium customer relationships are rising quickly.

Customer-engagement expenses, including rewards and cardholder benefits, increased 16% during the quarter.

That growth outpaced revenue, raising questions about whether the company can continue expanding its premium offerings without putting additional pressure on profitability.

The company's underlying pretax earnings growth was also relatively modest, while lower taxes and share repurchases helped support earnings per share.

For investors, the distinction is important. Strong earnings growth is more sustainable when it comes primarily from improving business profitability rather than financial adjustments or a lower share count.

Workforce Reductions Add to Investor Concerns

American Express also announced plans to eliminate approximately 5% of its global workforce.

The company recorded a $336 million restructuring charge during the quarter.

Chief Executive Stephen Squeri said the changes are intended to make the organization more efficient and better positioned to invest in innovation.

The restructuring comes as American Express continues expanding its technology capabilities and customer offerings.

Although the initiative is designed to improve operating efficiency, it also highlights the company's efforts to manage costs while maintaining investment in its premium-card business.

The announcement contributed to the cautious investor response despite the company's higher earnings outlook.

Credit Quality Remains Healthy

One area showing continued stability was credit performance.

American Express reported a net write-off rate of 1.8%, improving slightly from 1.9% a year earlier.

The measure reflects card balances that the company no longer expects to collect.

Delinquencies also remained low, while provisions for credit losses declined from the previous year.

Part of that improvement reflected a release of previously established reserves, rather than solely a reduction in new credit losses.

Even so, the results indicate that American Express's customer base continues to demonstrate relatively strong repayment behavior.

That resilience is particularly important because American Express differs from payment networks that do not directly carry comparable consumer lending exposure.

What Comes Next for American Express's Premium-Card Strategy?

The next phase of American Express's growth will depend on whether its premium-card investments continue attracting customers and generating enough additional revenue to justify their cost.

The company has demonstrated that many cardholders are willing to pay higher annual fees in exchange for valuable benefits.

However, maintaining that appeal requires continued investment in rewards, travel services, and exclusive partnerships.

Those expenses are becoming an increasingly important factor in the company's profitability.

Airbnb Partnership Expands Premium Travel Benefits

American Express recently announced a partnership with Airbnb (ABNB), bringing more than one million accommodation listings to its travel platform.

The agreement expands the range of travel options available to cardholders and introduces additional rewards opportunities for eligible premium customers.

For American Express, the partnership reinforces its strategy of making premium cards more valuable through travel-related services and experiences.

It also reflects the competitive environment in which card issuers are seeking to differentiate their products.

Capital One (COF) and JPMorgan Chase (JPM) are also investing in premium-card offerings, increasing competition for affluent customers.

American Express must therefore balance the benefits of richer rewards programs against the cost of delivering them.

Operating Efficiency Becomes a Priority

Management's restructuring plans are another important development.

American Express expects the workforce reductions to create a more agile organization and provide greater capacity to invest in its business priorities.

The company is also expanding commercial services and expense-management products as it seeks additional growth opportunities.

However, investors will be watching whether these initiatives translate into stronger underlying profitability.

The company's updated earnings outlook reflects confidence in its performance, but the relatively modest increase in pretax earnings highlights the importance of expense management.

Another factor will be the pace of cardholder spending.

Although affluent consumers have remained resilient, billed business growth has moderated, making it important for American Express to maintain customer engagement without relying on increasingly expensive incentives.

What It Means for Investors

American Express's earnings reveal a business with healthy customer demand but growing pressure on operating efficiency.

Premium-card adoption, strong retention, and continued spending among affluent consumers remain important strengths. Credit quality has also held up well despite inflation and elevated interest rates.

However, rising customer-benefit expenses are consuming a larger share of revenue, while slower spending growth and modest underlying pretax profit expansion have raised questions about the sustainability of earnings momentum.

The company's restructuring plans and expanded travel partnerships illustrate its effort to address both sides of that challenge: controlling costs while continuing to attract and retain valuable customers.

For investors following AXP stock, the key issue is whether American Express can convert its strong premium-card franchise into more consistent underlying profit growth without sacrificing the benefits that distinguish its products.

Conclusion

American Express's third-quarter results show that affluent consumers continue spending and paying for premium financial services, supporting record revenue and higher earnings guidance. Yet the stock's decline reflects growing scrutiny of rising rewards costs, slower spending growth, and the company's restructuring plans. Strong credit quality and customer retention remain encouraging, but the next challenge is improving operating efficiency. Future results will help clarify whether American Express can sustain its premium-card momentum while translating more of that growth into underlying profitability.

FAQs

Why did American Express stock fall after its third-quarter earnings?

American Express shares declined despite stronger-than-expected adjusted earnings because revenue slightly missed expectations, customer-benefit expenses increased, and the company announced plans to eliminate approximately 5% of its workforce. Investors also focused on modest underlying pretax profit growth.

How did American Express perform in the third quarter of 2026?

American Express reported approximately $20.1 billion in revenue, up 9% year over year, and adjusted earnings of $4.68 per share. The company also raised the lower end of its full-year adjusted earnings guidance to $17.60 per share.

Are American Express customers still spending?

Yes. American Express reported an 8% increase in billed business to $454 billion, supported by continued spending among affluent consumers. However, spending growth moderated slightly from the previous quarter.

Why is American Express reducing its workforce?

American Express announced plans to eliminate approximately 5% of its global workforce as part of a restructuring initiative intended to improve efficiency and provide greater capacity to invest in business priorities. The company recorded a $336 million restructuring charge during the quarter.

What are the main challenges facing American Express?

The main challenges include rising rewards and customer-benefit costs, moderating cardholder spending growth, and competition in premium credit cards. The company must balance investments in customer benefits with its efforts to improve underlying profitability.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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