American Express Affirms 2025 Outlook Following First-Quarter Beat

In a quarter marked by macroeconomic uncertainty, American Express (AXP) delivered a resilient performance, exceeding earnings expectations while reaffirming its full-year guidance. Despite a pre-market stock dip, the company’s fundamentals—driven by premium customer growth, robust fee dynamics, and international expansion—signal a path to sustained profitability in 2025.

Financial Resilience Amid Mixed Signals

American Express reported Q1 2025 revenue of $17 billion, a 9% year-over-year increase excluding leap year effects. Net income rose to $2.6 billion, lifting EPS to $3.64, surpassing estimates by 4.6%. Card member spending grew 6% YoY, with goods and services outpacing travel—a reversal from recent quarters. Notably, 20% YoY growth in card fees marked the 27th consecutive quarter of double-digit fee expansion, driven by premium products like Centurion and co-branded cards.

The company’s focus on high-value customers is paying dividends. Millennials and Gen-Z accounted for 60% of new global consumer accounts, while affluent U.S. consumers spurred an 8% rise in billed business. Retention rates remain robust, and credit metrics—delinquency and write-off rates below pre-pandemic levels—underscore the strength of its portfolio.

Growth Drivers: Premium, Technology, and Global Ambition

1. Demographic Shifts: Younger cohorts are fueling growth. New premium cardholders now represent 70% of new accounts, with average fees rising 40% over three years due to demand for exclusive benefits (e.g., luxury travel credits, concierge services).
2. International Momentum: All five major markets (e.g., UK, Canada, China) saw double-digit card services spend growth, driven by post-pandemic travel recovery and penetration of premium products.
3. Tech-Driven Ecosystem: Integrations with acquisitions like Center are enhancing SME tools, while over 150 product refreshes in recent years have boosted customer engagement.

Risks Lurking in the Rearview

While American Express is positioned to navigate near-term headwinds, challenges loom:
- Macroeconomic Uncertainty: A 5.7% peak unemployment rate is factored into guidance, with risks concentrated in white-collar sectors. The U.S. dollar’s strength continues to pressure FX-neutral metrics, though less severely than feared.
- Spending Volatility: Airline billings dipped sequentially, though premium travel (e.g., first-class bookings) surged 11%. Management dismissed “spending pull-forward” as minimal, but SMEs face tariff-related headwinds.
- Regulatory and Competitive Pressures: Intensifying scrutiny of rewards programs and premium pricing could constrain margins, though American Express’s CET1 ratio of 10.7% ensures ample capital flexibility.

Executive Strategy: Long-Term Over Short-Term Gains

CEO Steve Squeri emphasized a “disciplined, customer-centric” approach, prioritizing technology investment and premium product innovation over EPS growth targets. The $15-$15.50 2025 EPS guidance reflects confidence in expense leverage and a diversified revenue mix (75% fees/spending vs. lending).

Analysts, however, remain cautious. While InvestingPro’s Fair Value analysis suggests undervaluation, the stock’s 1.42% pre-market dip to $252.92 reflects investor anxiety about macro risks.

Conclusion: A Premium Play with Resilience Built In

American Express’s Q1 results underscore its ability to capitalize on premium demand even as broader economic clouds gather. Key metrics—27 quarters of fee growth, 14% international spend expansion, and a 34% ROE—highlight operational excellence.

The 8-10% revenue growth outlook and $15.50 EPS ceiling are achievable given its affluent customer base and sticky fee revenue. While risks like unemployment and currency fluctuations pose near-term hurdles, the company’s capital flexibility (CET1 ratio within 10-11% target) and focus on high-credit-score SMEs mitigate downside.

Investors should view dips like the Q1 post-earnings selloff as buying opportunities. American Express remains a defensive play in financials, offering exposure to premium spending trends and a dividend yield of 1.3%—a modest but stable reward for shareholders.

In a world where macroeconomic volatility is the norm, American Express’s strategy of premium customer retention, geographic diversification, and tech-enabled innovation positions it to outperform peers in both good and challenging times.