AmEx Profit Beats Expectations as Card Spending Holds Up
15min read American Express (AXP) delivered a resilient performance in Q1 2025, with earnings per share (EPS) surpassing estimates despite modest revenue headwinds. The financial services giant reported EPS of $3.64, a 9% jump year-over-year, fueled by strong fee growth and disciplined cost management. While revenue of $16.97 billion narrowly missed forecasts, key metrics such as billed business and net interest income highlighted the company’s enduring strength in premium card services and customer engagement.
Revenue Drivers: Fees Lead the Charge
AmEx’s fee growth took center stage, with card fees surging 20% year-over-year to a record high. This outperformance was driven by robust demand for premium products and a record 3.4 million new card issuances—60% of which came from millennials and Gen Z. The shift toward younger demographics signals effective retention of high-growth cohorts, critical for long-term value.
The $439.6 billion billed business figure, though slightly below estimates, underscored broad-based spending resilience. Goods and services spending grew 7% (excluding leap-year impacts), outpacing travel and entertainment categories. Lodging and dining segments, in particular, showed vigor, aligning with trends toward experiential consumption.
Credit Quality: Stability Amid Uncertainty
AmEx’s credit metrics remained robust, with a net write-off rate of 2.1%—well below pre-pandemic levels—and low delinquency rates. Premium products, which contributed 80% of revolving loan growth, attracted high-creditworthy customers, reinforcing the company’s risk management.
Total card member loans rose to $139.2 billion, slightly exceeding expectations, with strong performance in U.S. consumer loans offsetting softer international results. CFO Christophe Lakayeak emphasized the 10.7% CET1 capital ratio and 34% ROE, reflecting a financially sound balance sheet capable of supporting shareholder returns, including a 17% dividend hike.
Operational Momentum and Guidance
Despite macroeconomic headwinds, AmEx maintained its full-year outlook, projecting 8–10% revenue growth and EPS of $15.00–$15.50. This confidence stems from its spend-driven business model, which benefits from premium customer loyalty and strategic investments in SME ecosystems. CEO Steve Squeri highlighted the company’s focus on technology and data analytics to enhance customer experience, a key differentiator in a competitive landscape.
Stock Performance and Analyst Outlook
Shares dipped 1.42% pre-market on modest revenue misses but closed at $252.92, down 6.6% over the past month. The Zacks #3 “Hold” rating reflects near-term cautiousness, though analysts project 9.3% annualized revenue growth over the next three years—outpacing the broader consumer finance sector’s 11% forecast.
Risks and Challenges
The outlook is not without hurdles. Rising unemployment and currency fluctuations could pressure international spending, while regulatory scrutiny and intensifying competition from fintechs pose threats. However, AmEx’s premium positioning, disciplined capital allocation, and stable credit metrics mitigate these risks.
Conclusion: A Hold with Upside Potential
American Express’s Q1 results reaffirm its resilience in a challenging environment. The EPS beat and record fee growth demonstrate the strength of its premium offerings, while stable credit metrics and maintained guidance signal confidence in long-term trends. Despite near-term stock underperformance, the company’s focus on high-margin segments, customer acquisition, and capital efficiency positions it to outpace peers over the medium term.
With a Zacks Rank #3 and a dividend yield of 1.7%, AmEx remains a Hold for investors seeking stability. However, those with a longer time horizon may find value in its $15.50 EPS target, which, if achieved, would imply a 12% upside from current prices. As the premium segment continues to outperform, AmEx’s strategic bets on younger demographics and SME ecosystems could solidify its position as a top-tier financial services player.
In a sector where fee growth and credit discipline are kingmakers, AmEx has laid the groundwork for sustained success—provided it can navigate macro risks without compromising its premium advantage.
