American Express Earnings Call Highlights Premium Growth Momentum

American Express Company ((AXP)) has held its Q4 earnings call. Read on for the main highlights of the call.

American Express Signals Strong Growth Momentum Despite Competitive and Macro Risks

American Express Company’s latest earnings call painted a picture of a business running at full throttle: record revenue, double‑digit EPS growth, best‑in‑class credit metrics, and powerful momentum in both consumer and international spending. Management struck a confident tone on its ability to keep growing revenue around 10% annually and earnings in the mid-teens, underpinned by heavy investment in technology and product enhancements. While executives acknowledged competitive pressure in small business and fintech, higher near‑term engagement costs tied to premium card upgrades, and macro and regulatory uncertainties, they insisted that the strength of the franchise and clear strategic focus outweigh the headwinds.

Record Revenue and EPS Underscore Core Earnings Power

American Express delivered a standout year with full‑year revenues climbing 10% to a record $72.0 billion and earnings per share rising 15% year-over-year, excluding a one-off gain. Management framed these results as validation of the company’s premium, high‑spend customer strategy and a proof point that its multi‑year growth algorithm is working. The combination of strong top‑line growth, disciplined expense management, and still‑benign credit costs has given Amex considerable earnings leverage, reinforcing investor confidence in its ability to sustain high returns on equity.

Net Card Fees Hit New Highs as Premium Strategy Pays Off

Net card fees surged 18% for the year to a record $10.0 billion, with fourth-quarter fees up about 16% on a currency‑adjusted basis. Amex attributed this to strong demand for its premium charge and credit products, particularly in the platinum and gold segments, and high retention despite recent fee increases. Management expects fee growth to accelerate through 2026 as the current wave of platinum renewals laps and the benefits of refreshed products continue to build, signaling that fee-based revenue remains a powerful and growing engine for the company.

Spending Trends Stay Strong Across Retail, Luxury, and Dining

Billed business remained healthy, with total spend up 8% in the fourth quarter on an FX‑adjusted basis. Retail spending rose 10% and luxury retail an even stronger 15%, underscoring the continued resilience of higher‑income consumers. Restaurant spending climbed 9% overall, with U.S. consumer restaurant spend up more than 20%, highlighting robust discretionary activity in dining. Transactions grew about 9%, showing broad-based usage growth rather than a narrow reliance on ticket size. Management used these trends to argue that cardmembers remain highly engaged and that Amex is well positioned in experience‑driven categories where spending is still expanding.

International Growth and Younger Cohorts Drive Structural Tailwinds

International markets were another bright spot, with spending up 12% on an FX‑adjusted basis in the quarter. At the same time, millennials and Gen Z have become the largest share of U.S. consumer spending on the Amex network and are the fastest-growing cohorts. The average age of a new U.S. consumer platinum cardmember is just 33, and gold is 29, highlighting the brand’s success in skewing younger while maintaining a premium positioning. Management portrayed this demographic shift as a long-term tailwind, as younger customers who enter the franchise early tend to increase their spending and product usage over time.

Net Interest Income and Balance Growth Add Another Leg to Earnings

Net interest income (NII) rose 12% in the quarter, outpacing roughly 7% growth in loans and cardmember receivables. Even after adjusting for about a one‑percentage‑point drag from portfolios held for sale, the company is seeing healthy borrowing growth from its customer base. The fact that NII is growing faster than balances suggests improved margins and product mix, giving Amex another robust revenue lever beyond interchange and fees. Management’s guidance assumes that loans and receivables will grow roughly in line with billed business, with NII continuing to outpace that growth.

Credit Metrics Remain ‘Best‑in‑Class’ and Below Pre‑Pandemic Levels

Despite rising consumer leverage worries in some corners of the market, Amex reported that delinquency and write-off rates remained flat and still below 2019 levels, which management repeatedly described as “best‑in‑class.” The company expects credit metrics to remain generally stable into 2026, underpinning its confidence in mid‑teens EPS growth. This benign credit backdrop gives Amex room to keep investing aggressively in growth initiatives without having to sharply increase provisions, a dynamic that investors will watch closely if the macro backdrop softens.

Heavy Technology Investment Targets Efficiency and Faster Innovation

Amex is leaning hard into technology, with around $5.0 billion of annual tech spending and investment up roughly 11% for the year. A central initiative is its new third‑generation data and analytics platform running in the public cloud, which is already cutting processing time for key marketing and fraud workloads by about 90%. The company plans to migrate 100% of these processes to the platform by 2027. Management argued that this digital transformation is not just an efficiency play but a growth driver, enabling faster product innovation, more targeted offers, and better risk management.

Marketing Efficiency and Premium Product Refresh Fuel Demand

Marketing spend was $6.3 billion for the year, up 4%, but management stressed improving efficiency and high returns from its product refresh program. The U.S. consumer and small business platinum updates, including richer benefits and higher fees, have driven strong new account demand and engagement. The new U.S. platinum product is performing above expectations, with high usage of benefits and retention rates that have remained unchanged despite a higher annual fee. The company also noted that the share of fee‑paying U.S. consumer products rose eight percentage points year-over-year, indicating a deeper shift toward more profitable customer relationships.

Operating Leverage and Self‑Service Improvements Support Margin Story

Operating expenses as a share of revenue have fallen by four percentage points since 2022, even with elevated technology investment, signaling meaningful operating leverage. One driver is the company’s push into digital self-service, which has reduced calls per account to customer service centers by around 25% over the past three years. These efficiency gains free up resources to redeploy into growth initiatives while helping to support margins in a period of heavy product and tech investment.

Strong Capital Returns, Dividend Hike, and High ROE

Shareholder returns remain a central pillar of the Amex story. The company returned $7.6 billion of capital over the year—$2.3 billion through dividends and $5.3 billion through share repurchases—while delivering a full‑year return on equity of 34%. Since 2022, the share count has fallen about 7%, amplifying EPS growth. Management plans to raise the quarterly dividend by 16% to $0.95 and keep capital comfortably above regulatory minimums, a combination that signals ongoing confidence in the balance sheet and earnings durability.

Commercial and SME Segment Shows Pockets of Softness

Not all segments are firing equally. While small business remains generally healthy, Amex noted a slight deceleration in middle‑market commercial spending, identifying SME/middle‑market as the comparatively weaker area within its commercial services portfolio. Management did not flag a broad-based downturn but acknowledged that this part of the business is facing more pressure and will be an area to watch, especially if macro conditions become less supportive.

Higher Engagement Costs Push VCE Ratio Up

The company’s Value of Cardmember Engagement (VCE) ratio—essentially the cost of delivering rewards, benefits, and services relative to revenue—rose to 45% in the quarter, driven mainly by investments tied to the U.S. platinum refresh. While this underscores the success of the new benefits in getting cardmembers to engage more, it also means higher near‑term costs. Management expects the VCE ratio to ease modestly to around 44% in 2026, as benefit uptake normalizes, but investors will be sensitive to how quickly this investment curve flattens.

Volatile Card Acquisition and Questions on ‘Cost to Grow’

Net cards acquired showed some sequential softness and continued quarter‑to‑quarter volatility, which has sparked investor questions about visibility into growth and the timing of returns on marketing spending. Amex countered that it is prioritizing revenue per customer and long‑term value over headline card counts and that acquisition patterns will naturally fluctuate. Even so, with marketing spend still elevated, some market participants are scrutinizing the “cost to grow” and how quickly these newer, premium customers translate into sustainable earnings.

Competitive Pressures Intensify in Small Business and Fintech

Management was candid about rising competitive pressure in the small‑business and expense‑management arena, citing moves such as new deals and acquisitions by rival issuers and the rapid scaling of platforms like Ramp. While Amex emphasized its scale advantages, unique network model, and long-standing relationships in commercial payments, it acknowledged that the SMB/fintech battleground is highly competitive. This environment could force continued innovation and potentially higher incentive or product costs to maintain share.

Regulatory Uncertainty Adds Another Risk Factor

Potential regulatory and policy changes were flagged as a meaningful risk, including possible proposals that could cap certain aspects of credit-related economics. Management warned that such measures could produce unintended consequences for consumers and the broader ecosystem but did not speculate on specific outcomes. For investors, the message was clear: while Amex is confident in its current trajectory, regulatory developments remain a wildcard that could impact returns and product economics over time.

Premium Cards Depend on Sustained High Engagement

The platinum refresh has driven a surge in benefit usage and engagement, contributing to both strong fee growth and higher VCE costs. Management expects the initial spike in benefit uptake to moderate as the product matures, which should help stabilize economics. However, this also introduces some cadence risk: if engagement normalizes faster than anticipated or if competitive offerings force further benefit enhancements, the profitability profile of these premium products could be pressured before the full revenue impact is realized.

Macro and Political Backdrop Remains a Key Swing Factor

Amex’s upbeat outlook is not immune to broader macroeconomic and political risks. Management cited the overall economic environment and political uncertainty as principal downside risks to its 2026 targets, particularly if they weigh on consumer confidence or business spending. While current spend trends—especially among higher‑income consumers—are robust, any significant deterioration in employment, inflation dynamics, or geopolitical stability could show up in weaker billed business, rising credit costs, or both.

Guidance: Confident Path to High‑Single‑Digit Revenue Growth in 2026

For 2026, American Express guided to revenue growth of 9–10% and EPS of $17.30–$17.90, while reiterating its longer‑term aspiration for 10%+ annual revenue growth and mid‑teens EPS growth. The company expects its VCE‑to‑revenue ratio to normalize to roughly 44%, operating expenses to grow in the mid‑single digits, and marketing to increase at a low-single‑digit pace, even as technology investment stays at record levels around $5 billion. Underpinning this outlook are assumptions that billed business and loans will expand together, NII will continue to grow faster than balances, net card fees will build on the current $10 billion base, and credit metrics will remain stable. Capital return plans include a 16% dividend increase and continued buybacks, supported by a 34% ROE and a meaningfully lower share count than in 2022.

American Express’s earnings call highlighted a franchise delivering record results, powered by premium customers, strong international and younger‑cohort growth, and heavy investment in technology and product innovation. While there are clear pressure points—ranging from a tougher competitive landscape in SME and fintech to elevated engagement costs and macro and regulatory uncertainties—the company’s current performance and confident guidance suggest that the growth story remains intact. For investors, the balance of evidence from this call leans firmly positive: Amex appears intent on trading near‑term spending and volatility for what it believes will be durable, high‑return growth over the coming years.