American Express Company (AXP) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong performance in premium card segments, optimistic guidance, and strategic refreshes. Despite unclear details on competitive takeaways and new card potential, the overall sentiment is positive with stable consumer health, strong international growth, and effective expense management. The Q&A supports optimism with robust SME growth and engagement in the Platinum card refresh. These factors suggest a positive stock reaction.
Key Financial Performance
Revenue $18.4 billion, up 11% year-over-year. The increase was driven by broad-based growth across revenue lines, strong retail spending, and a rebound in travel.
Earnings Per Share (EPS) $4.14, up 19% year-over-year. The growth was attributed to strong revenue performance and excellent credit quality.
Card Member Spending Increased by 9% (8% on an FX-adjusted basis) year-over-year. This was supported by strong retail spending and a recovery in travel.
Annual Card Fees Approaching $10 billion annually, with double-digit growth for 29 consecutive quarters. Growth was driven by demand for premium products and product refreshes.
Delinquency Rates Below 2019 levels for U.S. consumer and small business segments, indicating excellent credit performance.
Premium T&E Bookings Spending on front-of-cabin airline tickets increased by 14% year-over-year, reflecting strong momentum in premium travel.
Millennials and Gen Z Spending Accounted for 36% of total spend, with their average number of transactions per U.S. customer about 25% higher than older cohorts.
International Spending Up 13% FX-adjusted year-over-year, with three of the top five countries growing by 18% or more.
Net Interest Income (NII) Increased by 12% year-over-year, driven by balance growth in line with spending and higher margins earned on balances.
Provision Expense $1.3 billion, including a reserve build of $125 million, reflecting balance growth.
Net Card Fees Up 17% FX-adjusted year-over-year, maintaining a strong growth pace since 2019.
Capital Return to Shareholders $2.9 billion, including $0.6 billion in dividends and $2.3 billion in share repurchases. The company achieved a return on equity (ROE) of 36%.
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Operating Highlights
Launch of refreshed U.S. Consumer and Business Platinum cards: The refreshed cards reinforce leadership in the premium space, with initial customer demand and engagement exceeding expectations. New Platinum account acquisitions are running at twice the level before the refresh, and over 500,000 requests for the new mirror card were made in the first three weeks.
Digital enhancements: Introduced a new app experience for U.S. Platinum members to improve engagement with card benefits.
Merchant network expansion: The number of merchants accepting American Express cards has grown nearly 5x since 2017, providing card members with more places to use their cards.
International market growth: International spending grew 13% FX adjusted, with three of the top five countries growing by 18% or more this quarter.
Revenue growth: Revenue increased by 11% year-over-year to $18.4 billion, driven by strong retail spending and a rebound in travel.
Credit performance: Credit performance remains excellent, with delinquency and write-off rates stable or declining.
Card fees: Annual card fees are approaching $10 billion, growing at double digits for 29 consecutive quarters.
Focus on premium products: Continued investment in premium value propositions, including the Platinum refresh, which targets high-income, highly creditworthy customers.
Generational targeting: Millennials and Gen Z now account for 36% of total spend, with strong engagement and higher transaction rates compared to older cohorts.
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Risk or Challenges
Macroeconomic Uncertainty: The company acknowledges ongoing uncertainty in the macroeconomic environment, which could impact consumer spending and overall financial performance.
Credit Performance Risks: While credit performance remains strong, any deterioration in the creditworthiness of customers could lead to higher delinquency and write-off rates, impacting profitability.
Revenue Growth Dependency: Revenue growth is partially dependent on the success of product refreshes and customer retention, which may not always meet expectations.
Lag in Revenue Realization: The realization of fee revenue from product refreshes is lagged, which could delay the financial benefits of these initiatives.
Expense Growth: Investments in premium value propositions and marketing are increasing expenses, which could pressure margins if revenue growth slows.
Regulatory and Compliance Risks: Forward-looking statements are subject to risks and uncertainties, including regulatory changes that could impact operations.
International Market Risks: While international spending is growing, geopolitical or economic instability in key markets could adversely affect performance.
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Guidance & Outlook
Full Year Revenue Growth: The company has raised its full-year revenue growth guidance to 9% to 10%, reflecting strong performance through the first three quarters of the year.
Earnings Per Share (EPS): The company expects full-year EPS to be between $15.20 and $15.50, assuming a stable macroeconomic outlook.
Card Fee Growth: Card fee growth is expected to moderate before an upward inflection in 2026 due to product refreshes. The full impact of the recent Platinum refresh on card fees will take roughly two years to materialize.
Premium Product Demand: Demand for premium products remains strong, with over 70% of new accounts acquired on fee-paying products. The refreshed U.S. Platinum card has seen new account acquisitions running at twice the level before the refresh.
Digital Capabilities Expansion: The company plans to continue expanding its digital capabilities for consumers and businesses, including the integration of Centers expense management solution for commercial customers.
Merchant Coverage Growth: The company will focus on growing merchant coverage outside the U.S. to provide card members with more places to use their Amex cards.
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Shareholder Return Plan
Dividends paid: $0.6 billion of dividends were paid to shareholders in the quarter.
Dividend growth: The dividend has increased by 58% over the past 3 years.
Share repurchases: $2.3 billion worth of shares were repurchased during the quarter.
Capital return to shareholders: A total of $2.9 billion was returned to shareholders, including dividends and share repurchases.
Shareholder return rate: Around 70% of earnings have been returned to shareholders over the past 3 years.
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Key Q&A
Q:Can you talk about the resiliency and strength across your customer base, including corporate and small business, and the path forward in a stable macro backdrop?
A:Stephen Squeri noted that there was a slight acceleration in billings this quarter, but over the last 6-7 quarters, it has been relatively stable. He mentioned strong performance in travel and entertainment (T&E), particularly in airlines and restaurants, with premium airline spending up 14%. U.S. consumer travel bookings reached an all-time high. Small business growth was 4%, large and global business grew 6%, and international performance remained strong. Retail spending in the U.S. consumer business was up 9%, which is a positive indicator for the holiday season. He does not expect a significant acceleration or deceleration in the near term.
Q:What is the financial impact of the Platinum refresh on card fees and VCEs, and does it affect the ability to generate mid-teens EPS growth during the refresh period?
A:Christophe Le Caillec explained that the Platinum refresh is a significant investment, but it was planned with the expectation of mid-teens EPS growth. The card fee dynamic is delayed and amortized over 12 months, while benefits are immediate. Expenses related to the refresh are expected to step up in Q4 and continue into 2026. Despite this, the company remains committed to its long-term goals of 10%+ revenue growth and mid-teens EPS growth.
Q:How much did the Platinum refresh contribute to the acceleration in billed business growth during the quarter?
A:Christophe Le Caillec stated that the overall impact of the Platinum refresh on total billed business for the quarter was small. The growth was primarily driven by macro changes, such as a 5% increase in airline spending. However, specific partners associated with the Platinum refresh saw a 2x increase in customer numbers, though the total billing impact was not material.
Q:What are you seeing in SME growth, and do you see any scenarios where it could normalize by 2026?
A:Stephen Squeri highlighted good acquisition and organic growth in the SME segment, particularly in the small and middle market. He noted stabilization in larger transactions and expressed optimism about the business Platinum launch. He acknowledged competition in the SME space but emphasized the company's efforts, such as the Center acquisition and upcoming product launches, to capture opportunities in this segment.
Q:How much of the Platinum Card refresh is attracting customers from competitors versus upgrades within your own portfolio?
A:Stephen Squeri mentioned that it is too early to determine the extent of competitive takeaways versus internal upgrades. However, the company is pleased with the upgrades and new card acquisitions. He noted that international performance was strong, with 18% growth in three of the big five markets, and the company continues to focus on increasing coverage in key cities and countries.
Q:Can you provide more details on the step-up in expenses related to the Platinum refresh and how they will play out over time?
A:Christophe Le Caillec explained that the benefits of the Platinum refresh are available to card members immediately, and expenses are recognized as they are incurred. The expense pattern is expected to be more linear compared to card fees, which are amortized over 12 months. Over time, the company aims to increase card member engagement with the benefits, leading to a modest upward trend in expenses.
Q:Are you seeing any interactions between Gold and Platinum cards due to the Platinum refresh, and is there potential for a new card between Platinum and Black?
A:Stephen Squeri stated that Gold card acquisition remains strong, and there have been some upgrades to Platinum. He mentioned that the company occasionally considers the possibility of a new card between Platinum and Centurion (Black), but there are no immediate plans. The focus remains on enhancing the value propositions of existing products.
Q:What are you seeing in terms of consumer health, particularly at the lower end of your customer base, and any impact from the government shutdown?
A:Stephen Squeri reported stable consumer health, with delinquencies at 1.3% and write-offs at 1.9%. He noted strong spending and engagement among cardholders. The company has not observed any significant impact from the government shutdown and has programs in place to support affected card members.
Q:Can you provide details on marketing spend and its allocation, particularly in relation to the Platinum refresh?
A:Christophe Le Caillec explained that the largest share of marketing spend is allocated to welcome incentives for new card members. The company balances the desire to invest more with the need for efficiency and profitability. Marketing dollars are subjected to rigorous analysis to ensure returns meet profitability criteria. The company plans to continue investing at elevated levels while maintaining discipline.
Q:How do you view the performance of new card members and their impact on spend volumes and revenue growth?
A:Christophe Le Caillec noted that newer card members tend to over-index on fee-paying and premium products, as well as being younger. Younger card members transact 25% more than older cohorts and provide higher wallet share and longer retention. Stephen Squeri emphasized the strategy of acquiring younger, premium cardholders to grow with them over time, leading to increased spend and loyalty.
Q:How has partner receptivity to co-funding credits and rewards changed over time, and are there differences between the Gold and Platinum refreshes?
A:Stephen Squeri stated that partner receptivity has been strong, with existing partners increasing their engagement. The Platinum refresh includes a broader range of benefits, such as lifestyle, wellness, and retail, to appeal to a wider audience. The Gold card focuses more on dining, while the Platinum card offers a more comprehensive value proposition. The company aims to anticipate card member needs and build value propositions accordingly.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the competitive takeaways from the Platinum refresh, the potential for a new card between Platinum and Black, and the exact vintage performance of new card members in terms of spend volumes and revenue growth. Additionally, Christophe Le Caillec did not provide a clear timeline for the step-up in expenses related to the Platinum refresh beyond general trends.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Amex Travel
Amex card
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Card Member
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Centers expense
Centurion Lounges
Christophe revenue
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Mr Ramachandran
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Platinum context
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Platinum traveler
Ramachandran today
Travel Platinum
addition
app
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The earnings call summary indicates strong financial performance, with raised revenue growth guidance and strong EPS expectations. Product development is promising, with premium product demand and digital expansion plans. Market strategy shows optimism, despite competitive pressures. Expenses are well-managed, and financial health appears stable. Shareholder returns are not explicitly detailed, but the overall outlook is positive. The Q&A reveals confidence in strategic initiatives and risk management, with analysts generally positive. Adjustments for critical factors like raised guidance and strong metrics further support a positive sentiment.
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