By Naveen Athrappully
American Express generated record second-quarter revenue amid strong spending by cardholders, the company said in a July 18 statement.
For Q2 ending June 30, Amex brought in $17.85 billion in total revenues after interest expenses, up 9 percent compared to the same period in 2024. However, its net income registered a drop of 4 percent, and diluted earnings per share fell 2 percent.
Shares of the company ended Friday down by roughly 2.3 percent. Overall, so far this year, Amex shares are up by around 2.65 percent, having largely moved within a price range of $220 to $330 per share during this period.
According to the company, the 9 percent jump in revenues was “primarily driven by increased Card Member spending, higher net interest income supported by growth in revolving loan balances, and continued strong card fee growth.”
Because the company’s business model is geared more towards wealthy customers, the higher card spending by Amex users suggests robust consumer spending among high-net-worth groups. It also indicates sustained customer appetite for premium goods and services.
Nearly four out of 10 U.S. citizens with a net worth higher than $1 million have an Amex card, according to a Feb. 25 study by financial services company Motley Fool.
During a July 18 earnings call, Amex CEO Stephen J. Squeri said that total card member spending rose by 7 percent, which was “consistent with the pattern we’ve seen this year.”
Christophe Le Caillec, CFO at Amex, said, “Goods and services spending, which accounts for over 70 percent of our business, continued to grow at a similar pace to Q1.”
Restaurant spending remained strong, up 8 percent after adjusting for foreign exchange.
However, spending on travel and entertainment “was down a bit versus Q1 driven by softer airline and lodging spend,” Le Caillec said.
Squeri said that while airline and lodging spending are slowing down a bit, overall spending remains consistent among customers.
“Goods and services continue to be resilient and, you know, our Gen Zs and our millennials continue to be consistent,” he said.
Le Caillec highlighted that “millennial spend was up 10 percent and Gen Z spend was growing around 40 percent, though starting from a smaller base.”
This suggests that Amex is not only popular among the older wealthy classes but also embraced by the younger elite and upwardly mobile individuals.
Card Fees, New Cards
The company had a surge in card fees to go with the higher consumer spending.
“We continue to see strong momentum in net card fees, which reached record levels and were up 20 percent, FX adjusted again this quarter,” Le Caillec said. “The exceptional growth we’ve seen in card fees over the past several years, averaging 17 percent per year since 2019, really speaks to our strategy as we’ve increased our focus on the premium space.”
“This is the result of first acquiring new customers onto fee based products, then driving strong retention of our customer base, and finally, increasing value through product refreshes and pricing accordingly. The result is a net card fee line that has more than doubled since 2019,” he said.
Product refresh refers to relaunching credit cards with new updates, such as benefits or terms. Squeri said that in each of the recent product refreshes in the United States in the company’s Gold, Delta, and Hilton cards over the past two years, there has been a surge in customer demand.
Revenue growth for these three portfolios went up over 30 percent, with card fee revenues up by at least 60 percent and retention rates of 98 percent, he added.
Squeri said the financial results for the quarter were a testament to the earnings power of Amex’s business model as well as its strong capital position.
“Looking ahead, we’re very excited about the upcoming refresh of our U. S. Consumer and Business Platinum cards this fall. The competition for premium customers, while always intense, has been especially heated for over a decade,” he said.
Last month, Amex also announced the launch of a new Coinbase One Card, expanding the company’s offering into the crypto space and potentially attracting younger, tech-savvy, high-earning individuals.
On the downside, the company said in its July 18 statement that higher card member spending and usage of travel-related benefits resulted in higher “variable customer engagement costs.”
This increase in costs indicates that features and incentives added to Amex’s card offerings are affecting the company’s profit margins.
On the issue of handling traffic at airport lounges, Squeri discussed the company’s “Sidecar” concept as an innovative way to tackle the issue.
Sidecar is designed to be a smaller type of lounge aimed at people who “just want to go in for a quick drink or grab something quickly,” he said.
A Sidecar is scheduled to open at the Harry Reid International airport in Las Vegas next year.
