10-Q: American Express Reports Strong Q2 Revenue Growth Amid Record Card Member Spending

American Express announced robust financial results for the second quarter and first half of 2025, driven by record Card Member spending, increased net card fees, and growth in net interest income, despite a decline in quarterly net income due to a prior-year asset sale gain.

Summary

• Total revenues net of interest expense increased by 9% to $17.86 billion for the three months ended June 30, 2025, and by 8% to $34.82 billion for the six months ended June 30, 2025.
• Net income for the second quarter was $2.89 billion, or $4.08 per diluted share, compared to $3.02 billion, or $4.15 per diluted share, in the prior year, which included a $0.66 per share gain from the sale of Accertify Inc.
• Net income for the six months ended June 30, 2025, was $5.47 billion, or $7.71 per diluted share, a slight increase from $5.45 billion, or $7.48 per diluted share, in the prior year.
• Billed business grew 7% year-over-year to $416.3 billion for the quarter and 6% to $803.7 billion for the six-month period.
• Provisions for credit losses increased by 11% to $1.41 billion for the quarter and by 1% to $2.56 billion for the six-month period, primarily due to higher reserve builds and net write-offs.
• Total expenses increased by 14% to $12.90 billion for the quarter and by 12% to $25.39 billion for the six-month period, influenced by the prior-year gain on Accertify sale and increased investments.
• Total loans and Card Member receivables grew 7% year-over-year to $211.98 billion.
• Customer deposits increased by 12% to $149.39 billion as of June 30, 2025.
• The net write-off rate (principal, interest, and fees) for Card Member loans and receivables improved slightly to 2.2% for the quarter (from 2.4% in 2024) and 2.3% for the six-month period (from 2.4% in 2024).
• The 30+ days past due rate for consumer and small business accounts remained stable at 1.3% for both periods.
• American Express maintained its Common Equity Tier 1 (CET1) capital ratio at 10.6%, within its target range of 10% to 11%.
• The company returned $2.0 billion of capital to shareholders in the second quarter through $1.4 billion in share repurchases and $0.6 billion in common stock dividends.

Sentiment

Score: 8

Explanation: The document presents a largely positive outlook, highlighting strong revenue growth, record spending, excellent credit performance, and strategic investments. While quarterly net income and EPS were down due to a prior-year one-time gain, the underlying business momentum and year-to-date EPS growth are strong. The company's robust capital and liquidity positions, along with its commitment to shareholder returns, reinforce a positive sentiment, despite ongoing legal and regulatory challenges.

Positives

• Total revenues net of interest expense increased by 9% for the quarter and 8% for the six-month period, demonstrating strong top-line growth.
• Billed business grew by 7% for the quarter and 6% for the six-month period, indicating strong Card Member spending.
• Net card fees increased significantly by 20% for the quarter and 19% for the six-month period, driven by high new card acquisitions and strong Card Member retention.
• Net interest income grew by 12% for the quarter and 11% for the six-month period, reflecting growth in loan balances and increased usage of lending features like Pay Over Time.
• Total loans and Card Member receivables increased by 7% year-over-year, in line with billed business growth.
• Net write-off and delinquency rates remained stable and are described as 'best-in-class,' supported by a premium global customer base and disciplined risk management.
• Acquired 3.1 million proprietary new cards in the second quarter, indicating successful customer acquisition strategies.
• Operating expenses, when adjusted for the prior-year Accertify gain, grew in line with revenue, reflecting disciplined management while investing in growth.
• Maintained a robust capital position with a CET1 ratio of 10.6%, within the target range of 10% to 11%.
• Returned $2.0 billion of capital to shareholders in Q2 2025 through share repurchases and common stock dividends, demonstrating commitment to shareholder returns.
• U.S. Consumer Services billed business grew 7%, with continued strength in spending by Millennial and Gen-Z Card Members.
• International Card Services billed business grew 15% (12% FX-adjusted), showing strong global expansion.

Negatives

• Net income for the three months ended June 30, 2025, decreased by 4% to $2.89 billion compared to $3.02 billion in the prior year, primarily due to a $531 million gain from the sale of Accertify in Q2 2024.
• Diluted earnings per common share decreased by 2% to $4.08 for the three months ended June 30, 2025, compared to $4.15 in the prior year, also impacted by the Accertify gain.
• Provisions for credit losses increased by 11% for the quarter, driven by a higher reserve build and higher net write-offs.
• Total expenses increased by 14% for the quarter and 12% for the six-month period, partly due to higher investments and the absence of the prior-year Accertify gain.
• Return on average equity (ROE) decreased to 36.3% for the quarter (from 41.4% in 2024) and 35.0% for the six-month period (from 37.9% in 2024).
• T&E spend showed a modest deceleration from the prior quarter on an FX-adjusted basis, primarily reflecting softness in airline and lodging spend.

Risks

• Ability to grow earnings per share depends on revenue growth, credit performance, credit reserve levels, effective tax rate, and sustained high-level investments, all of which can be impacted by macroeconomic and geopolitical conditions, including tariffs, trade relations, international tensions, and inflation.
• Future contingencies such as legal costs, settlements, fines, monetary penalties, and Card Member remediation could impact financial results.
• Issues impacting brand perceptions and reputation pose a risk.
• Changes in the competitive environment, including pricing pressures, merchant acceptance, and new competitors, could affect profitability.
• Net interest income and loan growth could be impacted by Card Member behavior, interest rate changes, capital market volatility, and governmental actions to cap credit card interest rates.
• Future credit performance and reserve levels depend on macroeconomic factors (unemployment, GDP, bankruptcies), Card Member payment behavior, changes in loan/receivable outstanding, and effectiveness of financial relief programs.
• Actual spend on Card Member rewards and services, and business development, could be higher than expected due to changes in Card Member behavior, redemption costs, and new contractual obligations with partners.
• Ability to control operating expenses is subject to salary and benefit expenses, inflation, technology costs, and expenses related to risk management, compliance, and litigation.
• Tax rate may not remain consistent due to changes in tax laws, geographic mix of income, and unfavorable tax audits.
• Changes affecting capital return plans depend on capital levels, regulatory ratios, stress testing results, and economic environment.
• Substantial and increasing worldwide competition in the payments industry, including from financial technology companies and alternative payment mechanisms, could impact market share and profitability.
• Failure in or breach of operational or security systems, including cyberattacks, could compromise data, disrupt operations, and lead to regulatory scrutiny and reputational harm.
• Changes in capital and credit market conditions may affect liquidity, funding costs, asset valuation, and credit ratings.
• Legal and regulatory developments, including those related to payments regulation (e.g., interchange fee caps, surcharging), could affect business practices, profitability, and relationships with stakeholders.
• The outcome of ongoing antitrust litigation and VAT challenges is uncertain and could have a material adverse effect on results of operations, potentially leading to significant penalties or increased merchant steering.

Future Outlook

The company remains confident in its differentiated business model, global premium customer base, and spendand fee-centric revenue mix to navigate evolving competitive, geopolitical, and macroeconomic environments. It plans to continue returning excess capital to shareholders while managing its CET1 capital ratio within the 10-11% target range and supporting balance sheet growth. The full-year 2025 funding plan includes approximately $12.0 billion to $16.0 billion of unsecured term debt issuance and $6.0 billion to $10.0 billion of secured term debt issuance. The company also anticipates continued investment in enterprise risk management capabilities and technology to support business growth, and plans major updates to its U.S. Consumer and Business Platinum Cards later this year.

Management Comments

• Our strong results for the second quarter reflect the resilience of our premium customer base and the earnings power of our business model.
• We saw record Card Member spending in the quarter, high customer loyalty and engagement, strong demand for our premium products and excellent credit performance.
• We remain focused on driving marketing and operating expense efficiencies over time.
• We plan to continue to return to shareholders the excess capital we generate while managing our CET1 capital ratio within our target range and supporting balance sheet growth.
• Our robust capital, funding and liquidity positions provide us with significant flexibility to maintain a strong balance sheet.
• Our Membership-focused model and proven product refresh strategy give us confidence as we navigate the evolving competitive landscape.
• While we recognize the uncertainty of the geopolitical and macroeconomic environment, we believe our differentiated business model, which includes our global premium customer base, spendand fee-centric revenue mix and operating expense leverage, is resilient and positions us well to navigate a range of economic environments.
• We continue to manage the company for the long term, focusing on backing our customers and colleagues, exercising disciplined expense management and strategically investing in our business.

Industry Context

The global payments industry continues to evolve rapidly due to new technologies, changing business dynamics, and intense competition for premium customers. American Express is adapting by focusing on its premium customer base, enhancing its product offerings (e.g., Platinum Card refreshes), and investing in digital capabilities and expense management solutions. The company faces ongoing regulatory scrutiny regarding card network operations, pricing, and practices, including interchange fees and surcharging, which could impact its discount revenue and cobrand relationships. The increasing focus on privacy, data protection, AI, and cybersecurity also presents significant compliance and operational challenges across the financial services sector.

Comparison to Industry Standards

• The net write-off and delinquency rates are described as 'best-in-class,' indicating superior credit performance compared to industry averages, supported by the company's premium global customer base and strong risk management.
• The company's CET1 capital ratio of 10.6% is within its target range of 10-11% and exceeds the Basel III minimum requirement of 7.0%, demonstrating a strong capital position relative to regulatory standards for bank holding companies.

Corporate Governance

Legal Proceedings

• Pizza Hazel, Inc., et al. v. American Express Co., et al.: Filed September 30, 2024, alleging anti-steering and non-discrimination provisions in merchant agreements violate federal antitrust law, seeking unspecified damages and an injunction.
• 5-Star General Store aka Bento LLC, et al. v. American Express Co., et al.: Filed March 21, 2024, alleging anti-steering and non-discrimination provisions violate federal antitrust law, seeking an injunction and declaration of antitrust violation.
• Anthony Oliver, et al. v. American Express Company and American Express Travel Related Services Company Inc.: Putative class action filed January 29, 2019, by non-Amex cardholders alleging higher prices due to anti-steering/non-discrimination provisions. Classes certified for Visa/MasterCard debit cardholders (8 states + DC) and Visa/MasterCard/Discover credit cardholders (no rewards/annual fee, 2 states + DC). Trial scheduled for July 2025.
• B&R Supermarket, Inc. d/b/a Milams Market, et al. v. Visa Inc., et al.: Filed March 8, 2016, alleging conspiracy through EMVCo to shift fraud liability to merchants. Class certification granted August 28, 2020. Motion to compel arbitration granted August 14, 2024, but claims not stayed. Appeal filed November 15, 2024, for stay. Agreement in principle to settle reached March 31, 2025, subject to court approval.
• Mawarid Investments Limited arbitration: Ongoing arbitration since 2006 regarding revenue allocation in a joint venture. Partial awards rendered in 2008, September 2021, May 2022, and December 2024. A final award is expected in 2025.
• Value-added taxes (VAT) challenges: The company is being challenged in several countries regarding its application of VAT to international transactions, with potential additional assessments. The estimated range of possible loss in excess of accruals for these and other matters is zero to $210 million.
• IRS examination: Under examination by the IRS for 2017 and 2018 tax years, with a Notice of Proposed Adjustment proposing an increase to U.S. taxable income of approximately $185 million and penalties of $50 million for transfer pricing. The company strongly disagrees and plans to contest.

Stakeholder Impact

• Shareholders: Impacted by net income and EPS performance, capital returns through share repurchases and dividends, and potential risks from litigation and regulatory changes affecting share price.
• Card Members: Benefit from enhanced premium products, loyalty programs, and services, but could be negatively impacted by increased merchant surcharging or differential acceptance practices.
• Merchants: Affected by the company's discount rates, network policies, and potential outcomes of antitrust litigation regarding anti-steering and non-discrimination provisions.
• Employees: Impacted by compensation costs and the company's focus on attracting and retaining talent, as well as investments in technology and operational efficiencies.
• Regulators: The company is subject to extensive scrutiny and compliance requirements, with ongoing reviews and potential enforcement actions impacting its operations and financial condition.
• Business Partners: Relationships with cobrand partners and third-party service providers are crucial for business development and network expansion, subject to contractual obligations and regulatory changes (e.g., EU payments legislation).

Next Steps

• Continue to return excess capital to shareholders through dividends and share repurchases.
• Manage CET1 capital ratio within the 10-11% target range.
• Support balance sheet growth through disciplined funding activities.
• Implement major updates to U.S. Consumer and Business Platinum Cards later this year.
• Continue to invest in enterprise risk management capabilities and technology to support business growth.
• Pursue all available remedies to vigorously contest the IRS's proposed adjustments for 2017 and 2018 tax years.
• Await final award in the Mawarid Investments Limited arbitration expected in 2025.
• Prepare for the trial scheduled for July 2025 in the Anthony Oliver, et al. antitrust case.
• Seek court approval for the agreement in principle to settle the B&R Supermarket antitrust action.
• Monitor the outcome of the CJEU proceeding regarding interchange fee caps and cobrand relationships in the EU.
• Continue to evolve and improve risk management framework, governance structures, practices, and procedures in response to regulatory scrutiny.

Key Dates

Recommendation

Keywords

American Express, AXP, SEC Filing, 10-Q, Quarterly Report, Financial Performance, Card Member Spending, Credit Performance, Net Card Fees, Net Interest Income, Provisions for Credit Losses, Capital Ratios, Share Repurchases, Dividends, Payments Industry, Credit Cards, Charge Cards, Loans, Receivables, Risk Management, Regulatory Compliance, Antitrust Litigation, Cybersecurity, Customer Deposits, Global Network