American Express (AXP) saw its shares decline 4.3% in premarket trading Friday to $318.55, despite reporting first-quarter results that topped analyst expectations. The stock's move lower came as investors weighed higher expenses and signs of softening in airline spending against an otherwise solid earnings beat.
The New York-based card giant posted first-quarter earnings per share of $4.28, an 18% increase from the prior year, while revenue net of interest expense rose 11% to $18.9 billion. Net income climbed to $3.0 billion, up from $2.6 billion a year ago. Billed business, the total value of transactions processed on AmEx cards, reached $428 billion, a 9% gain on a foreign-exchange-adjusted basis.
Market Reaction and Peer Comparison
The initial market response focused on the sustainability of spending trends rather than the earnings beat itself. Shares of Visa (V) and Mastercard (MA) also slipped in early trading Friday, though their declines were less pronounced than AmEx's. The steeper drop in AXP reflects the company's greater exposure to fluctuations in cardholder spending, rewards costs, and credit quality compared to its network-only peers.
American Express is often viewed as an early indicator of higher-income consumer behavior, and cardmember spending accelerated at its fastest pace in three years during the quarter, according to Reuters. However, this robust growth occurred against a backdrop of persistent inflation, elevated fuel prices, and ongoing geopolitical tensions that continue to weigh on travel demand.
Airline Spending and Cost Concerns
Airline spending, a key category for AmEx, increased 8% year-over-year in the quarter, but CFO Christophe Le Caillec noted "some movement and some noise" in volumes late in the period. He pointed to the Middle East conflict and an uptick in refund requests as factors that introduced uncertainty into the travel outlook.
Consolidated expenses climbed 11% to $13.9 billion, driven by higher customer engagement spending, the refresh of the U.S. Platinum Card, and increased usage of travel and lifestyle benefits by cardholders. Provisions for credit losses rose to $1.3 billion from $1.2 billion, reflecting the company's reserves for potential loan defaults.
Guidance and Strategic Outlook
American Express reaffirmed its 2026 full-year targets, which call for revenue growth of 9% to 10% and earnings per share in the range of $17.30 to $17.90. The company also signaled plans to increase marketing and technology spending to "capitalize on long-term growth opportunities," according to CEO Stephen J. Squeri, who described the quarter as a "very strong start to the year."
Retail spending was a bright spot, with overall retail spending up 11% and luxury retail advancing 18%. Squeri also noted that credit performance "remained excellent." However, the company highlighted a range of risks in its earnings release, including softer economic growth, shifting consumer or business sentiment, job losses, further Middle East escalation, tariffs, rising energy prices, market volatility, and potential regulatory changes such as caps on credit-card interest rates.
The quarter illustrates a mixed picture: spending remained robust and credit quality held up, but the cost of growth is rising. American Express is investing heavily in marketing and technology, even as a slowdown in customer air-travel spending introduces caution. Unlike Visa or Mastercard, which operate primarily as payment networks, American Express also handles card issuing and merchant acquiring, meaning higher spending boosts revenue but also increases rewards costs, servicing expenses, and credit risk.
With the earnings beat and guidance reaffirmed, investors are now watching closely to see whether premium card spending can continue to outpace rising costs and travel uncertainty, or if those pressures will eventually force a revision to the outlook.
