American Express (AXP) Q1 2025: Premium Card Fee Growth and Expense Flexibility Anchor Confident Guidance

April 17, 2025 | By EarningsIQ Research

American Express delivered 8% revenue growth in Q1 2025, powered by record card fee growth and resilient premium customer spend, while maintaining robust credit performance and reaffirming full-year guidance despite macro uncertainty. Management’s long-term focus, expense discipline, and ongoing investment in premium product refreshes and SME technology reinforce AXP’s differentiated business model and confidence in navigating volatility.

Summary

• Premium Fee Acceleration: Net card fees surged 20% YoY, driving 27 consecutive quarters of double-digit growth and supporting 8% total revenue growth.
• Expense Leverage Commitment: Management highlighted significant flexibility in marketing and opex, balancing ongoing investment with disciplined cost control.
• Younger Cohort Momentum: Millennials and Gen Z comprised over 60% of new consumer accounts, with spend from this group up 15% in US and 22% internationally.
• Guidance Resilience: Full-year revenue and EPS outlook maintained, even as guidance now bakes in a higher 5.7% unemployment scenario.

Performance Analysis

American Express reported Q1 2025 revenues of $17 billion, up 8% year-over-year (YoY) FX-adjusted, or 9% excluding the leap year impact. Net income reached $2.6 billion, translating to $3.64 per share. Total card member spending rose 6% YoY (7% ex-leap year), with goods and services outpacing T&E (travel and entertainment) growth, and strong restaurant and lodging spend offsetting a sequential slowdown in airline billings. Notably, millennial and Gen Z consumers accounted for over 60% of new cards, and card fee revenue hit a new record, up 20% FX-adjusted.

Credit performance remained robust, with delinquency and write-off rates below pre-pandemic levels and flat YoY. Loans and cardmember receivables grew 7% YoY, led by premium pay-over-time and co-brand portfolios. International card services spend surged 14%, with double-digit growth in all top five markets. The company added 3.4 million new cards, with 70% of new accounts on fee-paying products. Return on equity reached 34%, and the dividend was increased by 17%.

• Card Fee Growth Outpaces Spend: Net card fees rose 20% YoY, while total spend grew 6%, highlighting the shift to higher-value, fee-based products.
• Millennial/Gen Z Spend Drives Growth: US spend from this cohort rose 15%, and international spend 22%, now representing 35% of US billings.
• Expense Flexibility Preserved: Variable customer engagement expenses (VCE) to revenue ratio held at 43%, with marketing and opex cited as key levers for adapting to macro shifts.

Management’s ability to deliver steady growth in premium segments, maintain credit quality, and flex expenses underpins their confidence in the full-year outlook despite a more cautious macro scenario.

Executive Commentary

Strategic Positioning

1. Premium-Focused, Fee-Driven Model

American Express’s business model relies on a high-income, premium customer base and a mix where spend and card fees account for 75% of total revenue. This reduces reliance on lending and insulates the company from credit cycle shocks. Card fee growth—now at 27 consecutive quarters of double-digit gains—reflects both pricing power and customer willingness to pay for value.

2. Disciplined Expense Management and Flexibility

Management emphasized the ability to quickly dial up or down marketing and operating expenses, leveraging scale and natural hedges in variable customer engagement costs. While rewards and cardmember services scale with spend, long-term technology and product investments are protected, even in downturns, to avoid undermining future growth.

3. Long-Term Investment in Product and Technology

Ongoing investment in product refreshes (35–50 planned for 2025) and SME technology platforms (Cabbage, Center, Nipendo) is core, with management adamant about not pausing these efforts even in uncertain environments. Recent acquisitions are intended to create a unified SME ecosystem, supporting retention, acquisition, and eventual organic spend growth.

4. Resilient Credit and Risk Management

Credit performance is well above industry averages, with low-tenure cardmember delinquency rates 30% lower than 2019. Risk models are actively managed, especially for small business exposure amid potential tariff or macro shocks. The portfolio is now even more premium than pre-pandemic, with average FICO at 750 for new millennial/Gen Z accounts.

5. Targeted Growth in Younger Segments and International Markets

Millennial and Gen Z customers are driving the fastest growth, now responsible for 35% of US billings and an even higher share internationally. International card services grew 14%, and management continues to tailor value propositions—such as the Gold Card’s dining focus—to capture this demographic’s preferences.

Key Considerations

The quarter underscores American Express’s ability to grow through premiumization and disciplined investment, even as macro risk intensifies. Strategic priorities remain focused on long-term value creation, not short-term earnings management.

Key Considerations:

• Fee-Based Revenue Resilience: Card fees and premium product mix provide a durable, less cyclical revenue base compared to pure lending models.
• Expense Flex as Downturn Hedge: Marketing and opex can be flexed quickly, giving AXP the ability to defend margins without sacrificing long-term investments.
• SME Technology Integration: The Center acquisition, alongside Cabbage and Nipendo, aims to create a sticky, high-value ecosystem for small business clients, though integration is still in early stages.
• Macro Sensitivity in SME and Small Business: Management is proactively monitoring small business exposure, particularly if tariffs or cost shocks materialize.
• Guidance Integrity Despite Higher Unemployment: Maintaining the 8–10% revenue growth guide even with a 5.7% unemployment scenario signals confidence in the model’s resilience.

Risks

Key risks include a sharper-than-expected downturn in premium consumer or SME spending, potential tariff impacts on small business, and execution risk in integrating new technology platforms. While credit performance is currently strong, a spike in white-collar unemployment could pressure spend and credit metrics in core segments. Management’s focus on long-term investment could limit near-term cost-cutting flexibility if macro conditions deteriorate rapidly.

Forward Outlook

For Q2 2025, American Express expects:

• Consistent spending trends across goods, services, and T&E, as seen in early April.
• Continued strong demand for premium products and high retention rates.

For full-year 2025, management maintained guidance:

• Revenue growth of 8–10% (incorporates a 5.7% peak unemployment scenario).
• EPS of $15.00–$15.50.
• Ongoing investment in product refreshes and SME technology integration.

Management noted:

• Expense levers (marketing, opex) will be actively managed if conditions change.
• Premium customer base and fee-driven model are expected to sustain growth.
• Credit quality and risk models will be closely monitored, especially in SME.

Takeaways

American Express’s Q1 results reaffirm the strength of its premium, fee-driven model and its disciplined approach to expense management and long-term investment.

• Premiumization Drives Growth: Sustained card fee and affluent customer growth, with millennials and Gen Z fueling new accounts and spend, supports a durable top-line trajectory.
• Expense Flexibility and Strategic Investment: Management’s willingness to flex marketing and opex, while protecting product and technology investment, positions AXP to weather volatility without sacrificing future opportunity.
• Macro Watchpoints Remain: Investors should monitor SME credit, small business spend, and integration of technology acquisitions as potential swing factors in the coming quarters.

Conclusion

American Express delivered another quarter of premium-led growth, underpinned by resilient spend, record card fees, and robust credit quality. The company’s long-term focus and expense discipline provide confidence in its ability to deliver through macro uncertainty, with guidance maintained even as risk factors rise.

Read-Through

AXP’s results and commentary reinforce the value of a premium, fee-centric business model in volatile conditions, with clear implications for peers reliant on lending or lower-income segments. Card issuers and payments networks should note the importance of flexible expense structures and ongoing product innovation, while banks with heavy SME exposure may need to sharpen risk management as macro risks evolve. The continued outperformance of millennial and Gen Z cohorts signals a generational shift in premium financial services demand, with product refreshes and experiential value emerging as key differentiators across the industry.

AXP Financials Payments Premiumization Card Fees SME Expense Management