American Express (AXP) Q2 2025: Net Card Fees Up 20% as Premium Refresh Strategy Drives Fee Revenue

July 18, 2025 | By EarningsIQ Research

American Express extended its premium card leadership in Q2, with net card fee revenue jumping 20% YoY and robust customer retention, despite muted travel spend and intensifying competition. Management’s confidence in its refresh playbook and premium customer base underpins reaffirmed guidance, while investors should watch for the timing of Platinum fee benefits and expense leverage in the coming quarters.

Summary

• Premium Fee Momentum: Net card fee growth remains robust, reflecting high retention and successful product refreshes.
• Expense Leverage in Focus: Operating leverage improved, but investments in technology and card services are set to rise with upcoming launches.
• Competitive Refresh Cycle: The fall Platinum refresh will test pricing power and differentiation as rivals intensify premium product competition.

Performance Analysis

American Express delivered another record quarter, with revenue up 9% year-over-year, driven by continued expansion in premium fee-based products and a resilient spend base. Total card member spending rose 7%, with goods and services accounting for over 70% of the business and maintaining steady growth. Travel and entertainment (T&E) spend softened, particularly in airlines and lodging, but restaurant spending remained strong, up 8% FX-adjusted.

Net card fees surged 20% FX-adjusted, marking several years of double-digit growth and underscoring the strength of Amex’s premium model. Millennial and Gen Z spend continued to outpace older cohorts, with Gen Z up 40% (albeit off a small base), and international billings rose 12%. Credit metrics remain best-in-class, with low delinquency and write-off rates, and the company’s performance in the Fed’s CCAR stress test reaffirmed its superior credit quality. Operating expenses as a percentage of revenue fell to 21% from 25% in 2023, reflecting improved efficiency even as investments ramped in risk management and technology.

• Fee-Based Revenue Expansion: Net card fees, now more than double 2019 levels, are a structural driver of top-line growth.
• Premium Lending Margin: Net interest income growth outpaced volume, enabled by higher margins and improved risk pricing.
• Expense Growth vs. Revenue: Variable customer engagement expenses (VCE) grew faster than revenue, reflecting mix shift and upcoming product refresh costs.

Capital returns remain robust, with $2B returned to shareholders and a CET1 ratio of 10.6%, supporting ongoing buybacks and dividend increases.

Executive Commentary

Strategic Positioning

1. Premium Card Refresh Playbook

Amex’s strategy centers on regular, high-value refreshes of its premium cards, notably the upcoming U.S. Platinum relaunch. The model relies on enriching benefits via partner-funded offers, exclusive access (Centurion lounges, Resy, hotel perks), and differentiated customer service. Past refreshes in Gold, Delta, and Hilton portfolios drove double-digit account growth, 30%+ revenue growth, and 60%+ fee growth, with 98% spend retention—demonstrating the formula’s repeatability.

2. Fee-Based Revenue Model

Net card fees have become the core engine of Amex’s revenue growth, reflecting a successful pivot from transaction-based to membership-driven economics. 70% of new cards acquired are fee-based, and fee revenue now grows faster than spend volume. This model is underpinned by high customer engagement and retention, especially among Millennials and Gen Z, who increasingly opt for premium, high-value products.

3. Margin and Credit Outperformance

Margin expansion in premium lending is driven by improved risk pricing, new lending features, and deposit growth, with over half of net interest income growth since 2019 coming from higher balances. Credit performance remains a standout, with Amex posting the lowest credit card loss rates and highest return on assets in the Fed’s CCAR stress test. Delinquency rates for younger cohorts are 40% better than industry averages, supporting capital flexibility and ongoing capital returns.

4. International and SMB Opportunity

International billings continue to grow double digits, with premium products priced even higher than in the U.S. Small business (SMB) revenue remains strong, even as billings growth lags due to cautious inventory and spend decisions. Loss of the Amazon and Lowe’s portfolios is not expected to materially impact SMB performance, as management emphasizes ongoing relationships with these merchants and the resilience of the fee-based and lending businesses in the segment.

5. Technology, Partnerships, and Digital Currency

Amex is investing in enterprise risk management and technology, supporting operational scale and new digital initiatives. The partnership with Coinbase signals a forward-looking approach to stablecoins and blockchain, with management viewing digital currencies as a future enabler for cross-border transactions, especially for SMBs, rather than a replacement for existing payment rails.

Key Considerations

This quarter reinforced Amex’s ability to leverage its premium brand and product refresh cycle, but also surfaced key questions for investors around sustainability, expense leverage, and competitive intensity.

Key Considerations:

• Timing of Platinum Refresh Impact: Expense increases from new Platinum benefits will precede full fee revenue realization, creating a temporary lag in P&L benefit.
• Expense Leverage Sustainability: Operating leverage improved, but ongoing tech and risk investments, plus rising VCE from premium mix, will pressure margins in the near term.
• Competitive Dynamics in Premium: The fall refresh cycle will test Amex’s ability to maintain pricing power and differentiation as rivals intensify their premium product push.
• International Scaling: Double-digit international growth and low market share offer a long runway, but regulatory and acceptance challenges remain.
• SMB and Co-Brand Portfolio Shifts: Portfolio churn (Amazon, Lowe’s) underscores the need for continuous innovation and resilience in SMB and co-brand strategies.

Risks

Competitive intensity in the premium card segment is rising, with major banks aggressively targeting affluent customers and replicating value propositions. Expense growth tied to product refreshes could outpace near-term revenue realization, pressuring margins. Macro uncertainty, especially in travel and SMB spend, could weigh on billings, while international expansion faces regulatory and acceptance hurdles. Portfolio churn in co-brand partnerships, as seen with Amazon and Lowe’s, highlights ongoing risk to acquisition channels.

Forward Outlook

For Q3, American Express guided to:

• Continued stable spend trends and new card acquisitions in line with recent quarters
• Operating expense growth in the mid-single digits, excluding Certify, driven by technology and risk investments

For full-year 2025, management reaffirmed guidance:

• Revenue growth of 8 to 10%
• EPS between $15.00 and $15.50

Management emphasized confidence in the premium refresh strategy, ongoing capital returns, and a long runway for fee-based growth, while acknowledging near-term expense pressure and macro uncertainty.

• Platinum refresh will drive incremental value but create a temporary expense/revenue timing gap
• Card fee growth rate expected to moderate in the back half before re-accelerating in 2026

Takeaways

Amex’s premium model continues to deliver, but the next phase will test its ability to balance expense growth, competitive pressures, and international scaling as the industry intensifies its focus on affluent customers.

• Premium Fee Flywheel: The repeatable refresh strategy and high retention rates position Amex to sustain above-market fee growth, even as spend moderates in some categories.
• Expense and Margin Watch: Investors should monitor the timing mismatch between new benefit costs and fee revenue, as well as the sustainability of recent operating leverage gains.
• Competitive Moat at Risk: The fall Platinum refresh will be a key test of Amex’s differentiation and pricing power as rivals crowd into the premium space.

Conclusion

American Express remains the premium card leader, leveraging its refresh playbook and fee-based model to drive resilient growth. Expense discipline and innovation will be critical as the company navigates a more competitive and uncertain macro environment, with the upcoming Platinum refresh serving as a major inflection point for both revenue and margin trajectory.

Industry Read-Through

The intensifying battle for premium cardholders signals a structural shift in the payments industry, with all major issuers racing to add value and deepen customer engagement through experience-driven offerings. Fee-based revenue models are gaining traction, with high retention and partner-funded benefits emerging as key levers for growth. Expense management and credit discipline will separate winners from laggards, as the cost of acquiring and servicing premium customers rises. Digital currency partnerships and international expansion are becoming more prominent, offering new growth vectors but also exposing issuers to regulatory and operational complexity. Other payment networks and banks should expect continued pressure to innovate, as the bar for premium customer experience and value continues to rise.

AXP Financials Consumer Finance Premium Cards Fee Revenue Membership International Expense Leverage