American Express (AXP) Q3 2024: Card Fee Revenue Jumps 18% as Premium Refresh Strategy Scales
American Express’s record quarterly revenue and raised EPS guidance reflect the compounding impact of its premium product refresh and fee-based model. Card fee revenue growth, driven by targeted refreshes and millennial engagement, is now the company’s most dynamic lever, even as overall billing growth remains steady but subdued. Management’s commentary points to continued investment in premium experiences and digital capabilities, with a clear focus on building long-term earnings power through engaged, fee-paying customers.
Summary
- Card Fee Acceleration: Premium product refreshes drove the fastest card fee revenue growth in years.
- Millennial and Gen Z Focus: Younger cohorts are fueling both new account growth and deeper engagement.
- Guidance Raised: Management’s confidence in sustainable mid-teens EPS growth is underpinned by strong fee and lending economics.
Business Overview
American Express is a global payments, network, and financial services company that generates revenue from cardmember spending, annual card fees, lending (net interest income), and merchant discount fees. Its major segments include U.S. Consumer Services, Commercial Services, and International Card Services. The business model is increasingly anchored in premium fee-paying cardholders, with a growing emphasis on “subscription-like” card fee revenues and value-added services such as dining, travel, and digital engagement platforms.
Performance Analysis
American Express delivered another record revenue quarter, with total revenues up 8% year over year, marking the tenth consecutive quarter of record revenue. The company’s card fee revenue surged 18%, outpacing all other growth levers and reflecting the impact of its ongoing product refresh strategy. Net interest income also grew 17% as revolving balances continued to recover, though management noted this line is expected to moderate going forward.
Spending growth (billings) was stable at 6% FX-adjusted, a level consistent with the past year and reflective of a resilient but not accelerating consumer environment. The fastest growth came from International Card Services, up 13%, while U.S. consumer spend was steady, particularly among affluent millennials and Gen Z. Credit quality remains a core strength, with write-off rates declining to 1.9% and delinquency rates staying low.
- Fee Revenue Outpaces Spend Growth: The 18% jump in card fees now represents a compounding, subscription-like revenue stream that is less sensitive to macro spend volatility.
- Premium Customer Mix Deepens: Over 60% of new cards acquired are fee-paying products, and millennial/Gen Z cohorts now drive 80% of new Gold Card acquisitions.
- Expense Leverage Maintained: Operating expenses rose just 5% year over year, well below the pace of revenue growth, supporting margin expansion even as marketing investment increased by $800 million year to date.
Overall, AXP’s growth is increasingly driven by fee-paying, engaged customers and a diversified global base, with spend per card member slightly pressured by lower organic spend among tenured customers, especially in small business. However, the company continues to add new, highly engaged cardholders at scale, laying a foundation for future organic spend growth as macro conditions improve.
Executive Commentary
"A key reason for my confidence is the sustainability of our product refresh strategy and the growth it is generating across our portfolio. We have already achieved our plan of refreshing 40 products globally this year, and we expect to do several more by year end...we’re seeing strong new account acquisitions and continued high retention levels among existing U.S. Gold Card members, indicating that our customers see that real value in the enhancements we’ve made."
Steve Squeary, Chairman and CEO
"Our business model is performing really well...we continue to add many more customers to the franchise, transaction engagement is deepening, and we benefit from our diverse set of customer types, revenue streams, and geographies. Our focus on continuously refreshing products is resulting in an acceleration in our card fees revenue, which grew by 18% this quarter."
Christoph Lecayac, Chief Financial Officer
Strategic Positioning
1. Premium Product Refresh and Subscription Revenue
The company’s ongoing product refresh strategy—notably the U.S. Gold Card and co-brand partnerships—has become a powerful engine for recurring, “subscription-like” card fee revenue. Each refresh embeds new benefits, often tied to dining or lifestyle, and targets high-value demographics. This approach enables price increases that are offset by enhanced value, driving both acquisition and retention, especially among millennials and Gen Z.
2. Deepening Engagement with Younger Cohorts
Younger customers (millennial and Gen Z) now account for the majority of new premium card acquisitions, and their engagement is outpacing prior vintages. These cohorts transact more frequently, particularly in key categories like dining, and are highly responsive to new benefits and digital experiences. The Gold Card, for example, is now acquired at a rate 30% higher than the Platinum Card, and 80% of new U.S. Gold Cards are issued to millennials and Gen Z.
3. Dining Platform Investments as Differentiators
Dining is now the fastest-growing T&E (travel and entertainment) spend category for AXP, with restaurant spend up 7% year over year and nearly double the industry growth since 2019. Strategic acquisitions—Resi, Tock, and Roam—have expanded the company’s dining ecosystem, providing exclusive experiences for cardholders and new digital tools for merchants. These platforms are increasingly embedded into premium card benefits, reinforcing the membership model and providing cross-sell opportunities.
4. Disciplined Expense Management and Capital Return
Expense leverage remains a core strength, with operating expenses up just 5% year to date against double-digit revenue growth. Marketing spend is being ramped up strategically, with a full-year target of $6 billion, yet management remains disciplined in layering investments over time. Capital return is robust, with $2.4 billion returned this quarter, including $1.9 billion in share repurchases, the highest in two years.
5. International Diversification and Growth
International Card Services delivered double-digit spend growth for the fourth consecutive quarter, outpacing U.S. trends and benefiting from premium customer acquisition in markets like Japan and Mexico. The international segment’s lower discount rates are offset by higher growth and deeper engagement from younger cohorts, providing a counterbalance to more mature U.S. segments.
Key Considerations
American Express’s Q3 results underscore a business model shift toward recurring fee revenue, premium customer acquisition, and digital-first engagement. The company is navigating a stable but not accelerating spend environment by leaning into its product refresh engine and expanding lifestyle benefits that resonate with high-value cohorts.
Key Considerations:
- Fee Revenue Momentum: Subscription-like card fee growth is now the company’s most robust and defensible revenue stream, less exposed to macro cyclicality.
- Millennial and Gen Z Cohort Dynamics: Younger customers are not only driving new account growth but also transacting more frequently, especially in dining and lifestyle categories.
- Dining Ecosystem Expansion: Recent acquisitions (Resi, Tock, Roam) are embedding American Express deeper in the premium dining experience, differentiating its membership model.
- Expense Leverage and Capital Return: Management is balancing elevated marketing and tech investment with disciplined cost control and record capital return to shareholders.
- Organic Spend Headwinds: Organic spend per tenured cardholder, especially in small business, remains pressured, requiring ongoing acquisition and engagement to sustain growth.
Risks
The company’s mid-term growth remains sensitive to organic spend trends, particularly as per-card spending has flattened among existing customers and small business organic spend is negative. International growth is strong but carries lower discount rates, potentially diluting margin if U.S. spend remains muted. Competitive intensity in premium cards and dining platforms is rising, and ongoing investments must continue to deliver tangible engagement and retention to justify higher fees and margins. Any normalization in credit or macro deterioration could challenge the current credit performance and EPS trajectory.
Forward Outlook
For Q4 2024, American Express guided to:
- Continued revenue growth stability, with Q3 trends expected to persist into Q4
- Operating expense seasonality, with a modest uptick in Q4
For full-year 2024, management raised guidance:
- EPS of $13.75 to $14.05 (up from prior $13.30 to $13.80)
- Revenue growth of approximately 9%, at the low end of the original range
Management highlighted several factors that support the outlook:
- Ongoing premium product refreshes and new card acquisitions
- Stable spend and credit trends, with international growth offsetting U.S. moderation
Takeaways
American Express’s quarter demonstrates the compounding value of its premium, fee-based model, even as macro spend trends remain steady rather than accelerating. The company’s ability to drive double-digit card fee and lending revenue, while maintaining expense discipline and capital return, supports its raised EPS outlook and long-term growth aspirations.
- Premium Fee Engine: The 18% growth in card fees, underpinned by product refreshes and millennial adoption, is now the most important driver of recurring revenue and future margin expansion.
- Engagement Over Volume: Growth is increasingly about deepening engagement with high-value cohorts and embedding lifestyle benefits, not just driving raw spend volume.
- Future Watch: Investors should monitor the pace of organic spend recovery, especially among tenured and small business customers, and the ongoing impact of new digital and dining platform investments on cardholder engagement and retention.
Conclusion
American Express is capitalizing on its premium positioning and product refresh cycle to drive robust, recurring fee revenue, even as overall spend growth remains stable. The company’s focus on millennial and Gen Z engagement, coupled with disciplined investment and capital return, positions it for continued mid-teens EPS growth. The durability of this model will hinge on sustained customer engagement and the ability to reignite organic spend as macro conditions evolve.
Industry Read-Through
American Express’s results highlight a broader industry pivot toward recurring fee revenue and premium customer engagement, as traditional transaction-driven models face macro headwinds. Competitors in payments, banking, and loyalty platforms will need to accelerate product innovation and experiential benefits to capture high-value, subscription-oriented customers. Dining and lifestyle ecosystems are emerging as key battlegrounds, with digital booking, exclusive access, and merchant integration becoming table stakes for premium financial brands. Expense leverage and capital return discipline remain critical differentiators, especially as marketing and technology investments rise across the sector.