American Express Earnings: Revenue Growth Exceeds Our Expectations but Is Offset by Higher Expenses

Key Morningstar Metrics for American Express

• Fair Value Estimate
  : $335.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

What We Thought of American Express’ Earnings

American Express AXP reported solid second-quarter earnings as higher spending on its cards drove strong revenue growth. Net revenue increased 10% from last year to $19.6 billion while diluted earnings per share rose to $4.53 from $4.08. These results translate to a return on average equity of 36.4%.

The bottom line: In response to the release, American Express’ shares are trading lower on July 24. We disagree with this response, as we think the market is focusing too much on American Express’ unchanged earnings per share guidance and not enough on the underlying strength in the firm’s business.

• Foreign exchange-adjusted card member spending growth was the strongest it has been in three years, with billed business rising 9.5% to $455.8 billion. The strength was broad; US consumer spending growth accelerated again to 11% while commercial card spending momentum continues to recover, rising 5% from last year.
• On the other hand, total operating expenses did rise 12% from last year, more than we had expected. This was mostly driven by American Express’ platinum card refresh and strong engagement with its service rewards, which drove card member service costs up 50% from last year.

Key stats: As we incorporate these results, we are increasing our fair value estimate for wide-moat-rated American Express to $335 per share from $319. Despite their poor performance in 2026, we think the shares are roughly fairly valued, as we thought they were pricey heading into the start of the year.

• The increase in our fair value estimate comes from higher medium-term revenue growth projections, primarily from higher discount revenue, which we now see growing at an 8.3% CAGR over the next five years, up from 7.7% previously.
• This is partially offset by higher operating expenses. The luxury card space is highly competitive, and while there is operating leverage to American Express’ business, we expect any potential margin expansion to be returned to customers in the form of more rewards.