American Express Company (AXP) defied concerns about consumer belt-tightening in the first quarter of 2025, reporting a notable +9.30% surge in diluted earnings per share (EPS) compared to the prior year, significantly outpacing its +7.00% revenue growth. This performance underscores a critical strategic advantage: the company's deep penetration among affluent consumers and its accelerating success in capturing the spending power of younger generations.
This differential growth rate between the top line and bottom line, coupled with robust engagement from key demographics, paints a picture of operational efficiency and strategic execution paying dividends. While the broader economic landscape presents variables, American Express's targeted approach appears to be creating a degree of insulation, allowing it to translate revenue gains into more substantial profit expansion.
American Express Reports Strong Q1 2025 Results: Key Financial Highlights#
American Express Company (AXP) commenced 2025 on a positive trajectory, delivering first-quarter results that exceeded market expectations. The financial performance was underpinned by solid revenue growth and disciplined cost management, showcasing the company's resilience in the current economic environment. The results, as reported by American Express Investor Relations, demonstrate the continued strength of its integrated payments network model.
The company's ability to grow both its top and bottom lines in a period marked by persistent inflation and fluctuating interest rates is a testament to the spending power and loyalty of its card members. These key financial highlights provide a crucial snapshot of the company's health and momentum heading further into the year.
Revenue, Net Income, and EPS Performance in Q1 2025#
For the first quarter of 2025, American Express reported total revenues net of interest expense of $17.0 billion, a +7.00% increase compared to $15.8 billion in the first quarter of 2024. This revenue growth translated into robust profitability, with net income reaching $2.6 billion, up +8.30% from $2.4 billion in the prior-year quarter. Diluted EPS saw an even stronger increase, rising +9.30% to $3.64 from $3.33 in Q1 2024. This EPS figure also notably surpassed the estimated earning of $3.47, representing an earnings surprise for the quarter, according to data from Zacks.
These figures highlight effective operational leverage, where net income and EPS grew at a faster pace than revenue. This suggests that the company is managing its expenses efficiently while expanding its top line, a positive sign for profitability and shareholder value. The strong EPS growth is particularly significant for investors, reflecting increased earnings power on a per-share basis.
| Metric | Q1 2025 | Q1 2024 | Year-over-Year Change |
|---|---|---|---|
| Total Revenues Net of Interest Expense | $17.0 billion | $15.8 billion | +7.00% |
| Net Income | $2.6 billion | $2.4 billion | +8.30% |
| Diluted EPS | $3.64 | $3.33 | +9.30% |
Analysis of Billed Business Growth#
Billed business, a fundamental metric reflecting the aggregate spending on American Express cards, demonstrated healthy expansion in Q1 2025. The total billed business reached $387.4 billion, representing a +6.00% increase year-over-year. When adjusted for foreign exchange impacts, the growth was even stronger at +7.00%, according to the company's earnings release. This sustained growth in spending volume is a critical driver for American Express, directly influencing discount revenue from merchants.
This performance indicates continued engagement from American Express card members across various categories. Analyzing the components of billed business growth by customer segment and geography provides deeper insights into which areas are contributing most significantly to the company's revenue streams and overall network activity. The consistent growth underscores the enduring appeal of the American Express network and its associated benefits.
Net Interest Income Contribution#
Net interest income (NII), generated from interest charged on card member balances, played a supportive role in the Q1 2025 results. Amidst the prevailing interest rate environment, American Express has benefited from higher yields on its loan portfolio. The company reported an +11.00% increase in NII on an FX-adjusted basis, contributing positively to overall revenue growth, as highlighted by American Express Investor Relations.
Growth in net interest income complements the fee-based revenue derived from discount fees and card fees, contributing to the overall financial strength. While the company's model is less reliant on NII compared to traditional banks, its contribution remains significant, particularly in the current rate cycle. The increase in NII reflects both growth in the loan portfolio and the impact of higher interest rates.
Resilience in Spending: Decoding American Express's Affluent and Younger Card Member Trends#
A key theme emerging from American Express's recent performance is the differentiated spending behavior across its customer base, particularly the notable strength within the affluent segment and the accelerating influence of younger generations. This segmentation strategy is central to American Express's business model and its ability to generate resilient growth.
Understanding these spending dynamics is crucial for investors assessing the company's market position and future growth prospects. The data reveals that not all consumer segments are behaving identically, and American Express's focus on specific demographics is yielding tangible results.
Spending Trends by Customer Segment: Premium vs. Other#
American Express's focus on the premium and affluent customer segment continues to provide a stable foundation for its business. Despite broader economic uncertainties, this customer base has demonstrated remarkable spending resilience. According to comments from CFO Christophe Le Caillec, affluent U.S. consumer spending rose by a robust +8.00% in the first quarter of 2025. This growth rate underscores the discretionary spending power retained by this segment and their continued engagement with premium card products and services.
This trend aligns with historical observations that affluent consumers tend to maintain spending levels more consistently through economic cycles compared to other segments. The stability provided by this core customer base is a significant advantage for American Express, helping to buffer against potential volatility in other areas of the market.
Quantifying Millennial and Gen-Z Spending Growth#
Perhaps one of the most compelling takeaways from the Q1 2025 results is the extraordinary growth momentum driven by Millennials and Gen Z. American Express has made a strategic push to attract these younger demographics, and the data indicates this strategy is yielding impressive results. Research findings cited in the earnings highlights show that spending by Millennial and Gen-Z card members within the U.S. Consumer segment surged by a substantial +14.00% year-over-year in Q1 2025. This rate significantly outpaced the growth seen in older generations, with Gen X spending increasing by +5.00% and Baby Boomer spending rising by only +1.00% during the same period.
This differential growth highlights the increasing importance of these younger cohorts to American Express's future. Their higher growth rate, even if they currently represent a smaller portion of total spending than older generations, signals a significant shift in the company's customer mix and future revenue potential. This trend is not just about acquisition but also about engagement and increasing wallet share among these valuable customers.
New Account Acquisition Trends#
The success in attracting younger customers is further evidenced by American Express's new account acquisition data. In the first quarter of 2025, Millennials and Gen Z accounted for over 60.00% of new consumer accounts acquired globally, according to information from American Express Investor Relations. This consistent ability to onboard a large proportion of new card members from these demographics ensures a healthy pipeline for future spending and revenue growth.
This strategic focus on acquiring affluent younger customers aligns seamlessly with American Express's premium brand positioning. These customers are often drawn to the extensive benefits, rewards programs, and aspirational value associated with American Express cards. The strong demand for premium card products among this group contributes directly to growth in card fees, reinforcing the positive feedback loop of this customer acquisition strategy.
Millennials and Gen Z: The Engine Driving American Express's Future Growth#
The data unequivocally positions Millennials and Gen Z as the primary catalyst for growth within American Express's U.S. Consumer segment. Their spending growth rate of +14.00% in Q1 2025 is not merely incremental; it is transformative, dramatically outpacing the single-digit growth observed in older demographics. This demographic shift is rapidly reshaping the composition of American Express's billed business.
While Millennials and Gen Z currently constitute approximately 35.00% of total U.S. Consumer spending, their accelerated growth trajectory suggests this proportion will continue to rise significantly in the coming years. This trend is a direct outcome of American Express's intentional strategy to cultivate relationships with these customers early in their financial lives, recognizing their long-term potential as their careers advance and spending power expands.
The Growing Influence of Younger Demographics on Billed Business#
The disproportionate spending growth of Millennials and Gen Z is fundamentally altering the landscape of American Express's billed business. As their spending increases at a much faster rate than that of Gen X and Baby Boomers, their overall contribution to the total transaction volume is growing. This dynamic is crucial because billed business is the engine that drives American Express's discount revenue, its largest revenue stream.
American Express's success in capturing this younger market segment is a strategic advantage that differentiates it within the payments industry. It suggests that the company's product offerings, marketing efforts, and brand appeal resonate strongly with the next generation of high-spending consumers. This trend is not just about current performance but about securing relevance and growth for decades to come.
Strategic Importance for Long-Term Growth Potential#
The popularity of American Express among Millennial and Gen-Z consumers is a key factor underpinning the bullish long-term outlook for the company among some analysts. This demographic success ensures a continuous influx of engaged card members whose spending power is expected to increase over time. It positions American Express favorably for sustained revenue expansion.
By effectively appealing to these younger consumers, who are often early adopters of technology and value experiences and rewards, American Express is building a durable foundation for future growth. The sustained strength in American Express Millennial and Gen-Z spending growth validates the effectiveness of their targeted strategies and underscores the long-term potential embedded within the company's customer base.
Assessing American Express's Credit Quality Amidst Economic Uncertainty#
In the current macroeconomic climate, characterized by evolving interest rates and potential economic shifts, the credit quality of a financial services company's loan portfolio is paramount. American Express's Q1 2025 results provide a reassuring perspective on the health of its credit assets, indicating stability despite the broader economic backdrop.
Key credit metrics such as delinquency rates and net write-off rates offer valuable insights into the performance of the loan portfolio and the effectiveness of the company's risk management practices. The latest figures suggest that American Express card members are largely maintaining their financial obligations.
Delinquency Rate Analysis#
Delinquency rates, which track the percentage of loan balances that are past due, serve as an early indicator of potential credit stress. For U.S. Consumer Card Member loans, the rate for balances 30 days or more past due remained stable at 1.40% across January, February, and March of 2025. Similarly, for U.S. Small Business Card Member loans, the delinquency rate held steady at 1.60% in March 2025. These figures, consistent with performance in late 2024, suggest that the vast majority of card members are managing their credit responsibly, according to data from American Express Investor Relations.
Maintaining stable delinquency rates is crucial for controlling future write-offs and preserving asset quality. The consistency observed in Q1 2025 is a positive signal regarding the financial health of American Express's core customer segments.
Net Write-off Rate Performance#
The net write-off rate, representing the percentage of uncollectible loan balances, is another critical measure of credit quality. In Q1 2025, American Express reported a stable net write-off rate of 2.10% for its total loan portfolio. Specifically for U.S. Consumer principal only, the net write-off rate in March 2025 was 2.40%, showing a slight improvement compared to February 2025. These rates are reported as being consistent with or better than 2024 performance and below pre-pandemic levels, indicating robust asset quality within the AXP Credit Quality portfolio, as noted in the earnings materials.
Low and stable net write-off rates are indicative of effective underwriting and collections processes. The performance in Q1 2025 suggests that despite growth in the loan portfolio, the quality of those assets remains strong, mitigating concerns about potential credit deterioration in a changing economic environment.
| Metric | Q1 2025 | Q4 2024 | Q1 2024 |
|---|---|---|---|
| Total Net Write-off Rate | 2.10% | N/A | N/A |
| U.S. Consumer 30+ Days Past Due (March) | 1.40% | 1.40% (Dec 2024) | N/A |
| U.S. Consumer Net Write-off Rate (March) | 2.40% | N/A | N/A |
| U.S. Small Business 30+ Days Past Due (March) | 1.60% | 1.60% (Dec 2024) | N/A |
| U.S. Small Business Net Write-off Rate (March) | 2.60% | N/A | N/A |
Movements in Provision for Credit Losses#
The provision for credit losses is the amount a company sets aside to cover expected future losses on its loan portfolio. In Q1 2025, American Express's provision for credit losses was $1.15 billion. This figure represents a decrease from $1.27 billion in Q1 2024 and $1.29 billion in Q4 2024. The decrease was primarily driven by a modest net reserve release in Q1 2025, contrasting with a net reserve build in the prior-year period. This reserve release was partially offset by higher net write-offs resulting from overall loan growth, according to the company's financial disclosures.
The movement in the provision for credit losses is influenced by factors such as changes in the size and composition of the loan portfolio, observed credit quality trends, and the macroeconomic assumptions incorporated into the company's Current Expected Credit Losses (CECL) models. The net reserve release in Q1 2025 suggests that the company's models indicated a slightly improved or stable credit outlook compared to the prior year, despite the impact of portfolio growth on write-offs.
Segment Deep Dive: Performance Across Global Consumer, Commercial, and Merchant#
American Express operates through several key segments, each contributing uniquely to the company's overall performance. Analyzing the results of the Global Consumer Services, Global Commercial Services, and Global Merchant Services segments provides a more granular view of where the company is seeing growth and facing challenges.
Understanding the dynamics within each segment is essential for assessing the effectiveness of American Express's strategies and its exposure to different parts of the economy. While the Global Consumer segment remains the largest contributor, the performance of the Commercial and Merchant segments offers insights into broader business activity and network expansion.
Global Consumer Segment Performance#
The Global Consumer Services segment is the cornerstone of American Express's business, primarily serving individuals with a range of card products. This segment continued to exhibit strong performance in Q1 2025, with billed business growing by a robust +7.00% year-over-year. As discussed earlier, this growth was significantly propelled by the accelerated spending of Millennial and Gen-Z card members, coupled with the sustained resilience of affluent consumers, according to American Express Investor Relations.
The success in this segment is driven by the strong brand appeal, attractive rewards programs, and the perceived value of American Express's premium card offerings. The continued demand for these products contributes positively to both billed business volume and card fee revenue, reinforcing the segment's position as a key engine of growth for the company.
Global Commercial Segment Challenges and Opportunities#
The Global Commercial Services segment caters to the spending and financing needs of small, medium, and large businesses. In Q1 2025, this segment experienced more moderate growth compared to the consumer side. Commercial Services spend increased by +3.00%, consistent with trends observed in 2024. Within this segment, U.S. Small and Medium Enterprises (SME) saw spending growth of +2.00%, while U.S. Large and Global Corporate spending grew by +1.00%.
This performance may reflect a more cautious spending environment within the business sector, potentially influenced by factors such as borrowing costs, economic uncertainty, or specific industry dynamics. While positive, the growth rate in this segment highlights its potential sensitivity to broader economic conditions. In contrast, the International Card Services segment, which encompasses both consumer and commercial spending outside the U.S., demonstrated stronger growth at +13.00% to +14.00% in Q1 2025, indicating healthier momentum in international markets.
Global Merchant Segment Trends#
The Global Merchant Services segment is responsible for expanding the acceptance of American Express cards and processing transactions. The revenue generated by this segment is primarily tied to the volume of billed business on the network through discount fees. Given that overall billed business grew by +6.00% (or +7.00% FX-adjusted) in Q1 2025, the performance of the Global Merchant segment generally mirrored this trend.
A strategic priority for American Express is to continuously expand its merchant network, making it easier for card members to use their cards in more places. This expansion enhances the utility and value proposition of American Express cards for both consumers and businesses. The segment's performance is fundamentally linked to the spending activity generated by the Global Consumer and Global Commercial segments, as increased billed business directly drives merchant revenue.
Capital Allocation and Shareholder Returns: American Express's Approach#
American Express has a stated commitment to returning value to its shareholders through a combination of dividends and share repurchases. The company's capital allocation decisions are influenced by its financial performance, future investment needs, and regulatory requirements. The Q1 2025 results provided the basis for a notable action regarding shareholder returns.
Decisions on dividends and buybacks signal management's confidence in the company's financial health and future earnings power. These actions are closely watched by investors as they directly impact total shareholder return.
Increased Quarterly Dividend Analysis#
Following the strong first-quarter performance, American Express announced a significant increase in its quarterly dividend. Effective with the dividend payable in May 2025, the quarterly payout was raised from $0.70 to $0.82 per share. This represents a substantial increase and reflects the company's confidence in its sustained profitability and cash flow generation capabilities. The declaration date for this increased dividend was March 3, 2025, with a record date of April 4, 2025, and a payment date of May 9, 2025, as detailed in the dividend history provided by Monexa AI.
This dividend increase is a positive signal to investors, demonstrating management's willingness and ability to return a larger portion of earnings to shareholders. It suggests that the company believes it can fund its growth initiatives and maintain a strong balance sheet while also enhancing direct shareholder returns. Looking at the historical dividend payments, this marks a notable step up in the level of capital returned via dividends.
| Declaration Date | Record Date | Payment Date | Dividend Per Share |
|---|---|---|---|
| 2025-03-03 | 2025-04-04 | 2025-05-09 | $0.82 |
| 2024-12-12 | 2025-01-03 | 2025-02-10 | $0.70 |
| 2024-09-24 | 2024-10-04 | 2024-11-08 | $0.70 |
| 2024-05-07 | 2024-07-05 | 2024-08-09 | $0.70 |
Share Repurchase Program Status#
In addition to dividend payments, American Express actively utilizes share repurchase programs to return capital to shareholders. While specific buyback figures for Q1 2025 were not explicitly detailed in the initial earnings summary, the company had approximately 75 million shares remaining under its existing repurchase authorization at the end of 2024. In the full year 2024, American Express spent a significant $5.9 billion on share repurchases, according to company filings.
Share buybacks reduce the number of outstanding shares, which can have an accretive effect on earnings per share and potentially support the stock price by reducing supply. The combination of a meaningful dividend increase and an active share repurchase program underscores American Express's balanced approach to capital allocation, aiming to enhance shareholder value while maintaining financial flexibility for strategic investments and managing its credit portfolio effectively.
American Express 2025 Outlook and What It Means for the Industry#
Following a strong start to the year, American Express provided investors with an updated perspective on its expectations for the remainder of 2025. Management's guidance is a key indicator of their confidence in the company's ability to navigate the macroeconomic environment and execute on its strategic priorities. The outlook also provides valuable insights into broader trends impacting the credit card and payments industry.
Evaluating the company's forward guidance in the context of its recent performance and prevailing market conditions is essential for investors formulating their expectations.
Reiterated 2025 Revenue Growth Guidance#
Based on the positive momentum observed in Q1 2025, American Express reiterated its full-year 2025 guidance for revenue growth. The company continues to expect revenues to increase in the range of +8.00% to +10.00% for the full year, according to management guidance provided during the earnings announcement. This reiterated guidance suggests confidence in the sustainability of the key trends driving Q1 performance, including resilient premium spending and strong growth from younger demographics.
The guidance incorporates a macroeconomic outlook that includes potential uncertainties, such as a projected peak unemployment rate. This indicates that American Express believes its business model, particularly its focus on affluent customers and its success with Millennials and Gen Z, positions it well to achieve this growth target even in a potentially challenging economic landscape. This positive AXP 2025 Guidance is a crucial data point for market participants.
Industry Comparison: Credit Quality and Consumer Spend Trends#
American Express's Q1 2025 performance and its reaffirmed outlook offer valuable insights into prevailing Credit Card Industry Trends. The resilience in consumer spending, particularly among the high-end segment, appears to be a consistent theme observed across some financial services companies, as noted in recent industry commentary. This suggests a bifurcation in consumer behavior, with affluent households continuing to spend despite inflationary pressures.
Furthermore, American Express's stable credit quality metrics compare favorably to some competitors who have reported some signs of credit normalization or deterioration. The company's lower delinquency and write-off rates relative to pre-pandemic levels suggest effective risk management and a potentially healthier loan portfolio composition. The continued significant growth driven by Millennials and Gen Z also highlights a demographic shift that is relevant across the entire payments industry, indicating the importance of effectively engaging these future high-spenders. Overall, American Express's results suggest that companies with strong brands, loyal customer bases, and effective segmentation strategies may be better positioned to maintain growth momentum and asset quality amidst macroeconomic fluctuations.
Financial Health and Valuation Snapshot#
Beyond quarterly performance, a review of American Express's key financial health and valuation metrics provides a broader perspective on its standing. Metrics such as return on equity, debt levels, and valuation multiples offer insights into the company's efficiency, leverage, and market perception.
Analyzing these metrics in conjunction with recent performance helps to build a comprehensive picture of American Express's financial position and investment profile.
American Express demonstrates strong profitability metrics, with a trailing twelve months (TTM) Return on Equity (ROE) of 34.05% and a Return on Invested Capital (ROIC) of a remarkable 129.35%, according to Monexa AI data. These high returns indicate efficient use of shareholder capital and invested capital to generate profits. The company's financial health metrics appear sound, with a TTM current ratio of 0.99x and a Debt to Equity ratio of 0.05x, suggesting a relatively low reliance on debt compared to equity, although the nature of a payment network involves significant liabilities related to customer deposits and outstanding balances.
From a valuation perspective, American Express trades at a TTM Price-to-Earnings (PE) ratio of 17.55x, based on the stock price of $251.31 and TTM EPS of $14.32. The forward PE ratios, based on analyst estimates, suggest potential multiple compression if earnings grow as projected: 17.37x for 2024, 16.15x for 2025, and 14.10x for 2026. The TTM Price-to-Sales ratio stands at 2.60x, and the Price-to-Book ratio is 5.65x. The Enterprise Value over TTM EBITDA is 8.79x, with forward EV/EBITDA estimates also declining in the coming years (e.g., 8.86x for 2025), according to Monexa AI valuation data. These valuation metrics provide context for the current market price relative to the company's earnings, sales, book value, and cash flow generation.
Strategic Effectiveness and Management Execution#
American Express's Q1 2025 results offer a window into the effectiveness of its strategic priorities and the management team's execution capabilities. The focus on attracting and retaining affluent customers, coupled with the successful pivot towards engaging younger demographics, appears to be translating directly into financial performance.
The ability to achieve strong revenue and EPS growth while maintaining stable credit quality underscores disciplined execution in a dynamic environment. Management's decision to increase the dividend signals confidence in the sustainability of current performance and future prospects, aligning capital allocation with stated goals of returning value to shareholders.
The accelerated spending growth among Millennials and Gen Z, significantly outpacing older generations, is a clear indicator that the resources allocated to targeting these groups are yielding results. This demographic success is not accidental; it reflects deliberate strategic choices in product development, marketing, and partnerships. The consistency in credit quality metrics, despite overall portfolio growth, suggests effective risk management and underwriting practices, which are critical for a lending-based business. Management's historical track record in navigating economic cycles and consistently growing the premium customer base provides a precedent for evaluating their current execution against strategic objectives.
Key Takeaways#
- American Express delivered a strong Q1 2025, with revenues up +7.00% and diluted EPS up +9.30% year-over-year, beating analyst estimates.
- Billed business grew +6.00% (+7.00% FX-adjusted), indicating continued card member engagement and spending.
- Net interest income increased +11.00% (FX-adjusted), contributing positively to overall revenue.
- Spending by affluent U.S. consumers remained resilient, growing +8.00%.
- Millennial and Gen-Z spending surged +14.00% in the U.S. Consumer segment, significantly faster than older generations.
- Millennials and Gen Z accounted for over 60.00% of new consumer accounts acquired globally in Q1 2025.
- Credit quality remained stable, with U.S. Consumer 30+ day delinquency at 1.40% and total net write-off rate at 2.10%, consistent with or better than 2024 and below pre-pandemic levels.
- Provision for credit losses decreased year-over-year, driven by a net reserve release.
- The company increased its quarterly dividend by +17.14% to $0.82 per share, signaling confidence in future financial health.
- American Express reiterated its full-year 2025 revenue growth guidance of +8.00% to +10.00%.
American Express's Q1 2025 results underscore the effectiveness of its premium strategy and its successful efforts to attract and grow spending among younger, affluent demographics. The resilience in core spending metrics, coupled with stable credit quality and a commitment to returning capital to shareholders, provides a positive indication of the company's positioning in the current economic environment. The accelerated growth from Millennials and Gen Z highlights a key driver for long-term potential, suggesting that the company is successfully cultivating the next generation of high-value customers. While the commercial segment shows more modest growth, the overall picture is one of a company executing effectively on its strategic priorities and demonstrating financial strength.