American Express Q2 FY26 Earnings Call | $AXP | 🔴 WATCH LIVE

Thanks. Thank you, Cart. Good morning and thanks for joining us today. We delivered another excellent quarter with 10% revenue growth and EPS at $4.53. Our results continue the momentum we've seen over the last few quarters and reinforce the confidence that we have in our strategy for sustaining long-term growth. Based on our better-than-expected performance year to date, we are raising our full-year revenue growth guidance to 10%. And we plan to reinvest this outperformance in growth initiatives across our business. We continue to expect full-year EPS of $17.30 to $17.90. I'm sure the question on your minds right now is if you're outperforming your expectations and you are raising your revenue guidance, why aren't you also raising EPS guidance? I'll answer it. We have a choice. We can either drop the overperformance to the bottom line and buy back more shares or we can invest to grow the business further through the wide range of attractive growth opportunities we have across our business both in the US and international. We've chosen the latter because in the long run it is the one that creates the most value for our shareholders as demonstrated by our high ROE. That is what we have consistently done over the past several years. As we're at the halfway point of the year, let me take a step back and walk you through how we approached this year and how our results reflect the strength of our business model and the strategic decisions we've made to position the company for long-term success.

Over a year ago, consistent with our strategic focus on strengthening our leadership in the premium space, we made the decision to make a significant investment in enhancing our flagship platinum products in the US. While I've said this before, it's worth repeating. When we invest in a product refresh, we expect to realize the full benefits a year or two after launch. First, we anticipate increased customer engagement as well as strong demand and spend growth. Then, as we lap the investments and as the new fees kick in over time, we expect fee revenues to increase and VCE expense growth to moderate. And by focusing on bringing in high credit quality premium customers, we expect to see consistently strong credit performance, which supports strong earnings growth. With that in mind, as we entered 2026, our plan was as follows. Make the upfront investments in the platinum value propositions, which we anticipated would continue to drive the high pace of revenue growth, maintain strong credit risk management, and drive operating leverage across our marketing and operating expenses. The combination of high revenue growth, strong credit performance, and discipline expense management were key elements of our plan for driving mid-teens EPS growth for the fourth consecutive year. Six months into the year, we're seeing stronger momentum than we expected. The investments we made in our value propositions have driven accelerated spend and revenue growth, and our platinum portfolio is now the fastest growing in our US consumer business. Our credit performance is also better than we expected. Retention rates remain very high and we continue to attract a large number of high creditworthy customers with 65% of new consumer accounts coming from millennials and Gen Zs. Importantly, we've continued to deliver strong revenue and earnings growth while at the same time being able to invest more in customer acquisition and technology over the course of the year as we capitalize on the growth opportunities that position the company for long-term success.

In looking to the second half of the year, we have great momentum. We expect card fee growth to accelerate, credit to continue to be very strong, and variable card member engagement growth to decelerate as we lap the platinum refresh of last year. As the platinum refresh has shown, the key to our growth momentum over the past several years has been our focus on investing in innovating our membership-based value propositions to attract and engage premium customers across generations and geographies. Creating compelling premium value propositions that are competitively differentiated is not just about reward points. It's about enabling spending power, providing access to highly desirable travel, dining, entertainment, and exclusive experiences, forging relationships with world-class partners who provide additional value, and having talented, dedicated colleagues who back our customers and merchant partners when issues arise. In essence, a great premium value proposition is not just a product. It's a multifaceted relationship between the brand and the customer. This is what our membership model delivers and it is very difficult to replicate on a global scale. To build deep enduring relationships with our premium customers, we've leaned in to adding benefits they value and where they spend like travel, which is why we continue to expand our lounge and luxury hotel networks and dining, which is why we acquired Resy and our proposed acquisition of The Fork, a leading online restaurant booking platform, which would add 50,000 restaurants to our dining network across 11 European countries.

It's also why we've added new sports sponsorships like the NFL and Fanatics and provide access to a wide variety of exclusive membership-only experiences around the world. Deepening the engagement with our premium customers is also why we continue to introduce new digital payment capabilities such as the recent announcement that card members can redeem Membership Rewards points directly within Apple Pay, giving them greater flexibility to use their points on everyday purchases. A core element in designing our value propositions is working with world-class partners who value the opportunity to reach our high-spending premium card members. We're expanding partnerships with many of the premier companies in the world across a range of industries that further enrich the value of membership and drive customer engagement. In fact, just a few days ago, we announced a new global partnership with All Accor, the booking and loyalty platform for Accor's portfolio of 45 worldwide hotel brands, which include Raffles, Fairmont, and Sofitel. Importantly, our approach to creating value propositions is not a one-size-fits-all exercise. It is tailored to meet the needs and preferences of different customers in different locations. For example, the Platinum card is designed for customers who value premium travel and lifestyle perks like airport lounge access, luxury hotel benefits, and one-of-a-kind experiences. The Gold Card, on the other hand, is designed for those who do some traveling but prioritize their spending on dining, grocery, and other everyday benefits. Likewise, our co-brand cards each have their own value propositions with benefits that appeal to their specific customer bases. And our value propositions for small and medium-sized business customers are designed to fit the different payment and financial management needs of their businesses. For example, in the second quarter, we introduced the $300 ChatGPT business annual statement credit for our US Business Platinum and Gold card members and we launched a pilot of our new expense management platform to an initial group of middle market customers.

We've been executing the same strategy internationally, creating premium value propositions with benefits, partnerships, and experiences that are tailored to the customer needs and local dynamics in each geography at price points that are typically higher than in the US. Since 2023, we've refreshed our platinum card in approximately 80% of the countries where these cards are issued, which has helped to drive 20% FX-adjusted growth in international platinum card spending this year. Furthermore, around 70% of new consumer platinum card accounts outside the US are coming from millennials and Gen Zs. This approach to innovating our premium value propositions has served us well and we plan to continue implementing this successful playbook across our business. As a result, we have built a business that compounds earnings more durably and at a faster pace than in the past. When compared to our historical performance, we now have more momentum in both the top and bottom lines, a more premium fee-paying customer base with strong loyalty, less credit risk, including when it's under stress, and more younger customers who represent greater lifetime value. In sum, we are competing from a position of strength.

We are tracking ahead of the expectations we set at the beginning of the year, generating momentum that enables us to invest more in 2026 than we initially planned in opportunities that drive long-term growth. In fact, our proposed acquisition of The Fork is one of those great opportunities. We did not have it originally in our plan at the beginning of the year and will require investment in the second half of the year. As our strong performance has shown, we are winning with the next generation of premium customers and we have significant growth opportunities across our businesses and around the world. Taken together, this gives us confidence in our long runway to sustainable growth and our ability to continue delivering attractive returns for our shareholders. I'll now turn it over to Kristoff for details on the quarter.

Hey, good morning Sanjay. So on USCS billing, you're absolutely correct. It's up to 11.4%. We went back in time to see when was the last time we saw such growth and if you strip out the discontinuity of COVID, you have to go back to Q1 2018. So it's truly an impressive performance. One of the biggest contributors to the acceleration is the platinum refresh. It is by far the biggest product we have. It has the fastest growth rate. There's truly a lot of momentum. We see that momentum coming from new card member acquisition as well as tenure card members that are increasing their spend as well as people who had another card in their wallet and upgrading to platinum card. So platinum is definitely pulling a lot here in the acceleration. If you go back to Q1, we quantified that acceleration. I talked about it in the Q1 number, but we talked about a 600 basis point acceleration across the entire platinum portfolio in US consumer. So it's truly coming from a lot of tenure card members that are just consolidating their spend because they enjoy the new value proposition.

Good morning, Ryan.

Okay, thanks for the question. Look, I think we've gotten to a point where the company has gotten quite large and to continue the revenue growth, it requires us to continue to invest and those investments come across a wide range. The one thing that I did call out was obviously we've acquired, we're going to acquire The Fork, all things working out the way we hope they work out, and that will be deal costs, integration costs, things like that. We're investing in technology and when you think about our company, we've got international business, US business, corporate card business, small business, we operate in so many different countries. We have a merchant acquiring business and a network business. There is no shortage of technology investments or enhancements or refreshes that need to occur. And so across a wide range of technology platforms, we're able to pull some of those investments into the second half of the year. And so to be able to get to things quicker is a huge advantage for us because we're going to have to make these investments over time. And why not make those investments sooner rather than later to update the platforms and so forth. The other thing that is still out there is there are still card acquisition opportunities. And to my point about sustaining the growth, you need to continue to invest in acquiring high revenue generating card holders and high spending card holders to continue the really good revenue growth that we've seen over the last few years. And so that's where you can think about these investments occurring. They're in technology, a little bit in The Fork, and also in card acquisition. And then you've seen we've announced a number of things that we're participating in from an agentic commerce perspective and that requires investment as well and those things weren't on the docket at the beginning of the year. So it's not a stagnant business and it's not a business that you don't need to put gas in the tank, and that's what we're doing and I think it's a strategy we've employed for a number of years. I think it's really served us well. We've been consistently growing the last four years, double-digit revenue growth, mid-teens EPS growth, and we don't look at just a year. We look at the medium to long term, and we think this is the best strategy for us and for our shareholders.

Okay, thanks for the question, Don. Look, I think we announced a very aggressive commercial card roadmap earlier in the year. I think you're seeing a little bit of a bounce back. We were at 5% from an SME perspective, 5% from a large and global perspective. And from a middle market space, Ramp and Brex have been out there and Center, which is our expense management system which we just launched, I think this will help us not only retain business but actually win new business as well. It's middle market where we have seen softness. Small business has been very strong and large and global and corporate has been moving along very nicely. So my perspective is we've seen an uptick in SME billings over the last two quarters and I think the roadmap that we have and the launch of the middle market expense management software will certainly help us. As far as agentic, I think the closed loop we've talked about for many, many years. We've talked about it from a physical perspective and then we talked about it from an e-commerce perspective and I think we're even more advantaged.

From the e-commerce perspective both from a fraud and data, but when you think about agentic commerce and you think about just how potentially fraught it is with not only fraud but also with hallucinations that can occur. I think by understanding what a card member truly wants to have and sort of intent and having that data, being able to go out and then match that purchase data will enable us to provide and back our customers a lot better, which is why we announced months ago now the agentic insurance product, where I think we're going to have a huge advantage from a trust, service, and security perspective over our competitors in the marketplace because we have the data from both sides. We know what the customer wants, we'll know what the customer wanted to do, and we'll also know what the merchant delivered. And I think, you know, people look, we're in the early innings, we're sort of in the preseason, we're not even to the early innings of the regular season yet, and I think people are a little bit nervous, they're nervous about interacting in this space. And what we hope is because of our knowledge of both sides of the equation that as this begins to take off, they will choose us because of our ability and our historical track record of backing our customers. And so I think that's our advantage. And I think we've talked about the advantage in the physical world. We've seen it play out there. We've seen it play out in e-commerce. I think it's going to play out even more over time, but as I said, really, we're not even in the early innings. We're in preseason here.

Okay, I'll take the UR question. So, the URR, for those not familiar, is part of the key element of our Membership Rewards program. We evaluate and quantify the ultimate rate of redemption. From an accounting standpoint, we book the cost of those rewards when they are earned and we make an assumption about how many of those points ultimately are going to be redeemed. So it's a fairly complex calculation. So on a regular basis we update the models. We try to make it better. We improve the data that feeds the model to be more accurate. And as you can imagine, there's a lot of reviews and a lot of work that goes into any revision of that assumption. And so when we did that, we came up with a slightly lower ultimate rate of redemption, but it really hasn't changed it much. I think we report externally the ultimate rate of redemption is like 96% rate and it really hasn't changed that much. So it has a small benefit in the quarter in terms of the MR cost, but at the full year level it's going to be de minimis. So it's not, it's more hygiene and making sure that we have the right accounting process, more than anything else.

Yeah. Thanks for the question, Craig. When we think about the NFL, Fanatics, and the other sponsorships that we have, the NBA, Formula 1, the USGA, Wimbledon, and US Open tennis, sponsorships are really all about access for our card members, experiences, special things that we can do, which is also why we have our event stadium benefits that we have as well with over 50 different locations around the world. And so what we're trying to do there is package up a group of experiences that our card members really like and that you could throw music and direct-to-artist things that we do as well. Specifically with the NFL, I think with the NFL, NBA, Formula 1, it gives us on a global basis access for our card members to events and to venues that they want to go to. And Fanatics sort of ties it all together for us, not only from an experience perspective when they have Fanatics Fest, but also the various things that we will do with Fanatics at the NFL draft, NBA All-Star Game, Super Bowl, etc., but also from a merch perspective and a collectibles perspective and trading cards and things like that. So I think you tie that whole experience together. From a cost perspective, both Fanatics and the NFL, when you think about our entire marketing budget, is very, very tiny. And they are in the plan, they're in the run rate. So when we talk about increased investments, that's not some of the things that we're investing in, but we really like the assets that we have and we like how they work together and how our card members really enjoy them.

Hey, good morning Rick. The executive summary, the answer to your question is we're not seeing anything on attrition. And I will send you back to your slide that we showed in Q1 that was actually pretty detailed on the Platinum card where we raised the fee by $200, and by the end of Q1 we had repriced about a quarter of the US Platinum portfolio, and the retention rates were not only through the roof, they were flat year-over-year, and last year there was no price increase. So we're not seeing anything on the attrition level. They remain very high. In terms of why people are trading or downgrading, sometimes people say, 'I just retired, I just don't need that kind of benefit anymore,' and I'm just going to downgrade. Vice versa, we've seen on the Platinum card as a result of the introduction of the new value proposition, a lot of card members upgrading. So in general, attrition levels remain very consistent with what we've seen in the past. And we've been refreshing a lot of our new products and we've been repricing a lot of the new card members, and the end result is that attrition levels have remained very, very constant and very low for the past few years.

Thanks for all those questions, Mark. No, so I think that what's interesting here with Resy, Tock, and The Fork. What we've really tried to do with Resy, Tock, and The Fork is to create many closed loops within our closed loop. Right? So what we've done here is we're connecting our card members and we're connecting merchants. But what's also really important is to remember that Resy, Tock, and The Fork are open platforms. So they're open also to non-card members, and that becomes useful for us from an acquisition perspective because what we'll do within those platforms is special offers for card members, table access for card members, and so forth. So it's an opportunity for us to acquire card members in a cheaper way and also for them to experience the potential benefits of being a card member. When you look at Resy, Tock with The Fork on a standalone P&L basis, we don't look at it that way, because it's part of the value proposition, that's how we look at it. It's a benefit. And I think when a restaurant looks at Resy, Tock, and again will look at The Fork, they will look at it from a perspective of 'I now have access to some of the best customers, the ones that are going to spend more money at my restaurant.' And the proof is in the pudding. It's 2x the spending at Resy restaurants, and our ticket prices are higher for card members versus non-card members in all restaurants. We have a higher ticket. As far as the plans, Resy and Tock will come together from a user experience perspective, especially from a front-end user experience perspective. And so that will give us a broader, more integrated look at restaurants from a card member perspective. And The Fork, given it is European focused at this point, will stay as a standalone entity, and I think that that works out. But importantly, our travel representatives will have access to both. So when you book travel, you book your hotel, you book your airline, you will be able to, they'll be able to also book restaurants for you. And restaurants in Europe is one of the highest demand things that we have in that area. So we don't look at the P&L per se of Resy and Tock and we won't look at it in The Fork. I mean we manage it aggressively but it's not a revenue maker or profit maker in itself. What it is though is it does help card member retention, customer acquisition, merchant satisfaction, and it drives spend, and that's what's really important, and it integrates very very well with our travel business as it adds the capability for our travel representatives to just have that at their fingertips.

Morning Terry.

Yeah. Hey, good morning Terry. So let me explain what's happening here. So we're growing card fee at 15%. What I said in my prepared remark is that we expect that card growth rate to accelerate in Q3 and to exit in Q4 in high teens. The key driver of that acceleration you can track back to the Platinum refresh. That's the single biggest contributor to that inflection point. The reason why it takes a while to hit the P&L is because we started repricing card members from January, and when we move card members to the new price point, we advertise it over 12 months. So it's a slow process. And that's why the impact is delayed. It is also because of that delayed impact that you've seen this kind of declining momentum because you have to go back to the refresh of the Delta card and the gold card, and you'll see that kind of acceleration on the card line, and we're now in the declining growth rate as a result of that. So there is inertia in that number, and it takes something like two years to find its way into the P&L. That's why you have this cycle. But to be clear, we expect that card fees are going to exit this year with a growth rate in the high teens.

Yeah. Hi. So let me clarify this because there is indeed a bit of noise in those numbers. First let me start with the balance sheet and the growth of balances. We're reporting this quarter growth rate of 9%, which is in line with the billing growth of 9%. Last quarter the balance growth rate was 7%. So there's a step up. The biggest contributor, the roundings don't help here, but the step up is a function of the classification of those two small business co-brand portfolios that we reclassified as held for sale over a year ago, and we just that kind of reclass, and that's why you see a step up in the balance growth now. From a P&L standpoint and the NII line specifically, despite the fact that those two portfolios were classified as held for sale, the economics were flowing through our P&L, but in Q2 specifically in the month of April we transferred one of these portfolios, the Lowe's portfolio to be specific, it's not a large portfolio but it was large enough to impact the NII growth rate by about one percentage point. So the decline you see in the growth rate from 12% to 11% is largely attributable to the transfer of that portfolio to the new issuer. And as you think about the balance of the year, there will be another transfer, the Amazon portfolio, in Q3, and so by the time you get to Q4 both portfolios will be out of our system, and the impact to the NII line is going to be two and a half percent. And this would be a headwind until we lap it. Now what's important to understand is that although it impacts NII, the impact to net income and earnings is really negligible. And it's not only negligible, it's also completely baked in in the original guidance that we gave at the beginning of the year because this was a slow train coming. We knew exactly what would happen. So no impact to guidance, no impact to earnings. But it does create some discontinuity both in terms of the balance sheet balance growth and in terms of the NII growth rate. Hope that was useful.

Yeah. All right, Darren, thanks for the question and let me ask Kristoff to talk about sort of what we look at for the rest of the year from an operating leverage perspective and then I'll come back and talk about AI.

Yeah. So let me talk a little bit about AI. I think every company out there is engaged with this at this particular point in time. I'm not so sure how many companies have really committed to actual P&L savings for 2026 and probably not even for 2027. When we look at it, one of the first places that we have deployed it, and we've deployed it in multiple places in the business right now, is technology. From a technology perspective, what we're seeing is anywhere from a 30 to 40% decrease in cycle time from a coding perspective. Now, that's really not a savings because what that does is allows us to do more. So we are, if you remember early on, I mentioned that we have a large backlog of technology projects and so we're getting to more things quicker. From a servicing perspective, both from a travel and from a card servicing perspective, we've equipped our customer service and travel agents with AI-powered tools. And so what we've seen there is a lack of acceleration in hiring more travel representatives, more customer service reps, even as the business continues to grow. If you look at how many representatives we had servicing our customers, that number really hasn't grown, and we would expect over time for that number to decrease from an attrition perspective. From a marketing perspective, we're really using AI right now to streamline some of our marketing campaigns so that we're getting out the marketing campaigns a lot quicker, and that gets you time to money, and I think that's critically important. And look, we've used AI in credit and risk and fraud for 15, 16 years, but now what we're doing is how do you implement unstructured data and agentic in that to help make the decisions a little bit better. So we're investing in it. I think one of the things, and other companies will talk about this as well, as you look to integrate AI within existing systems, you need to either as you redo them embed it within or you need to put a layer above so that you can integrate these systems in a seamless way, and by doing that you're making it a lot easier. We just launched a servicing portal for our card member service representatives where we've embedded within and it'll reduce the handle time for them and enable them to give our customers a much better experience. So a lot more to come on this. Again, I think we're further along on this than I would say we are on agentic commerce. This is more in the early innings, but like every other company, we have high hopes that this will streamline, make us more efficient, more productive, and eventually hopefully drive more topline revenue growth and more earnings growth as we move on.

Good morning, Bill, and welcome back.

Yeah. Well, thank you. So, I'm finishing up 41 years, so I've been around a little bit longer than Kristoff. But I think when we take a step back, what's changed is I think we've committed more to truly understanding what our customer needs and where our customer is going. I think that's fundamental. We've done a much better job as a team understanding the customer because this business is all about the customer and the customer doesn't stay stagnant. The customer continues to evolve. That's why product refreshes are so critically important because customer needs are changing. One could argue on a daily basis, but we can't change products on a daily basis. I think the other thing that we have done is really expanded our aperture of who our customer is. And fundamentally we believe, and we've always believed, that our customer is a high-spending, high-creditworthy, premium, aspirational customer. I think where we've pivoted is that before the pivot, we defined that as a specific cohort. And the reality is, whether you're a boomer, Gen X, a millennial, or Gen Z, there are those types of customers in every single cohort. What we've created now from a durability perspective is a flywheel and an ecosystem that we can adapt to the next cohort of customers that come through the pipeline, versus attempting to fit our one-size-fits-all product into multiple customer sets. We now are able to modify that product. So the product is very expandable because if you look at the Platinum product, that's a product that can play well with boomers, Gen X, millennial, and Gen Z, and the next generation along because we'll continue to add value to it that'll have applicability across a wider set. I think the other thing that we've done, and what we've really leaned into here, is we work a lot more with partners, not only from a co-brand perspective where we create specific co-brand opportunities that allow us to go into a joint customer base, but I also believe our premium partners really want access and are willing to provide benefits to our card holders. And so if you look at the value propositions that we have, and the limited time offers that we offer, the ability for our partners to access this base, I think that's been critically important.

The other thing that I would say, and I'm sorry for going on but you've opened up the door here, is that our focus on international has completely changed. From an international perspective, we've really leaned into coverage. We've really leaned into premium, and what we've also done is we're not treating all of the countries we operate from a proprietary perspective the same. We've leaned into the UK, Mexico, Canada, Australia, and Japan. That has played out really, really well for us. And so when you think about this, and I've only talked about the consumer side here, but when you think about this durability from a consumer perspective, you now have a machine that is able to go after different types of cohorts. We're able to go up to those cohorts with various offers that make sense to them, with various products that make sense to them, and also to integrate with our premium customers extra value. You then do that on a global basis, which we've done, which is why the Fork acquisition is going to be so important for us because it brings in, we already have travel, now it brings in restaurants. And then you look at that and then you bring the experience layer that we have and the investment that we've made in lounges and in Fine Hotels & Resorts. And so you create this premium ecosystem that our customers are going to live in. And it's durable. And the durability is reinforced by the growth that we continue to have, whether it be lounges, whether it be restaurants, whether it be Fine Hotels & Resorts, because our partners want to play in here. And I think that's what makes it different. And when we look at the flywheel and we look at the opportunity to reinvest some of our over-delivery that we've had this year, we feel confident because we know we can access the type of customer we need to access on a global basis, and there are more out there for us to access, and we think that's going to continue into the future. So again, I could speak hours on how I think the company is different and how we approach product development and innovation and how we've integrated technology. But I think that's what's different, and part of that is because our scale is so much bigger. If I go back just to 2017, we're a $30 billion revenue company, and now we're $70 billion this year, looking at 10% revenue growth, almost an $80 billion revenue company potentially by the end of the year. You have more scale and more ability to operate in the environment. So I think that's what's different.