American Express (AXP) posted a mixed Q3 and raised its annual profit guidance on Friday morning, but investors aren’t celebrating.
AXP shares came under pressure as the payments giant announced plans of eliminating about 5% of its global workforce.
The restructuring, intended partly to prepare the company for greater use of artificial intelligence, comes despite resilient spending among affluent customers.
For shareholders, the tension is clear: AMEX’s premium business keeps growing, but turning that growth into stronger profitability remains an expensive undertaking.
A key accounting distinction in AMEX’s Q3 earnings
American Express reported a 9% year-over-year increase in revenue to $20.06 billion on $4.68 per share of earnings.
Analysts had called for a lower $4.48 per share of earnings (EPS) but a higher $20.12 billion in revenue.
Investors should distinguish that performance from reported EPS of about $5.42 – which came in up 31% versus the third quarter of last year.
The adjusted figure removes the Global Business Travel Group stake-sale gain and associated restructuring charges, making it a more useful starting point for assessing continuing earnings power.
That said, the underlying demand picture remains rather encouraging. Card spending increased 8% to a whopping $454 billion, suggesting customers are still using their accounts actively.
Still, the revenue shortfall shows why healthy spending alone may struggle to lift AXP stock when expectations already assume considerable resilience.
AI-linked job cuts put premium-service model to test
American Express’ layoffs are part of an effort to simplify management, positioning the company for greater automation.
According to CFO Christophe Le Caillec, the goal includes becoming “leaner, more agile, and also to prepare for AI.” Amex recorded a $336 million restructuring charge in the quarter.
For investors, the potential benefit extends well beyond lower payroll costs – faster decisions and automated routine work could help the company expand without adding staff at the same pace.
But that opportunity carries an “execution risk.” Premium cardholders pay for dependable service, making customer experience a crucial constraint on cost cutting.
The investment case therefore depends on productivity improvements that preserve retention and service quality. A smaller workforce, by itself, does not establish that AI has delivered sustainable savings.
What’s the next catalyst for American Express?
AMEX now expects full-year adjusted EPS of at least $17.60 – and the financial services company remains on track for about 10% revenue growth.
Its credit metrics also offer reassurance: quarterly net write-off rate improved to 1.8% from 1.9% a year earlier.
However, lower credit-loss provisions partly reflected a reserve release, a benefit investors should avoid automatically projecting into future quarters.
That makes the next few quarters particularly revealing.
Investors should watch whether recurring earnings increasingly reflect business expansion and productivity, alongside continued discipline in lending.
Friday’s announcement offers a credible route to better profitability, but the valuation argument needs evidence that those benefits endure.
For prospective buyers, the most persuasive catalyst would be improving earnings quality while Amex protects the customer relationships that support its premium franchise.
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