By Rishab Shaju and Manya Saini
July 24 (Reuters) – American Express raised its 2026 revenue forecast on Friday as its affluent customers continued to spend on travel, entertainment and dining, but its shares slipped 6% as investors focused on an unchanged profit outlook.
Competition for premium credit card customers has intensified as issuers race to lure wealthy consumers with richer travel, dining and lifestyle perks, turning rewards into a key battleground for attracting and retaining high-spending cardholders.
The fight has pushed up marketing and rewards spending across the industry as issuers vie for Gen Z and millennial customers, who have emerged as a key source of long-term growth.
“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,” AmEx CEO Stephen Squeri told analysts, explaining why the company maintained its profit outlook.
“We’ve chosen the latter because, in the long run, it is the one that creates the most value for our shareholders.”
SPENDING TO GROW
American Express shares fell 6.4% in morning trading as investors looked past the earnings beat and focused on its unchanged full-year profit forecast of $17.30 to $17.90 per share.
Investors appeared unconvinced that the additional spending would deliver near-term returns.
“It (the company) left its full-year EPS target unchanged, signaling to investors that driving higher top-line growth is requiring more expense burn and won’t immediately flow through to bottom-line profits,” said David Wagner, head of equities and portfolio manager at Aptus Capital Advisors, which owns AmEx shares.
AmEx’s consolidated expenses came in at $14.5 billion in the second quarter, up 12% from a year earlier.
“Everyone has their individual explanation for the stock being down, but big picture they all tie back to the same theme — investors were hoping for accelerating growth this quarter and they didn’t really get it,” Truist analyst Brian Foran wrote in a note.
But he added that the absolute results were very strong and it is hard to fault management for wanting to reinvest more in the business.
WEALTHY CUSTOMERS KEEP SWIPING CARDS
Unlike many rivals that cater to a broader range of borrowers, the credit card issuer derives much of its business from higher-income consumers, who are generally better-positioned to weather inflationary pressures and maintain discretionary spending.
Billed business, a measure of total spending on AmEx cards, rose 9% to $455.8 billion. “This (billings growth) is the highest we’ve seen in the last three years, and it’s very much broad-based,” Chief Financial Officer Christophe Le Caillec told Reuters in an interview.
Travel and Entertainment billed business, a closely watched gauge of discretionary spending, increased 10% in the second quarter, with growth across key categories of restaurants, hotels and airlines.
The company now expects 2026 revenue to rise 10% — in line with Wall Street expectations, according to estimates compiled by LSEG.
In June, American Express agreed to buy Tripadvisor-owned restaurant booking platform TheFork for $700 million.
On appetite to do more deals, Le Caillec said, “We’re always on the lookout for investment opportunities.”
AmEx posted a profit of $4.53 per share for the three months ended June 30, sailing past expectations of $4.40 per share. Revenue rose 10% to $19.6 billion in the quarter.
AmEx’s earnings offer an early look at spending patterns, providing investors with an initial read on discretionary spending before other major card networks report results.
(Reporting by Rishab Shaju and Manya Saini in Bengaluru; Additional reporting by Pritam Biswas and Arasu Kannagi Basil; Editing by Joyjeet Das)
Comments