American Express Falls 2.7% Premarket as Card Spending Misses, Plans 5% Workforce Cut
TREE NEWS reports: American Express shares dropped 2.7% in premarket trading to $316.33 at 7:34 a.m. in New York on Friday after the company reported third-quarter card spending that fell short of analyst expectations and announced plans to cut about 5% of its workforce as part of efficiency measures. The mixed results highlighted a resilient affluent customer base but also raised questions about growth momentum.
Card spending for the quarter came in at $454 billion, below the average analyst estimate of $456.9 billion. The company attributed part of the shortfall to its exit from several small-business co-brand card partnerships. Expenses rose about 9% to $14.5 billion, also below the $14.8 billion consensus. Net revenue after interest expense rose to $20.06 billion, slightly missing the $20.12 billion forecast.
Despite the top-line miss, profitability remained strong. Adjusted earnings per share came in at $4.68, beating the FactSet consensus of $4.49. Net income surged to $3.71 billion, or $5.42 per share, from $2.9 billion, or $4.14 per share, a year earlier. The company recorded a $751 million after-tax gain from the sale of its stake in Global Business Travel Group Inc., part of which was used to absorb $253 million in after-tax restructuring charges related to the efficiency measures. Both items were excluded from adjusted results.
American Express raised its full-year adjusted EPS guidance to $18.30–$18.60 from a prior range of $17.30–$17.90, and said it still expects full-year revenue growth of 10%. CEO Steve Squeri cited strong performance in spending, new customer acquisition, and card member retention, along with excellent credit quality.
Market Implications
The premarket decline reflects investor disappointment over the spending miss, which is seen as a key gauge of consumer health, particularly among affluent households. The workforce reduction, while framed as an efficiency move, may also signal caution about the economic outlook. However, the raised guidance and strong earnings suggest the company’s premium card strategy continues to pay off.
For the broader market, the results offer a nuanced read on consumer spending. While American Express’s affluent customer base remains resilient, the miss on card spending could weigh on sentiment toward consumer discretionary and financial stocks. The company’s emphasis on premium cards and marketing spend—expected to rise about 10% year-over-year in the second half of 2026—indicates confidence in its niche.
Bond investors may watch for any signs of slowing consumer activity, though the strong credit quality mentioned by the CEO suggests limited immediate risk. In currencies, the dollar’s reaction is likely to be muted as the news is company-specific. Commodities are unlikely to see direct impact, but any perceived weakening in U.S. consumer spending could indirectly affect oil demand expectations.
Separately, American Express faces a $350 million fine from the Office of the Comptroller of the Currency and the Federal Reserve over deficiencies in its anti-money laundering systems. The company said the penalty will not affect its 2026 guidance or any 2027 outlook, and that the regulatory orders do not impose an asset cap.
Key Takeaways
- Mixed quarter: Card spending and revenue missed expectations, but adjusted EPS beat and full-year guidance was raised.
- Workforce cut: A 5% reduction aims to improve efficiency, but may raise concerns about cost pressures.
- Premium strategy intact: Affluent customers continue to spend, supporting the company’s fee-based model.
- Regulatory overhang: The $350 million AML fine is a reminder of compliance risks, though management says it won’t affect guidance.
- Investor focus: Watch for signs of consumer spending trends and the impact of restructuring on future earnings.
