American Express stock closed at $335.39 on July 28, rising 2.83% in the session and recovering part of the sharp decline that followed its second-quarter earnings release. The move left AXP trading at 17.75 times forward earnings, even after the company posted double-digit revenue growth and stronger card-member spending.
The key tension is not whether the quarter was solid. It was. The issue for investors is that American Express raised its 2026 revenue outlook to 10% but kept earnings-per-share guidance unchanged at $17.30 to $17.90, signaling that extra revenue will be reinvested rather than dropped to the bottom line.
That decision turned a nominal earnings beat into a valuation debate. Bulls see a premium card franchise adding high-fee customers, improving credit quality, and building recurring revenue. Skeptics see expense growth running ahead of revenue and a market unwilling to award a richer multiple until that spending translates into clearer earnings upside.
Key Facts
- American Express closed at $335.39 on July 28, up $9.22 for the day but still about 13.4% below its 52-week high of $387.49.
- Second-quarter diluted EPS rose 11% year over year to $4.53, while revenue net of interest expense increased 10% to $19.637 billion.
- Net card fees climbed 15% to $2.862 billion, making it the company’s fastest-growing major revenue line.
- Consumer and small business delinquency fell to 1.2% from 1.3% a year earlier, while provisions for credit losses declined 23% to $1.1 billion.
- The stock trades at 20.71 times trailing earnings and 17.75 times forward earnings, against trailing twelve-month revenue of $79.54 billion and return on equity of 34.01%.
American Express Stock
American Express delivered a quarter that was stronger operationally than the market reaction suggested. Billed business rose 9% on an FX-adjusted basis to $455.8 billion, and first-half revenue reached $38.544 billion, up 11%. Management also highlighted the strongest card-member spending growth in three years, a notable signal given concern about the durability of consumer demand.
What matters is how that growth is being funded and where it is showing up. Consolidated expenses increased 12% to $14.5 billion, faster than revenue growth, as the company spent more on marketing, customer acquisition, technology, and richer card-member benefits tied to its premium products. That trade-off is central to the investment case: American Express is choosing to defend and expand its premium ecosystem rather than maximizing near-term earnings.
The strategy affects multiple groups. Cardholders see more benefits and product features, merchants continue to benefit from high-spending customers, and shareholders are being asked to accept lower immediate operating leverage in exchange for stronger fee income and customer retention later. For a closed-loop payments and lending business like American Express, that calculation has outsized importance because growth quality matters as much as growth itself.
American Express is not struggling to grow; it is choosing to spend more aggressively to turn revenue momentum into longer-duration, higher-quality earnings.
Why Card Fees and Credit Quality Matter Most
The cleanest bullish argument sits in two figures: net card fees rose 15% to $2.862 billion, and delinquency improved to 1.2%. Fee revenue is especially valuable because it is recurring, relatively durable, and less tied to short-term transaction swings than discount revenue or interest income. Management expects card-fee growth to accelerate in the third quarter and exit 2026 in the high teens, supported by the repricing effects of its U.S. Platinum card refresh.
At the same time, credit trends remain unusually healthy for a card lender growing balances. Net write-offs on consumer and small business principal held at 2.0%, while provisions fell to $1.1 billion from $1.4 billion a year earlier. That combination suggests the affluent customer base continues to spend without showing meaningful signs of stress, a crucial distinction in a market still debating the strength of the U.S. consumer.
Implications for Investors
For investors, AXP sits in an interesting middle ground. The company is not priced like a pure payments network, and it should not be. Unlike Visa or Mastercard, American Express carries direct credit exposure and operates with a different margin profile because it combines lending, network economics, and card fees. That added complexity partly explains the discount multiple, but it also means investors can benefit more directly when credit metrics improve and spending remains strong.
The near-term risk is straightforward. If expense growth continues to outrun revenue growth, the market may keep the shares range-bound despite healthy operating trends. The unchanged full-year EPS guide shows management is comfortable sacrificing some near-term profit expansion to fund product investment and customer acquisition. That can pressure sentiment, especially when the shares have underperformed the broader market over the past year.
The opportunity is that valuation already reflects much of that hesitation. At 17.75 times forward earnings, with a 34.01% return on equity, 10% revenue growth, and buyback support from a lower share count, the stock does not look stretched if management executes. Analyst targets clustered around $370 to $385 imply upside from the July 28 close, though the path higher likely depends on evidence that reinvestment begins converting into renewed EPS leverage in coming quarters.
Investors should watch three indicators closely: whether card-fee growth does reach the high teens by year-end, whether delinquency stays near 1.2%, and whether expense growth moderates enough to allow stronger earnings revisions. If those pieces line up, American Express could regain momentum toward prior highs; if not, the stock may remain trapped between solid fundamentals and a cautious market multiple.