American Express shares tumble despite robust earnings, higher revenue outlook as rising costs weigh on sentiment | Stock Market News
Shares of American Express Co. fell sharply on Friday even after the credit card giant posted stronger-than-expected second-quarter earnings and raised its full-year revenue growth forecast, as investors focused on rising expenses and higher spending on customer acquisition.
At 1:10 p.m. EDT, American Express shares were down 5.34%, or $18.20, at $322.64 in New York, marking the stock's steepest intraday decline in nearly five months.
The company, which primarily serves affluent customers, continued to benefit from resilient spending on travel, dining and other discretionary categories despite ongoing economic uncertainty. Unlike many card issuers that cater to a wider customer base, American Express has greater exposure to higher-income consumers, who have generally remained more insulated from inflation and economic headwinds.
Total card spending, or billed business, climbed 9% year over year to $455.8 billion on a foreign exchange-adjusted basis. Quarterly revenue also rose 10% to $19.6 billion, reflecting healthy consumer activity.
"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," said Chief Executive Officer Stephen Squeri in a statement.
Encouraged by the strong performance, American Express lifted its full-year revenue growth forecast to 10%, up from its earlier guidance of 9% to 10%, bringing it in line with Wall Street expectations compiled by LSEG. The company, however, left its full-year earnings outlook unchanged.
The results provide investors with an early indication of spending trends among affluent consumers ahead of earnings from other major payment networks.
For the quarter ended June 30, American Express reported earnings of $4.53 per share, compared with $4.08 per share a year earlier, comfortably beating analysts' average estimate of $4.40 per share.
The New York-based financial services company also reduced its provision for credit losses to $1.1 billion, down from $1.4 billion in the same period last year, suggesting improving credit quality and confidence that borrowers will continue meeting their repayment obligations.
Supporting the positive consumer backdrop, the University of Michigan's Surveys of Consumers showed that US consumer sentiment rebounded from record lows in June, although households remain concerned about elevated living costs.
Despite the upbeat earnings, investors appeared concerned about rising operating costs. American Express said second-quarter expenses increased 12% to $14.5 billion, compared with $12.9 billion a year ago. The increase was driven by higher customer engagement costs as spending on cards increased, along with investments tied to enhancements of the US Platinum Card and greater usage of cardholder benefits.
Chief Financial Officer Christophe Le Caillec told analysts on Friday that marketing expenses are expected to rise by around 10% in the second half of 2026 from a year earlier, while full-year operating expenses are projected to increase at a mid-single-digit pace.
Although the company expressed confidence by raising its revenue outlook, the combination of higher spending on marketing and premium card offerings overshadowed the earnings beat, prompting investors to book profits in the stock.
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