American Express reported fourth-quarter 2025 earnings that revealed a classic Wall Street paradox: strong revenue growth coupled with disappointing bottom-line results. The credit card giant reported earnings per share of $3.53, falling just short of the $3.55 consensus estimate, while revenue of $18.98 billion actually beat expectations of $18.93 billion. This mixed performance sparked a 2.99 percent pre-market decline in the stock, illustrating how investor sentiment can shift dramatically when earnings fail to meet specific expectations, regardless of broader business momentum.
The Earnings Miss: A Narrow But Notable Shortfall
While a miss of $0.02 per share might seem inconsequential, markets have little tolerance for surprises in either direction. American Express fell short of analyst expectations by 0.6 percent on the earnings line, marking a rare miss for a company that has beaten or met expectations consistently throughout 2025. The quarterly EPS of $3.53 nonetheless represented a solid 16 percent year-over-year increase, demonstrating that the company's underlying business remained robust. However, investors pay close attention to forward guidance and quarterly results as indicators of whether management can consistently execute on its strategic plans. This small miss raised questions about cost management and whether the company's investments in customer acquisition and retention are beginning to weigh more heavily than anticipated.
Revenue Beat Provides A Silver Lining
The revenue outperformance tells a different story about American Express's operational trajectory. The company delivered $18.98 billion in fourth-quarter revenue, surpassing expectations and climbing 10 percent year-over-year. This consistency in revenue growth reflects sustained consumer spending patterns and the company's ability to expand its customer base across multiple segments. For the full year 2025, American Express achieved a remarkable $72.2 billion in revenue, also up 10 percent year-over-year. More impressively, net card fees reached nearly $10 billion for the year, up 18 percent compared to 2024, demonstrating the success of American Express's premium card strategy focused on higher-fee products that appeal to affluent consumers.
Why Costs Surged: Investing In Premium Experiences
The key culprit behind the earnings miss was Card Member Services expenses, which surged 53 percent year-over-year in the fourth quarter. This dramatic increase was primarily driven by the introduction of new benefits on the U.S. Platinum card and higher benefit utilization rates among cardholders. American Express management characterized these investments as "wildly successful" based on engagement metrics, suggesting the company views this spending as strategic investment rather than operational bloat. The company's focus on premium cardholders, particularly younger demographics including Gen-Z and Millennials, appears to be paying off in terms of customer engagement and loyalty. However, the market's initial reaction suggests investors want to see clearer evidence that these elevated costs will eventually translate into corresponding revenue gains or margin improvement.
Forward Guidance Signals Confidence Despite Near-term Headwinds
Despite the quarterly miss, American Express management projected 2026 earnings per share guidance of $17.30 to $17.90, with the midpoint surpassing street expectations. This forward guidance indicates management confidence that the company can navigate near-term cost pressures while maintaining profitable growth. The company also announced a 16 percent dividend increase to $0.95 per quarter, representing the third consecutive double-digit dividend increase and demonstrating substantial shareholder return commitment. Over the past three years, American Express's quarterly dividend has grown 58 percent, positioning the company as an attractive income investment for dividend-focused portfolios.
What This Means For Investors And The Market
The American Express earnings report highlights important dynamics in both consumer spending and the broader financial sector. While the earnings miss weighed on financial stocks, the underlying business metrics suggest consumer spending remains reasonably healthy. Transaction volumes grew 9 percent year-over-year in the fourth quarter, and global billed business increased 8 percent, reflecting sustained consumer activity despite economic uncertainty. However, the company did report a slight uptick in credit metrics, with net write-off rates increasing to 2.1 percent in Q4 compared to 1.9 percent in Q3, suggesting early signs of potential stress in credit quality that warrant monitoring.
For investors evaluating American Express, the key question is whether current investments in premium customer experiences represent near-term margin pressure with long-term upside potential, or whether they signal the beginning of a structural shift in the company's profitability profile. The company's 34 percent return on equity and $7.6 billion returned to shareholders through dividends and buybacks in 2025 suggest the business remains fundamentally healthy. Investors should focus on whether 2026 earnings actually meet the guidance of $17.30 to $17.90, as this will ultimately determine whether the market's initial reaction to the miss was warranted or premature.