Amex Earnings: Key Insights Into Revenue, Expenses, and Dividends

American Express (Amex) is a major player in the financial services industry, and its earnings reports provide valuable insights into its financial health. Investors monitor these reports to assess revenue growth, expense management, and shareholder returns.

Understanding Amex’s revenue streams, cost structure, and capital return policies helps investors evaluate its long-term profitability.

Sources of Revenue

American Express generates revenue from card-related fees, transaction charges, and value-added services. These sources fluctuate based on consumer spending, economic conditions, and regulatory changes.

Card Fees

Amex charges annual fees on many of its credit and charge cards, creating a steady income stream. Unlike competitors that rely heavily on interest income from revolving balances, Amex focuses on premium cards that generate substantial fee-based revenue. The Platinum Card and Business Platinum Card each carry a $695 annual fee as of 2024, offset by benefits such as airport lounge access, travel credits, and concierge services.

Additional revenue comes from late fees and foreign transaction charges. Under the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, first-time late payment fees are capped at $30, with subsequent late fees limited to $41, adjusted periodically for inflation. While many Amex cards waive foreign transaction fees, others impose a 2.7% charge on purchases made outside the U.S.

Merchant Discount

One of Amex’s largest revenue sources is the merchant discount—the percentage of each transaction that merchants pay when customers use Amex cards. Unlike Visa and Mastercard, which rely on banks to issue their cards and set interchange fees, Amex operates a closed-loop network, allowing it to determine its own rates.

The standard merchant discount rate ranges from 2.3% to 3.5%, depending on the industry, transaction volume, and merchant agreement terms. Higher fees apply in discretionary spending sectors like travel, dining, and luxury retail, while lower rates are charged for essential goods and services. By comparison, Visa and Mastercard interchange fees typically range from 1.5% to 2.5%. Amex’s higher rates have historically led to lower merchant acceptance, though its OptBlue program has expanded acceptance among smaller merchants by allowing third-party payment processors to set rates.

Merchant discount revenue fluctuates with consumer spending. During downturns, discretionary spending declines, reducing transaction volume. Conversely, strong consumer confidence drives higher spending on travel, entertainment, and luxury goods, boosting this revenue stream. Amex benefits from its affluent customer base, which tends to maintain higher spending levels even in uncertain economic conditions.

Travel Bookings

Amex earns revenue through its travel services, catering to both individual and corporate clients. American Express Travel offers flight and hotel bookings, vacation packages, and exclusive experiences, generating income from service fees, supplier commissions, and premium travel memberships.

For consumer travel, Amex earns commissions from airlines, hotels, and car rental companies, typically ranging from 5% to 15% of the transaction value. It also charges service fees for booking certain travel arrangements, such as airline tickets, which can add $6 to $39 per booking.

On the corporate side, American Express Global Business Travel (GBT), in which Amex holds a minority stake, provides managed travel solutions for businesses. GBT generates revenue through transaction fees, consulting services, and corporate travel management contracts. The post-pandemic recovery in business travel has contributed to growth in this segment.

Travel-related revenue is closely tied to economic conditions. Periods of expansion lead to increased discretionary travel spending, while downturns reduce demand. Amex leverages its premium cardholder base by offering exclusive travel perks, such as Fine Hotels & Resorts and The Hotel Collection, encouraging customers to book through its platform.

Expense Breakdown

Amex’s profitability depends on managing costs tied to customer rewards, operations, and technology investments.

Customer rewards and loyalty programs are among the company’s largest expenses. Amex offers Membership Rewards points, cash-back incentives, and co-branded card benefits with airlines and hotels. Costs fluctuate based on redemption rates, the value of rewards, and agreements with partners. Amex purchases airline miles at negotiated rates, which vary based on market conditions. Promotional offers, such as elevated welcome bonuses or increased earning rates in specific categories, temporarily raise costs but help drive card acquisition and spending.

Operational expenses include employee salaries, customer service, marketing, and compliance costs. Amex invests heavily in customer service, including 24/7 concierge support and dispute resolution teams. Marketing expenditures cover advertising, sponsorships, and partnerships, such as its long-standing association with the U.S. Open and Coachella. Compliance costs have risen due to stricter regulations, particularly in anti-money laundering (AML) and data security, where financial institutions face oversight from agencies like the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC).

Technology investments focus on fraud detection, personalized offers, and mobile app enhancements. Amex uses artificial intelligence and machine learning to improve security and user experience. Cybersecurity remains a priority, with spending allocated to encryption, multi-factor authentication, and real-time transaction monitoring to reduce fraud-related losses.

Credit Provisions

Amex sets aside funds to cover potential credit losses, a process known as provisioning. These reserves fluctuate based on economic conditions, portfolio composition, and delinquency trends. The company assesses credit risk using internal models that factor in borrower credit scores, charge-off rates, and economic forecasts.

Under the Current Expected Credit Loss (CECL) accounting standard, which took effect in 2020, Amex must estimate lifetime losses on outstanding balances. This forward-looking approach results in more dynamic adjustments compared to the previous incurred loss model, particularly during economic volatility.

The allowance for credit losses rises when economic conditions deteriorate or unemployment increases, as seen during the early months of the COVID-19 pandemic. Conversely, when economic indicators improve and delinquency rates decline, Amex may release some reserves, boosting reported earnings.

Key credit risk metrics include the 30-day delinquency rate and net write-off rate. As of 2024, Amex’s delinquency rate for its U.S. consumer lending portfolio remains below industry averages, reflecting its focus on higher-income cardholders with stronger repayment capacity. The net write-off rate, which measures uncollectible balances, is closely monitored by investors. While defaults rise during downturns, Amex’s underwriting standards help mitigate severe spikes. The company also adjusts interest rates and credit limits based on borrower profiles to manage risk.

Dividends and Buybacks

Amex returns capital to shareholders through dividends and share repurchases. The company maintains a conservative payout ratio, ensuring dividend sustainability even during economic downturns. The board periodically reviews dividend increases, aligning them with earnings growth and financial targets. In recent years, quarterly dividends have steadily risen, supported by strong profitability.

Stock buybacks are a key component of Amex’s capital return strategy. By repurchasing shares, the company reduces its outstanding share count, enhancing earnings per share (EPS) and supporting stock prices. Buybacks are executed under board-authorized programs, with volumes varying based on market conditions, regulatory requirements, and liquidity needs. The Federal Reserve’s annual stress tests influence repurchase decisions, as financial institutions must maintain sufficient capital buffers before engaging in large-scale buybacks.