American Express (NYSE: AXP) delivered a mixed third-quarter report on Friday, beating profit expectations but falling short on revenue, while also unveiling plans to cut about 5% of its global workforce. Despite the earnings beat and an upward revision to its full-year profit outlook, shares came under pressure as investors focused on the revenue miss and the costs tied to the restructuring.
Q3 Results: EPS Beat, Revenue Miss
The payments giant reported revenue of $20.06 billion, up 9% year over year, but slightly below the $20.12 billion analysts had projected. Adjusted earnings per share came in at $4.68, surpassing the consensus estimate of $4.48. Reported EPS, which includes a gain from the sale of a stake in Global Business Travel Group and restructuring charges, was $5.42, up 31% from the prior-year quarter.
The adjusted figure provides a clearer view of ongoing earnings power, as it strips out one-time items. Underlying demand remains resilient, with card spending climbing 8% to $454 billion, indicating that affluent customers continue to use their cards actively. However, the revenue shortfall underscores the challenge of translating robust spending into top-line growth that meets elevated expectations.
AI-Driven Job Cuts Test Premium Service Model
American Express announced it will eliminate approximately 5% of its global workforce as part of a restructuring aimed at simplifying management and preparing for greater use of artificial intelligence. CFO Christophe Le Caillec said the goal is to become "leaner, more agile, and also to prepare for AI." The company recorded a $336 million restructuring charge in the quarter.
For investors, the potential benefits extend beyond lower payroll costs. Automation could enable faster decision-making and streamline routine tasks, allowing the company to expand without adding staff at the same pace. However, this opportunity carries execution risk. Premium cardholders expect dependable service, making customer experience a critical constraint on cost-cutting efforts. The investment case hinges on productivity gains that preserve retention and service quality; a smaller workforce alone does not prove that AI has delivered sustainable savings.
Guidance Raised, but Credit Metrics Warrant Caution
American Express now expects full-year adjusted EPS of at least $17.60, up from its prior outlook, and remains on track for approximately 10% revenue growth. Credit metrics also provided some reassurance: the quarterly net write-off rate improved to 1.8% from 1.9% a year earlier. However, lower credit-loss provisions partly reflected a reserve release, a benefit that investors should not automatically project into future quarters.
The next few quarters will be particularly telling. Investors should watch whether recurring earnings increasingly reflect business expansion and productivity gains, alongside continued discipline in lending. Friday's announcement offers a credible path to better profitability, but the valuation argument requires evidence that these benefits are durable.
For prospective buyers, the most persuasive catalyst would be improving earnings quality while American Express protects the customer relationships that underpin its premium franchise.
This article is for informational purposes only and does not constitute financial advice.
