American Express Q3 2025 Analysis: Revenue Growth, Rising Costs, and Rock-Solid Credit

American Express (NYSE: AXP) is a giant in the global payments industry, known for its premium charge and credit cards. To understand how this financial powerhouse is navigating the current economic landscape, we're diving into its latest quarterly report, the Form 10-Q filed on October 17, 2025. The filing reveals a story of strong top-line growth, rising costs to fuel that growth, and impressively stable credit quality.

For the third quarter of 2025, American Express reported total revenues (net of interest expense) of $18.4 billion, an impressive 11% increase from the same period last year. This strong performance translated to the bottom line, with net income rising 16% to $2.9 billion, and diluted earnings per share (EPS) growing 19% to $4.14.

To better visualize how the company generates revenue and where the money goes, the flow diagram below breaks down the Q3 2025 income statement.

The inter-segment eliminations result in a $19 million reduction in revenue, which is noted as an unallocated revenue in the diagram.

Revenue Engine Firing on All Cylinders

The 11% jump in revenue wasn't driven by just one area; Amex saw strength across its key income streams.

• Discount Revenue: This is the fee Amex charges merchants for processing transactions. It grew 7% to $9.4 billion. This was powered by a 9% increase in "billed business" (total spending on Amex cards), which reached a massive $421 billion for the quarter. Simply put, customers are spending more.
• Net Card Fees: This high-quality, recurring revenue source saw a remarkable 18% increase to $2.6 billion. The company attributes this to the continued growth of its premium card portfolios, signaling strong demand for its high-end products like the Platinum and Gold cards.
• Net Interest Income: For its lending products, net interest income rose 12% to $4.5 billion. This was primarily driven by more customers carrying revolving balances on their credit cards.

The Cost of Growth

While revenues were strong, expenses also climbed, rising 10% to $13.3 billion. This shows the significant investment required to maintain Amex's premium brand and reward its high-spending clientele.

The two largest expense categories tell the story:

• Card Member Rewards: As spending grew, so did the cost of rewards, increasing 11% to $4.6 billion.
• Card Member Services: This category, which includes costs for benefits like airport lounge access and travel credits, jumped 25% to $1.5 billion. This sharp increase reflects higher engagement from premium cardholders, who are actively using the valuable perks offered with their cards.

These rising costs are a direct consequence of Amex's strategy. The company invests heavily in rewards and benefits to attract and retain affluent customers who, in turn, drive higher spending and fee revenue.

Credit Quality Remains Rock-Solid

With growing loan balances, a key area to watch is credit quality. Here, American Express showed impressive stability. The company's provision for credit losses—the amount set aside to cover potential bad debt—actually decreased by 5% to $1.3 billion compared to the prior year.

Furthermore, key delinquency metrics remained steady. The net write-off rate for its combined loan and receivables portfolio was flat year-over-year at 2.2%, and the percentage of consumer and small business accounts more than 30 days past due also held firm at 1.3%. This suggests that Amex's customer base remains financially healthy and resilient despite a mixed economic environment.

Final Thoughts

American Express's third-quarter performance demonstrates a successful execution of its premium-focused strategy. The company is effectively driving revenue growth through increased cardholder spending and strong demand for its fee-based products. While the costs associated with rewards and benefits are substantial, they appear to be a worthwhile investment. Most importantly, the company's ability to grow its lending business without a deterioration in credit quality is a significant sign of strength, underscoring the resilience of its target customer.