American Express (AXP +0.57%) just rocketed to an all-time high after a blowout earnings report and a raised forecast.
At the time of this writing, the financial stock is up 20% year-to-date compared to 15% for the S&P 500 (SNPINDEX: ^GSPC) -- putting the Dow Jones Industrial Average (DJINDICES: ^DJI) component on track to beat the S&P 500 yet again. American Express has outperformed the S&P 500 every year since 2021. Which is impressive, considering that period of market gains has been driven largely by tech-focused growth companies and artificial intelligence stocks.
Here's why American Express has what it takes to beat the S&P 500 and the Dow for years to come.
Image source: Getty Images.
American Express's advantages are on full display
American Express issues its own credit cards, offers charge cards and personal loans, and collects processing fees. This is a drastically different business model from Visa (V +0.19%) and Mastercard (MA 0.51%), which are pure-play payment processors. Visa and Mastercard are less risky because they work with banks and financial institutions to issue cards. However, American Express has more growth potential, which was showcased in its latest quarter.
American Express's revenue net of interest expense rose by 11%, diluted earnings per share by 19%, and it reduced its share count by 2% compared to the third quarter of 2024. American Express raised its full-year 2025 forecast, with revenue growth of 9% to 10% and earnings per share of $15.20 to $15.50 compared to adjusted EPS of $13.35 in 2024. That's earnings growth of about 15% -- which would be a fantastic year for American Express.
NYSE: AXP
Key Data Points
American Express cardholder spending is rising
Perhaps the most important metric from the third-quarter 2025 report was an 8% foreign exchange-adjusted increase in card member spending. On the earnings call, American Express Chief Executive Officer Stephen Squeri attributed the uptick in cardmember spending to strong retail engagement and a rebound in travel. He also said that the company's credit performance continued to be excellent -- showcasing its ability to manage risk with low net write-off rates.
During the quarter, American Express launched its refreshed Platinum cards for U.S. consumers and businesses. The cards include higher fees but more perks, which can be a win-win for American Express and its card members. Squeri said the following on the earnings call:
I'm very pleased to say that the initial customer demand and engagement are exceeding our expectations. In fact, while it's still early, this is the strongest start we've seen for a U.S. Platinum card refresh. Before I get into more details on Platinum, I want to provide some context. We are fortunate to have a global premium customer base that is unmatched in the industry, and our goal is to provide our customers with the best experience in the industry.
The solid increase in card member spending, paired with the successful launch of the new Platinum card, showcases American Express's advantages in today's bifurcated economy. Broadly speaking, consumer spending on discretionary goods and services, and even staples, is under pressure from relatively high interest rates and rising living costs.
By catering to an affluent consumer base and charging high card fees, American Express's customer base isn't as stressed by the rising cost of living. In fact, the upticks in spending may be partly due to higher asset prices, from stocks to real estate and gold. So, even though high interest rates and home prices have made housing unaffordable for average Americans, American Express's strong results show that affluent consumer spending is actually on the rise.
Cardmember rewards are roughly double what American Express collects in membership fees. So, its customers are getting a great deal on its cards. But American Express still turns a hefty profit because of the fees it collects from merchants. This brilliant business model creates high customer loyalty and interest in its latest offerings (as shown with the success of the new Platinum card). American Express cardholders are incentivized to use the cards for the bulk of their spending, which means more perks for cardholders and more transaction fee revenue for American Express.
American Express checks all the boxes
Despite more than tripling during the past five years, American Express shares remain a solid buy for 2026.
The stock is still a good value and carries a less expensive valuation than Visa and Mastercard.
American Express generates plenty of extra cash to repurchase stock and increase its dividend at a breakneck rate. During the past five years, American Express has roughly doubled its dividend. And the stock still yields more than Visa and Mastercard, even after its recent price run-up.
By catering to affluent customers, American Express is resistant to some of today's most pressing economic challenges.
All told, American Express has an elite business model and remains an excellent choice for long-term investors.
