Shares of American Express (AXP +1.16%) might have dipped following its fourth-quarter 2025 (ended Dec. 31) financial results, but the numbers were encouraging. Revenue (net of interest expense) increased 10% year over year, and net income climbed 13%. These are encouraging trends.
It's time to take a closer look at this business. Here are three things every investor in this financial stock needs to know.
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1. Brand and network effect
Berkshire Hathaway owns 22% of the outstanding shares of American Express. Fitting Warren Buffett's stringent test requires the business in question to possess an economic moat. This company does that in two ways.
The first is the brand. Amex's top credit cards are premium offerings. They bring in a more affluent membership base that appreciates excellent customer service, extensive perks and rewards, and a wonderful digital experience.
In addition to being the card issuer, Amex operates the underlying technical infrastructure that facilitates transaction processing. There are 153 million active cards on one side and 160 million merchant acceptance locations on the other side. The result is a powerful network effect whose value proposition improves for each cardholder as there are more merchants, and vice versa.
There's a very low probability that American Express' competitive position will come under pressure anytime soon. This is a very high-quality business.
2. Not as dependent on interest income
In Q4, American Express generated $9.9 billion, or about half of its revenue, from merchants that use its platform. It collected $2.6 billion in revenue from membership fees. Just 24% of sales came from net interest income. This is a favorable position to be in. It reduces credit risk and cyclicality, which might be bigger issues for industry peers.
This financial situation goes back to brand power. Since Amex can attract a higher-income cohort, customers might not need to hold revolving balances as much from month to month. This supports the company's spend-centric model. It makes money on every transaction, as it collects the previously mentioned merchant revenue. The average card member spent more than $25,000 in 2025.
NYSE: AXP
Key Data Points
3. Valuation is getting in the way
This has been a wonderful stock to own. In the past 10 years, American Express shares have produced a total return of 641% (as of Feb. 2, 2026). This gain has been supported, unsurprisingly, by strong financial performance.
These days, though, the valuation is not cheap. The stock trades at a price-to-earnings ratio of 22.9, which is near a three-year high. That might not support outsized returns going forward. However, investors who are still interested could consider dollar-cost averaging.
