Q2 2025 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q2 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session.

Should you require assistance during the call, please press star then zero. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Head of Investor Relations, Mr. Kartik Ramachandran.

Thank you. Please go ahead.

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC.

The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discuss. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Stephen Squeri, chairman and CEO, who will start with some remarks about the company's progress and results.

And then Christophe Le Caillec, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Stephen and Christophe. With that, let me turn it over to Stephen.

Thank you, Kartik, and good morning, everybody, and thanks for joining us on a beautiful Friday morning here in the summer. So thank you. We had another strong quarter. Revenues reached a record $17.9 billion, up 9% year over year.

Earnings per share were $4.08, up 17% excluding last year's gain from the sale of the certified. Total card member spending was up 7%, which was consistent with the pattern we've seen this year. While spend in some of the travel categories like airlines and lodging was softer overall, spending was a quarterly record. Based on our strong performance year to date, we are reaffirming our full-year revenue growth and EPS guidance that we provided in January.

Last month, we received the results of the Fed's annual CCAR process, which set our preliminary stress capital buffer requirement at the lowest permissible level of 2.5%. The results once again demonstrated that we had the lowest projected credit card loss and highest profitability rates under the Fed stress test among all banks subject to CCAR. Results were a testament to the earnings power of our resilient business model and our strong capital position. Looking ahead, we're very excited about the upcoming refresh of our US consumer and business platinum cards this fall.

The competition for premium customers, while always intense, has been especially heated for over a decade. It's been a very good thing for our customers, for the category, and for us. In fact, the past decade has been one of the very best in terms of growing our premium card portfolios and scaling our card member base. As the industry leader in premium cards, we benefit from a strong interest in the category.

The total addressable market is growing at a healthy rate globally, driven by several factors, including our own value proposition innovations, the investments of competitors, and generational shifts and the appeal of premium products. As a result, the basis of competition shifted especially among affluent consumers away from cash back and no-fee products and towards partner-rated value, access, experiences, and superior customer service, where we do excel. We believe we can continue to lead in this space as the category and competitive interest continue to grow. Let me tell you why.

To start with, we've led the premium card category for over forty years. We achieved that position by creating a multifaceted membership-focused business model which includes a wide range of assets that set us apart and when taken together are very difficult to replicate. To build on our success, we've increased our focus on the premium space over the last several years, strategically invested in refreshing our products regularly all around the world. Our refresh strategy focuses on enriching our value propositions, with more benefits and offerings in areas that our customers value most.

At a price point that delivers outstanding value. A key element of this strategy is our ability to attract a growing number of premier partners who fund offerings to gain access to our large-scale high-spending customer base. Beyond the individual product value proposition, that set the competitive standard. Giving our card member access to over 27,000 of the most sought-after restaurants, wineries, and other venues through Resi and Tap.

The largest airport lounge network in the industry, which includes thirty proprietary lounges today, with more on the way, as well as access to all Delco lounges. Exclusive experiences across sports, fashion, and entertainment, and a wide range of benefits at over 2,600 premium hotels and resorts worldwide. This strategy has worked especially well for us. For example, in each of the recent refreshes we've done for our US consumer gold, Delta, and Hilton cards over the last two years, customer demand has increased driving double-digit account growth.

Revenue growth in each of the three portfolios is up over 30%. With card fee revenues up at least 60%. And spend retention remains very high at 98% and we've seen no meaningful change after the refreshes. Additionally, the high credit quality of the new customers we're bringing in has helped us widen the gap between our credit metrics and the rest of the industry.

As we look ahead to our US platinum launches, you can expect to see the same formula. Providing the best premium experience to card members with more differentiated benefits and more world-class partners joining us to offer card members more value that substantially exceeds the annual fee. Longer term, when you combine our proven product refresh strategy with our global premium pest base at scale, our network of world-class partners, our lifestyle-oriented membership-defined brand, an addressable market that is growing at a healthy annual rate globally, especially in key areas we're focused on premium sector and younger consumers.

These are all the reasons why we believe we have a long runway for growth and can sustain our momentum and our leadership in the premium space going forward. I'll now turn it over to Christophe to provide more detail on the second quarter results.

Thanks, Stephen, and good morning, everyone. Let me start with the highlights for the quarter on Slide two. As Stephen noted, we reported revenue growth of 9% and earnings per share of $4.08, up 17% excluding the gain from the certified last year. On slide two, you'll see a list of several notable developments in the quarter.

We've selected these highlights because they are great indicators of the progress we're making towards our long-term strategy across key areas of the business, like technology, partnerships, or products. Before we get into the detail of this quarter's results, let me step back for a moment to reflect on what the trends from this quarter indicate. When you look at our performance across spend, transactions, demand for new cards, retention, and credit in the context of the significant macroeconomic and geopolitical developments of the past few months. What you see is remarkable resilience across our customer base.

And while there may be a bit of prudence around the edges, this performance indicates the strength of our business model and strategy. Turning to build business trends. At the overall level, spend was consistent with Q1. Up 7% for the quarter. Goods and services spending, which accounts for over 70% of our business, continued to grow at a similar pace to Q1. Now T and E growth was down a bit versus Q1, driven by softer airline and lodging spend, while restaurant spending continued to be very strong up 8% FX adjusted.

Our fastest growing cohorts kept up their momentum. In the US consumer business, millennial spend was up 10%. And Gen Z's spend was growing around 40% though starting from a smaller base. And our international business continued to grow in double digits, up 12% FX adjusted in the quarter.

Transaction growth was up 9% is another indicator of strong customer engagement and is largely consistent with what we've been seeing over the past few quarters. We acquired 3.1 million new cards in Q2, within the range of recent quarters. We sometimes get asked how we can sustain this pace. Starting this quarter, we're breaking out the number of cards we acquired by segment.

As you can see, we've acquired about 1.5 million new cards per quarter in the US consumer business over the past few quarters. When you compare that to industry-wide new account originations, even among customers with FICO scores above 660, it's a relatively small share. Indicating continued runway for growth. Turning to balance growth and credit.

Loans and common and receivables increased percent year over year FX adjusted. Growing at a similar pace to build business. This quarter's results had about a one percentage point impact from the health of sale portfolios that we previously disclosed. Our premium products continue to be the primary driver of that group.

With our pay over time and co-rent portfolios driving around 80% of growth in card member revolving loans in the quarter. Our growth in premium products over the past few years has further strengthened the credit quality of our portfolio resulting in very strong credit performance. Q2 delinquency and write-off rates remained low with delinquency rates flat to Q1 while write-offs rates declined. Our strong credit performance is remarkable across all age groups.

In fact, the delinquency rate for our US millennial and Gen Z customers are not only better than the industry average for those age groups, but they are also nearly 40% better than the industry average for older age groups. The strength of our premium model also holds in a stress environment. As demonstrated by their Fed's CCAR results, which show that we have the highest ROA and lowest credit card loss rate across all banks subject to the stress test. Total provision expense was $1.4 billion for the quarter, which includes a reserve build of $222 million reflecting growth in loan volume and a worse macroeconomic outlook.

As a reminder, there are scenarios used in the reserve model at the end of Q1 did not incorporate the changes in the outlook that we started to see in early April. Turning to revenue on slide fourteen, I'll hit on a few of the key points. FX adjusted revenue growth was 9%, both for the quarter as well as for the first six months of the year. We continue to see strong momentum in net card fees, which reached record levels and were up 20% effect adjusted again this quarter.

The exceptional growth we've seen in car fees over the past several years averaging 17% per year since 2019. Really speaks to our strategy as we increase our focus on the premium space. This is the result of, first, acquiring new customers onto fee-based products, then driving strong retention of our customer base. And finally, consistently increasing value through product refreshes and pricing accordingly. The result is a net card fee line that has more than doubled since 2019. Taking a look next at our premium lending business, net interest income grew at a double-digit pace against this quarter.

One question we sometimes get is around the drivers of our strong growth in NII over the past several years. Starting this quarter, we've aimed to give you a picture of how both volume and margin have led to this growth. The takeaway here is that since 2019, a bit more than half of the increase in NII has come from balance sheet growth. This volume growth has been about the same as growth in card member spending.

The reason that NII has grown faster than volumes is because we've increased the margin generated on these balances. We have achieved that margin expansion by improving pricing for risk, by rolling out more lending features, especially across our historically painful charge card products, and by growing our deposit business. Now most importantly, we've achieved this growth while maintaining very low credit risk. In fact, widening the gap to peers.

And looking ahead, we believe we have a long runway for growth in our premium lending business. Sum up our revenue performance, we feel good about the momentum we have halfway through the year. With the overall revenue growth tracking in line with our full-year guidance. Let's turn to expense performance on slide eighteen.

If you think about the way we manage the expense base, we generally expect VCE to grow a bit faster than revenue as a result of the mix shift towards premium products and the investment we make in products to drive acquisition, engagement, and strong credit outcomes. At the same time, we look to drive the leverage from marketing and OpEx over time as we generate efficiencies and economy of scale. That continues to be how you should think about our expense base for the full year. In Q2, VC expenses grew a bit faster than revenue and marketing grew in the mid-single digits.

OpEx, excluding a solidify, was up 9% in the quarter, a bit higher than our expectation coming into the year. The year-over-year growth is predominantly driven by investment in our enterprise risk management capabilities, and technology as the company scales. Looking ahead, for the full year, we expect OpEx growth to be in the mid-single digits versus last year except certified. Predominantly driven by the weaker dollar.

As you think about the ability of our business model to drive expense leverage, I'd note that since 2023, we've driven four points of operating leverage, with operating expenses as a percentage of revenue down from 25% in 2023 to 21% this quarter. Moving on to capital. Our CET1 ratio was 10% within our 10 to 11% target range. We returned $2 billion of capital to our shareholders including $0.6 billion of dividends and $1.4 billion of share repurchases.

In Q1, we increased our dividend by 17%. Based on the CCAR results, our preliminary stress capital buffer requirement remains at 2.5%. The lowest prescribed level allowing us to continue executing our disciplined capital management strategy while returning excess capital to our shareholders. Our business continues to generate very strong returns with an ROE of 36% in the quarter, providing us with capital flexibility.

That brings me to our 2025 guidance. We're now halfway through the year having delivered 9% FX adjusted revenue growth and EPS of $7.71. Trends across the business have been largely stable. While there continues to be uncertainty in how the coming quarters will play out, we have increased confidence in our path forward. As a result, we are reaffirming our full-year guidance of revenue growth of 8% to 10%, and earnings per share between $15 and $15.50. With that, I'll turn the call back over to Kartik and we'll take your questions.

Thank you, Christophe. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation. And with that, the operator will now open the line for questions.

Our first question comes from Sanjay Sakhrani of KBW. Please go ahead.

Thank you. Good morning. Stephen, Christophe, I know build business trends have been pretty resilient in the face of this uncertainty on the macro side. I'm just curious how you guys are planning for maybe just the intermediate term on spending trends.

I assume it's stable, but what gets things going? I know SMB has been sort of the hardest hit, airline spend as well. And if I could just ask on that same vein on SMB, maybe you could just address that Amazon portfolio loss sort of how we should think about how that plays into SMB. Thanks.

Yeah. So I think, you know, look, I think we're just planning for it to continue to be consistent as it is. And I don't know what gets it going. I'm not sure anybody really knows what gets it going.

We live in uncertain times, but I think people are continuing to live their lives. And you know, what we're seeing right now is very consistent spending. You've seen a little bit of a slowdown in airline, not necessarily front of the cabin. You're seeing a little bit of a slowdown in lodging, but again, not necessarily on the high transactions which are up.

But goods and services continue to be resilient, and you know, our Gen Z's and our Millennials continue to be consistent. So and obviously, we've said all along, we really had nothing to do with the stock market. When the stock market was all the way down, people continued to spend what they're spending now. Stock market is high.

People are continuing to spend what they are now. So you know, we'll just gonna ride this out as it is, and think it's gonna continue to be very, very consistent. In terms and look, in terms of the Amazon portfolio and, you know, other portfolios that happen. You know?

Amazon and Lowe's as well, they're good card accepting merchants, and we're gonna continue to do, you know, do business with them. But sometimes, you know, things just don't work out economically. And I think one of the things that we've seen in this space, unlike in the T and E space, is you've seen portfolios move in retail. I mean, it's not an unusual thing to see portfolios move in retail.

And you know, for us, it just it really just wasn't working out and, you know, that's just the way it is. I don't think it really is gonna have much of an impact from an SMB perspective. For us either one of those either one of those portfolios. Think from SMB, I think SMBs are a little bit more circumspect, I think, than the consumers are right now.

And so you know, not buying maybe as much inventory and maybe not and not spending as much. And so I think they're gonna need probably a little bit more assurance from an economic perspective longer term for that to get going. So but having said all that, I think, you know, from an SMB perspective, while billings are you know, probably not where we want them to be, our revenue from this segment continues to be strong. Our credit metrics continue to be strong.

Our lending book is strong, and our fee-based business here is strong. So overall, we're happy with SMB. We'd like to see more of the list.

Hey, Sanjay. Just to add one thing. In terms of the billing and the outlook. One of the things that provides support to our billing growth is the strength of our new account origination.

And you certainly saw that we added a little bit more disclosures and details on our new cards acquired and 3.1 million new cards this quarter and 1.5 million in the US consumer. So, you know, we see a lot of stability there. And with the upcoming, you know, launch of the platform called that gives us confidence in our ability to originate new cards in the balance of year that will certainly support their the billing growth.

Thank you. The next question is coming from Ryan Nash of Goldman Sachs. Please go ahead.

Good morning, everyone. Good morning. Good morning. So Stephen, you know, you spent a decent amount of time talking about refresh of the US platinum that's coming in the fall.

We obviously had a refresh from Chase. Citi is coming out of the new card. Obviously, cough coming out after that part of the market. Now I know that it's always competitive, but how do you think about the risk of too many players going after the same customer?

Many of them are copying your value proposition. And, inevitably, what do you think this means for pricing power over time? Thank you.

May the best company win. That's what I think. Look. I think that you know, it really hasn't it's not all that different.

I mean, remember Citi took a hiatus for a while. I mean, you know, when you think about this space over the last ten years, it's been extremely competitive. You know? And you saw that Chase Chase came out.

It was, like, ten, eleven years ago, and you know, since that time, we've done three refreshes, and you know, Citi was in the market, and then they popped out. Now they're back in. So you have Capital One, but I think what's happened is this focus by the banks in general and us on this premium space has been good for customers. It's been good overall for the industry.

And if you look at the track record, it's been really good for us. I think since our last refresh, we've pretty much doubled our base. I think what the industry has proven is that consumers will pay for value. And as long as you're delivering value, I think you still have that pricing power.

I mean, I think it's all about think when you look at who we're all acquiring here and we're acquiring you know, lots of lots of Gen Z's and lots of Millennials, with these cards. They're very value conscious, and they look at this, and they basically say, look, you know, for whatever the fee may be, I'm getting value. And if they don't feel they get the value from the platinum card, they can look at the gold card, and they get that. So I think it's good for the industry.

I think pricing power is much more tied to the value that you provide. And I think, as I said before, as long as we continue to do what we're doing, which is, I believe, offer the best product, you know, in the industry and leverage the assets that we do have, which, you know, some of them I'm obviously, I'm not gonna go through again, but I mentioned you know, in my opening remarks, I think we're gonna be, you know, continue to be in good shape. I think you know, for anybody in this space, complacency is a death nail and you can't be complacent, which is why we're on a very regular cycle of refreshing these products.

And anybody thinks that we're refreshing the product in response to what, you know, what, our competitors are doing is crazy. We have our own schedule and I think, you know, we'll see what we see in the fall, but we feel really good about what we're gonna launch. On both products, consumer and small business.

Thank you. The next question is coming from Mark DeVries of Deutsche Bank. Please go ahead.

Yes. Thanks. I had a related question on the upcoming platinum refresh. I know you're not gonna preview it now, but I was just wondering if you could just comment kinda qualitatively.

Should we expect the same type of meaningful step up in added value relative to the fee that we've seen past refreshes. And then also, how do you just think about the risk that as you do that, you're kind of asking more of the customer to both kind of track what all those incremental sources of value and engage more deeply to kind of justify the added step up in fee.

Well, I'll tell you what. If you don't tell anybody, I'll give you the preview. Look. I think that yeah.

You know, look. I'm not gonna get into ratios here, but what I would say is you know, our strategy has always been to if we do raise the fee, it has always been to add incrementally a lot more value. In terms of so, yeah, that's the same playbook. In terms of you know, as you think about the consumer, you know, years ago, when we used to do these things, we used to try and figure out how the consumer couldn't use the products and services.

But what we find is we make these things really easy. For consumers to use now. And we make it such that it's a wide range of value. And so you know, while not every consumer will use 100% of the value, getting back to your second point, we have enough disparity in the price and the value that you don't need to use all the value to get the value out of product.

There's a lot of value words there, but and that's what we'll continue to do. And I think that you know, one of the things that we've done here is we really have expanded overall last refresh the set of services and benefits and premium partners that are in the product. And you know, not every card member uses every benefit, but that's okay because it gives people the opportunity to pick and choose, but they do use enough of the services and the benefits that it more than outweighs whatever fee they're gonna pay.

And maybe just to build on either the how this could play out in the financials, the way to think about it, Mark, is that as we launch the new value proposition, you should expect to see a step up in the cost of card member services. And as you know, what we do is just like we wait until the renewal anniversary of the card member to increase you know, to move the card member to the new price point. So and then we amortize it over twelve months. So the cost of card member service moves kind of like immediately, and it takes, you know, like, maximum two years for the card fee benefit to flow through the P&L.

But all of that was kind of built in our guidance, in our planning, and expectations since the very beginning.

Thank you. The next question is coming from Don Fandetti of Wells Fargo. Please go ahead.

Yes. Stephen, can you talk a little bit about international in terms of your acceptance, growth, and how you're tracking versus your targets? And maybe, you know, a bit on the competitive dynamics. I think you generally felt like it's less competitive internationally.

Well, I don't know about less competitive. I think, you know, internationally, has its own set of challenges and own set of regulations. I think sometimes, you know, the regulations can make it a little less maybe a little less interesting for certain players to get into the market. But overall, we feel really good about international.

I mean, look, it's been double-digit growth. I don't know how many you know, it takes a couple of years after COVID. It's been double-digit growth since international really opened up again. And you know, for us, we've been focusing on a small set of those.

We talk about the five big markets that we focus on and we've been doing really well there. We talk about our city strategy and that's on track from a coverage perspective. And you know, we continue to add millions and millions of merchants international and we will continue to do that. So I think our acceptance gets better day by day.

And, you know, we feel good about the progress that we've made and we'll talk about a lot of that. I think, you know, when we have our next investor day. But international continues to make great strides. And I think it's ultimately a huge source of growth for us because when you look at the international markets, premium plays really well.

In a lot of cases, just about every market, actually. Our premium products are priced higher than they are in the US. I think when you look at our share internationally, it's very, very low. And the other part about it, when you look at small business, which I think there's big opportunity for us in small business, it really is a market that's really nascent at this point.

So we're very excited about international, and, you know, we're getting those growths with coverage that is still improving.

Thank you. The next question is coming from Erika Najarian of UBS. Please go ahead.

Hi. Good morning. I thought I'd ask the question that I've been getting, and it's that it's almost that you become a victim of your success a little bit. You know, given your premium valuation and, you know, your previous performance, you know, it feels like there is sort of a bearish case out there, building for building on the stock, meaning, like, you know, you've raised the bar on yourself, so what's next?

And I guess the question that I have here is, is how do you address that? You know, you talked a little bit, Stephen, about the spend, a little bit of slowdown in airline spend, a little bit of slowdown in lodging. But, obviously, you also have this platinum refresh. So as you think about maybe spend not accelerating, you know, how does American Express continue to deliver this 8 to 10% revenue growth, you know, continued consistency and build businesses, you know, perhaps in an environment where the macro the underlying spend is not necessarily accelerating.

And like Brian said, you know, all of a sudden we have fewer competition, even fiercer competition among your peers for your natural client base.

Well, I think, you know, we've been getting this question for a number of years now, and we've been continuing to deliver against that. But you know, and again, I've been around this business a long, long time, and I'm not so sure it's much fiercer, the competition, than it was. I think, you know, there may be a little bit more noise around it. People may talk about it, but when you're in the trenches, the competition is there.

And I think, you know, look, for us, we continue to deliver the EPS we need to deliver and we continue to deliver within that revenue range, and we're a hell of a lot bigger company than we were when we set these targets out. I mean, you know, when you look at this, the numbers that we're putting up year over year continue to be, you know, if I may say, quite impressive. But I think for us, it all starts with the customer. And I think what people lose sight of is customers are not widgets.

Customers are people that you really need to focus on what their true needs are. You need to provide phenomenal service, and you need to be there for them. And to us, customers we treat every customer as if it's the only customer we have. And if you ever call into our servicing center, there is quite a difference between how American Express treats their customers and how a lot of our competitors treat their customers.

It is a huge difference. I think the other thing that I would say is you know, when you think about sort of what we're doing with this product refresh strategy, it's not just platinum. You know, we've refreshed hundreds of products over the course of the last few years and will continue to refresh hundreds of products around the world. And so you know, look, the bearish case can continue to develop.

But we will continue to do what we do best is focus on our customers, continue to create innovative products and services, and continue to make investments that are providing returns to our shareholders. So, you know, look. I mean, as I said, I've been around a long time. I think the competitive environment to me hasn't been all that much different than it's been for the last ten years.

I think there's probably a lot more press about it. But we feel it every single day, and I think it makes us a lot better.

Thank you. The next question is coming from Richard Shane of JP Morgan. Please go ahead.

Thanks for taking my questions this morning. I just want to follow-up on Christophe's point about the timing of revenues and expenses associated with the refresh. The revenue explanation was very helpful. Can you talk about the timing of expenses associated with it?

Have you pulled some of that forward in anticipation, or should we see a step function over the next year or two consistent with what you're describing on the revenue side?

So we haven't pulled anything either from the very beginning. This was our plan. And we plan accordingly and guided accordingly. So let me kind of reiterate what I just said previously.

Right? So what you should expect is an increase in our cost of card member services, you know, after the launch of the platinum card. So, you know, most like, you know, let's say in Q4. And the card fee increases will take a little bit more time to filter through the P&L. And all in all, this will be value accretive for us and for our shareholders.

Yeah. I mean, just to say it really simplistically, the expenses come before the revenues here. Right? Because what happens is once we relaunch, the card members have the ability to take advantage of those benefits on day one.

They don't get billed if there's an increase in the fee until they come up to their cycle. And those fees are recognized over a twelve-month period. They're not recognized in the month that you get billed, but yet the benefits. That's a huge benefit to our cardholders, and it's something that we plan for.

It's something that we always done.

Thank you. The next question is coming from Jeffrey Adelson of Morgan Stanley. Please go ahead.

Hey, good morning. Stephen and Christophe. Just wanted to focus on the airline lounges. Obviously, that's a really important part of the Amex offering.

But I guess longer term, as you know, kind of continue to put up this really robust growth in card members, do you navigate some of the concerns about lounge access and overcrowding? Is that something you'll maybe to look to address in the next from the likes of Chase and Capital One with their own build out. And I think there's been more of a focus on the airlines lately to kind of build their own offering or enhance their own offering. So I guess do you think about navigating that competition longer term and just maybe addressing the concern of overcrowding?

Thanks.

Yeah. I think that, you know, look, what we try to do is a couple of things. Number one, we've tried to like a lot of the airlines done and a lot of the other cards have done, we did this probably before people did it, but you know, provide some priority. The other thing is you know, we're built you know, we're trying to make the lounges bigger.

I think the whole lounge game has been a boom for airport authorities in terms of how many lounges they can put in. And the other thing we get innovated, look, in Vegas, we just did what we call Sidecar. Right? Which is a more of a small kinda I don't know.

Maybe call it a speakeasy kind of lounge where you just wanna go in for a quick drink or grab something quickly, you can do that, and I think we work really closely with our partner Delta in those airports where we have you know, either we don't have a lounge or we do have lounges together to try and move traffic around a little bit. But I think you'll continue to see more innovation here. You'll look at more expansion of existing lounges where we can get space, and you'll look at a strategy that looks at satellite locations so that we can handle the demand that we get.

Thank you. The next question is coming from Brian Foran of Truist Securities. Please go ahead.

Hey, good morning, guys. Morning. So I wanna ask about one other pushback I keep getting on the stock lately. And before I do, you know, these slides you're adding, like slide twelve, and nine, I think there was sixteen, you know, kind of the bread thing to the investor if you head on and giving that next level of detail.

I really appreciate it. They're great. So I wanna get that context to that. I think you guys have been really open and kind of sharing your thought process on the key pushbacks.

So the other one I get is you know, if you do this walk, spend volumes plus seven, then discount is a little lower, plus five. And then if you back out rewards to do discount, you know, with rewards as a contra, it's, like, plus one to two. Then some people are even packing out new account contribution and saying, like, well, discount net of rewards, net of new accounts is actually slightly negative. I know that's, like, net of eight things, and your actual revenue is growing.

But maybe you could just speak to any part of that dynamic, you know, for investors who are focused on know, kind of the discount revenue being a little lower, the discount revenue net of rewards being a little lower still. You know, how would you think about that? Is that a valid concern, or is that a wrong path to go down?

Well, Christophe will answer. But the one thing I would say is, you know, thinking about only one component of revenue associated with rewards, is not really how we think about it. We think about overall revenue associated with it. But I'll let Christophe.

Hey, Brian. So the way we think about this and this type of decision and relationships between the expenses and the revenue? And we've been very transparent on it. Right?

Probably more so than many competitors is the VCE ratio to revenue, variable customer engagement expenses. As ratio to revenue. And we've provided a lot of details and transparency on the makeup of this VCE ratio, and that has been pretty stable over the years. And as we've said, you know, this is not an objective function for us.

This is a napkin. We make decisions product by product by product, and here's what you should not do. You should not equate a low VCE ratio to something positive. Because the highest VCE ratios that we have are on our remote premium more attractive, more value accretive products.

Right? Because we get a lot of that investment back in the form of efficiencies on the marketing line, in the form importantly of credit and positive selection on the credit line. So the overall balance is to your point, is a complicated one. We think we're really good at managing that balance and finding the optimum point to generate value, to generate growth and sustainable value for our shareholders.

So I don't quite follow your math, but I think we've got a good control over that expense to revenue ratio component. We are managing it thoughtfully, and every time there's a product refresh, that's where we spend a lot of our time in finance to find the right balance. So I think you know, you shouldn't worry too much about where this is going and where it's trending. You know, we feel that we're in a good place there.

Thank you. The next question is coming from Moshe Orenbuch of TD Cowen. Please go ahead.

Great. Thanks. And apologies for going back to the, you know, the competition kind of issue. But if you put together, you know, the questions from a couple of people and Stephen your answers, you know, to them, I guess, what strikes me is that this may be the first time that you're doing this US platinum refresh kind of into the teeth of a competitive environment.

And, you know, you've got crosscurrents. Obviously, you know, you have in the past benefited from some of the advertising and marketing of your competitors. And at the same time, there is this idea of, you know, kinda competing for a limited number of people. So could you is there a way to just talk about how you think it's going to play out this time versus others in terms of, you know, what, you know, what you kind of are expecting?

Any kind of things that you're thinking about that would differentiate your set of product refreshes from what you've seen from those competitors? Thanks.

Well, I would disagree with the characterization. It's the first time we're playing into the teeth of it actually. We did our first the first platinum refresh well, one of the platinum refreshes did ten years ago Chase just launched Sapphire. With a huge, huge bang.

I mean, the amount of money and the amount of press that they got with that and the intensity they went after, our book, played right into it. And the second one, we're around the same time. So I don't think it's that much different. And, really, if you think about it right now, Citi hasn't said when.

And you know, they're coming off of not having a prop not really having a product, and Chase is refreshing their product. So I think it's actually, if I look at it, it's probably less intense this time than it was ten years ago because I think there was so much hype around Chase coming out with this new card versus this is being an upgrade. That's just my opinion. Having said that, I'll just go back to what I said.

I think we've learned a lot. And we believe that what we're gonna come out with will be more than hold its own. Be very, very competitive, and we'll continue to be innovative. And you know, we'll just gonna have to wait and see if you guys are gonna have to wait and see because I can't really go into more detail in that contrasting the two.

All I can do is basically say every time we've done this, it's worked out pretty well for us. I guess worked out pretty well for consumers, and it's worked out well for the industry. But I just the characterization of this is different, I don't think that's the case at all.

Thank you. The next question is coming from Mihir Bhatia of Bank of America. Please go ahead.

Hi. Thank you for taking my question. So it is another question on this competition and premium card space. But, really, what I would like to focus maybe a little bit on is you've talked about how the customer value propositions have changed and evolved.

But how has this impacted the acquisition strategies? Is it becoming more expensive to attract these fee-paying cards? Is the acquisition mix changing? Really putting it all together at the end of the day, how returns in the premium card space Stable, increasing, decreasing because, like, yes, value propositions are increasing, but fees are increasing.

Card usage is increasing. So I'm just trying to get a sense of that. Thank you.

So I can help you a little bit with that. You know, the way this competition is materializing is that it's expanding the demand for premium products. So it's definitely giving us the opportunity to deploy more marketing dollars at very, very attractive returns. That's the way it's materializing.

Right? Because there are a lot more consideration now among the prospect population for premium products than there was ten years ago. Where we were the only player in that space. And every time card members look at or consider, you know, platinum card or premium card, consider the platinum card.

It's almost inevitable. And so that opens up an opportunity for us to put an offer in front of them. So, you know, the biggest benefit for us here like I really hard to compare the ROI ten years ago to the ROI today. But the level of marketing dollars, the quality of marketing dollars with deploying today is much bigger than what we were doing, say, ten years ago.

And I attribute a lot of that to a lot more activity in the marketplace, a lot more competition.

Thank you. The next question is coming from Terry Ma of Barclays. Please go ahead.

Hi, thank you. Good morning. I just wanted to ask about net card fee growth. It continues to be strong coming in at 20% year over year this quarter. As we think about the go forward, should the platinum refresh be kind of additive to that growth or just kind of sustain it as you lap some of the refreshes from last year?

Thank you. Yeah. So it's a complicated dynamic, Terry, but you might remember the beginning of the year, we said, you know, that you should expect the card fee growth rate to kind of moderate in the balance of the year. We still believe that's gonna happen.

So you should expect to see that in Q3 and Q4. And given the previous conversations that we had about the timing of the platinum fee increase, it's only sometimes in the new year in 2026. That you should see that inflection point and a bit more acceleration. But you know, you should still expect some moderation in the back of this year in terms of that you know, quarterly growth rates.

Thank you. The next question is coming from Craig Maurer of FT Partners. Please go ahead.

Yeah. Hi. Thanks. Wanted to you know, competition aside and AmEx is right to win aside.

You know, wanted to ask about how perhaps the mix of new is changing. And the reason why I'm asking is does the slowdown in travel spend put at risk the fantastic new acquisition channels you have with your co-brand partners like Marriott and Delta, do we have to think about that at all when it comes to net new card growth and know, just secondly, just quickly on the EPS guide, you had nice outperformance in EPS, but am I just reading it correctly that the projected increase in BCE spend as a percentage of revenue in the back half the year, which seems to be related, at least in part, to the platinum refreshes, what's keeping you from raising the range.

Thanks.

So under hi, Craig. Under on the acquisition mix, there's not been a big change in terms of our mix over the past few quarters. And like, almost, should say, over the past few years. Right?

And one way, you know, we're trying to characterize it for you is just by calling out the percentage of these new cards that are coming on a fee-paying product. Right? And has been in that 70% range for a few quarters now. And I don't really expect to see a change there.

To your second question about the earnings per share and the VCE in the balance of year. So listen, we're not giving guidance specifically, you know, let alone quarter by quarter on the VCE ratio. There's just so many moving parts here and we're also, you know, lapping, you know, some product refreshes from the past. So, you know, the way I think about that DCE ratio over time, it's that new.

It's just you should expect that DC ratio to slightly tick up over time as more and more as the mix, not only in terms of acquisition, but in terms of engagement of the portfolio, is trending a lot more towards premium and seed paying product. So that's gonna put a little bit of upward pressure on the VCE ratio. But that's as far it would go in terms of commenting on where this is gonna go in the year.

Thank you. Our final question is coming from Cristopher Kennedy of William Blair. Please go ahead.

Good morning. Thanks for taking the question. Just wanted to change the topic a little bit. You have the announcement with Coinbase and AmEx Ventures that a lot of investing in the space. Can you give your latest views on Stablecoin, and implementing blockchain technology into your tech stack?

Yeah. Well, let me just talk about sort of Stablecoin. I think it's been a lot of conversation around stablecoin and cryptocurrencies and what have you. And I think, you know, when you start to look at digital currencies, you know, we've got the cryptocurrencies, XRP, Bitcoin, Ethereum, and things like that.

I think that has sort of proven out that that's not really gonna take the place of any fiat currency. It's more of a sort of an investment vehicle at this point. And I think as we said for a long time now, that when you think about digital currencies, you need to think about sort of stable points and you need to think about government digital currencies. And it looks like now while there hasn't really been a lot of progress on government digital currencies, there has been a lot of activity, at least a lot of noise around stable points.

And I think there is a role in the payment systems for Stablecoins. There is a role in the store in the value system for cryptocurrencies. And I think when you look at what we did with Coinbase, as we see stablecoins, stablecoins, we believe, will be used for lots of cross-border transactions, small businesses, things like that. But remember, with stablecoins, you are trapping that liquidity and you do need off ramps.

And I think the partnership that we have with Coinbase does two things. Number one, it does provide that off ramp, but number two, what they've decided to do from a rewards perspective is allow you to earn digital currency. And, obviously, they're one of the largest keepers of digital currencies. And so I think that's a really interesting the stablecoins a little bit into the future here, you can see this as a way for SMBs, large corporations to do cross-border transactions especially when you are doing lots of cross-border transactions with the same group of people.

You just you avoid all the currency conversion. Makes it a lot easier to do business. I think potentially cross-border. That's not a big sort of revenue driver for us.

You know, foreign currency exchange and currency. Revenue for us. But it is an opportunity, and it's one that we are seriously looking at. And potentially to figure out how we think about either partnering or how we think about our own foray into Stablecoins, especially for small businesses where we do have a large share.

So I think there's a lot more to come here. I think, you know, the bill will be signed today in terms of overall regulation. And there's more to play out. But I think what you will see is companies like American Express, Visa, and Mastercard being off ramps.

For digital currencies. And I think that's an important part that we play. Will they replace the existing payment rails? No.

They were not gonna replace the existing payment rails. On AA, a good proxy and a good change and a good alternative to ACH and swift payments and wires and things like that, I think so. And the reason I don't believe they're gonna replace what we have today is what we have today is not broken. It provides lots of other benefits such as rewards, it provides, you know, contingent liability in terms of lending.

And it also provides lots of dispute resolution and things like that and tremendous acceptance. And it's just easy to use. So know, that's probably all I have to say on that, but it is something that we are working with and we'll continue to monitor and just figure out what's the right entry point for us. But we felt we're very happy about our partnership with Coinbase, and I think we're gonna be able to do some good things with them.

With that, we will bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions.

Thank you. Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at 877-660-6853 or 201-612-7415. Access code 13754529 after 1 PM Eastern Time on July 18th through July 25th.