American Express’s (AXP.N) second-quarter revenue rose by 9% to a record $16.33 billion, driven by robust spending from its affluent customers.
Despite this increase, the revenue fell short of expectations, causing a 4.4% drop in the company’s shares.
The company’s affluent cardholders have helped insulate it from broader economic weaknesses, even as other lenders face tepid loan demand amid high borrowing costs.
However, a slowdown in spending growth compared to the previous quarter has raised concerns among investors.
Data indicates that wage growth is slowing, potentially impacting discretionary spending.
Billed business, which measures spending on AmEx cards, grew by 6% in the second quarter compared to last year.
This follows a 7% increase in the first quarter.
Despite the revenue miss, AmEx has raised its 2024 earnings per share forecast to between $13.30 and $13.80, up from the previous range of $12.65 to $13.15.
“We remain confident in management’s ability to mitigate softer top line with expense control and achieve the EPS target,” said Citigroup analyst Keith Horowitz.
However, he noted that the revenue miss could lead to some weakness in the stock.
AmEx plans to increase its marketing budget by 15% this year compared to 2023.
CEO Stephen Squeri clarified that this boost is not due to anticipated spending slowdowns but rather a strategy to attract new cardholders and increase market share.
“You want to gain more traction with new cardholders and you want to gain more share,” he said.
The company’s profit for the three months ended June 30 was $3.02 billion, or $4.15 per share, marking a 39% increase from the previous year.
Excluding a one-time gain, AmEx earned $3.49 per share, surpassing analysts’ estimate of $3.24 per share, according to LSEG data.
Despite achieving record quarterly revenue of $16.33 billion, this figure was still below the LSEG estimate of $16.59 billion.