American Express Bets Bigger On Premium Consumers As Tech Spend Hits $5bn

A premium engine still running hot

American Express closed 2025 sounding like a company determined to prove that the age of the credit card is far from over – at least for the well-heeled. Stephen Squeri, chairman and chief executive, opened the call by pointing investors back to a three-year arc: double‑digit top-line growth, mid‑teens EPS expansion, and a business model that has deliberately tilted even further towards premium customers.

Full-year revenues rose 10 per cent to a record $72bn, while earnings per share reached $15.38, up 15 per cent excluding a prior gain. Return on equity came in at a punchy 34 per cent, a level many banks would envy. Management, for its part, insists this is not a one‑off surge but the result of a long-running investment philosophy: pour money into customer value propositions, technology, marketing and partnerships, then prune ruthlessly where returns fall short.

That strategy is now being stress-tested in a market where competition in rewards cards is fierce and regulators are probing the economics of consumer credit. Yet the message from the podium was that American Express feels both confident and in control. It is guiding investors to another year of robust growth in 2026 – revenues up 9–10 per cent, EPS between $17.30 and $17.90 – while promising a 16 per cent increase in the quarterly dividend to 95 cents, taking the payout more than 80 per cent above 2022 levels.

Spending power and the millennial pivot

Beneath the headline numbers, the spending data painted a picture of a customer base still willing, and able, to spend. Total billed business rose 8 per cent in the fourth quarter on a foreign‑exchange adjusted basis, matching the third quarter’s pace. Goods and services, as well as travel and entertainment, both grew faster than in the first half of the year.

Retail spend was up 10 per cent, with luxury retail merchants enjoying a 15 per cent uplift – a telling barometer for the health of Amex’s premium cohort. Airline and lodging outlays remained broadly stable, while restaurant spending advanced 9 per cent. Within that, US restaurant spend by US consumer customers tied to Amex’s dining assets climbed more than 20 per cent, an indication of how tightly the company’s card, app and Resy/Tock ecosystem are beginning to mesh.

The generational shift inside the franchise may be even more important for the long term. Millennials and Gen Z now account for the largest share of US consumer spending on the network and remain the fastest‑growing cohorts. The average age of new US platinum card customers is just 33; for gold, it is 29. American Express is not merely defending an older, affluent customer base, but actively re‑seeding it with younger, fee‑paying cardholders who could stay in the system for decades.

International markets, long a focus for expansion, added further heft. Spend outside the US rose 12 per cent FX‑adjusted in the quarter, with growth broad‑based across consumer and business segments and geographies. Transactions overall grew 9 per cent, consistent with earlier quarters, suggesting there has been no sudden break in engagement as higher rates and political uncertainty have washed through the macro backdrop.

Fees, loans and an unusually clean credit story

If there is a single line item that captures how the model has been shifting, it is net card fees. That revenue line jumped 18 per cent for the year to a record $10bn, underpinned by the continued migration towards fee‑paying products and a cycle of product refreshes. In the fourth quarter alone, card fees grew 16 per cent on an FX‑adjusted basis, a slight moderation that management had flagged in advance.

The new US platinum annual fee is now being applied at renewal, and so far, cardholder behaviour is strikingly steady: retention rates are unchanged versus pre‑refresh levels. Christophe Le Caillec, chief financial officer, expects card fee growth to re‑accelerate as 2026 progresses and more customers pass through the higher‑fee renewal gate, exiting the year with growth back in the high teens.

On the balance sheet, loans and card member receivables rose 7 per cent year on year, in line with billed business, after adjusting for a one‑percentage‑point drag from held‑for‑sale portfolios. Management expects balances to continue to grow roughly in tandem with spend in 2026, with net interest income again outpacing that growth. NII was up 12 per cent in the fourth quarter, highlighting the margin leverage Amex still enjoys on its lending book.

Credit quality remains the quiet cornerstone of the story. Delinquencies were flat through 2025, and write‑offs remain both “best in class” and below 2019 levels. There was no hint of the creeping deterioration some mass‑market lenders have signalled. For 2026, the company is guiding to broadly stable credit metrics, with provision noise largely driven by normal seasonal patterns rather than structural stress.

The premiumisation of the portfolio is visible here too. As marketing dollars were redirected away from lower‑fee cash back products towards platinum in late 2025, the percentage of new US consumer cards that are fee‑paying rose by eight percentage points year on year. That shift should, over time, further reinforce both fee revenue and credit outcomes.

The cost of value – and the quest for leverage

Against this rosy revenue and credit backdrop, the pressure point is the cost of delivering ever‑richer value propositions. In the fourth quarter, variable customer engagement (VCE) expenses – the bucket that includes rewards and cardmember services – climbed to 45 per cent of revenues, a step‑up from earlier in the year driven squarely by the enhanced platinum benefits.

Le Caillec was unapologetic. Those VCE investments, he argued, are an integral part of the growth engine: they fuel acquisition, deepen engagement, attract highly creditworthy customers and make marketing more efficient by increasing organic demand for the products. For 2026, Amex is assuming a VCE‑to‑revenue ratio of around 44 per cent, given the richer benefits mix and a continuing tilt towards premium cards.

The offsets come from technology and operational efficiency. Operating expenses as a share of revenue have fallen by four percentage points since 2022, even as technology spend has grown at an 11 per cent clip. Overall OpEx is expected to rise in the mid‑single digits in 2026, and marketing spend in the low single digits, to about $6.3bn plus – a subtle but important sign that management expects some payback from the heavy investments already made in value propositions and digital infrastructure.

Amex breaks its growth spending into three streams: welcome offers and distribution (marketing), technology development (in OpEx) and cardmember benefits and partnerships (in VCE). The current plan, according to both Squeri and Le Caillec, is to keep investment levels “high” across all three in 2026 while still delivering mid‑teens EPS growth. The levers they cite – better targeting, lower acquisition incentives, and long‑run customer economics – are familiar; the question for investors is how long this finely balanced mix can be maintained in a market where rivals are also bidding aggressively for premium spend.

Tech as the new moat

Where American Express now increasingly seeks differentiation is in the way its cards, apps, data and partnerships are being stitched together. The company spends about $5bn a year on technology, and Squeri described a landscape in which “run the business” infrastructure – everything from cybersecurity to licences – sits alongside a large and growing pot of development spend.

The showpiece is a third‑generation data and analytics platform, built on the public cloud, that is already reducing processing times for key marketing and fraud functions by 90 per cent. By 2027, the company aims to migrate 100 per cent of its data and analytics workloads to this new platform. The goal is not just speed, but more granular personalisation of offers, better servicing, and a new wave of generative AI and “agentic” use cases that can surface insights and next‑best actions for both customers and staff.

The impact is beginning to show up at the front end. A revamped platinum onboarding journey and the launch of a dedicated travel app have helped propel app‑driven engagement; over the past three years, the number of service calls per account has dropped by 25 per cent, as more customers use digital self‑service. Travel bookings, buoyed by the platinum refresh and the app, were up 30 per cent in the fourth quarter.

On the commercial side, the integration of Center’s expense management software into the Amex suite is slated for launch by mid‑year, aimed squarely at the same small and mid‑size business segment being courted by fintechs like Ramp and by Capital One’s newly acquired Brex. Squeri signalled this will be accompanied by a broader refresh of commercial products and capabilities, and hinted that the “battleground” in business payments has moved decisively into software – a shift he believes Amex is well positioned to meet.

Capital, deposits and the long runway ahead

All of this sits atop a capital and funding structure that remains comfortably above regulatory minimums. In 2025, American Express returned $7.6bn to shareholders: $2.3bn in dividends and $5.3bn in buybacks. Since 2022, the share count has been trimmed by 7 per cent. The planned 16 per cent dividend increase keeps the payout ratio within the stated 20–25 per cent target, and management clearly views dividend growth as a key signalling tool for the sustainability of earnings.

On the liability side, the group is quietly building a deposit franchise that dovetails with its card business. High‑yield savings balances rose 8 per cent over the year, with the majority of deposits coming from existing card members who, on average, hold higher balances than non‑customers – a reflection of the brand’s premium tilt. Less than 10 per cent of US consumer card members currently hold a high‑yield savings account with Amex, suggesting meaningful headroom for funding growth over time.

From a macro perspective, Squeri described the main risks to the 2026 outlook as political and economic rather than competitive. He was dismissive of the notion that the “cost to grow” has become unsustainably high for premium issuers, arguing that Amex has consistently avoided uneconomic portfolios, focused on long‑term relationship value, and used its data and brand to keep acquisition costs in check. The company’s economics, he insisted, remain “very compelling”.

For investors, the pattern is by now familiar: a franchise that is leaning ever more heavily on young, affluent fee‑payers; a balance sheet cushioned by unusually benign credit; and a management team willing to trade near‑term margin pressure for the promise of durable, compounding growth. The bet, in essence, is that the premium consumer’s appetite for points, perks and polished digital experiences will endure – and that American Express can stay at least one step ahead of the pack in delivering them.