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Despite stubbornly high interest rates and persistent inflation, American Express (AXP) has delivered consistently strong quarterly earnings reports and that trend continued as the credit card company surpassed 1Q25 EPS expectations on solid billed business growth of 7% (FX-adjusted). Ahead of AXP's Q1 earnings report, a slate of banks released better-than-expected quarterly results that featured healthy consuming spending trends, setting the stage for AXP's upside performance. For instance, JPMorgan Chase's (JPM) combined credit and debit card spending grew by 7% yr/yr in Q1, while Bank of America (BAC) saw credit/debit card spending growth of 4%.

What sets AXP apart, though, from most banks is its younger and more affluent customer base. Approximately 35% of AXP's U.S. spending is derived from Millennials and Gen Z, and the average household income for its premium products, such as Amex Platinum, is north of $400,000. This favorable customer mix makes AXP more immune to economic volatility and forms the basis of stronger credit quality.

• On that note, provision for credit losses decreased by $100 mln yr/yr to $1.2 bln and the net write-off rate was flat yr/yr at 2.1%. In comparison, BAC's provision for credit losses in its Consumer Banking segment increased by $200 mln yr/yr in Q1 to $1.5 bln, while consolidated net charge-offs rose by over 80% yr/yr to $1.5 bln.
• Meanwhile, spending remains brisk among AXP customers, especially in the Travel & Experiences (T&E) category. In Q1, T&E spending increased by 11% yr/yr, outpacing the overall spending on its cards, fueled by strong demand from Millennials and Gen Z cardholders who continue to prioritize experiential purchases.
• During the quarter, AXP added 3.4 mln new cards, while retention also remained strong. Although AXP didn't disclose a specific cardholder retention rate for 1Q25, CEO Stephen Squeri stated that customer retention was better compared to 2024, reflecting continued high engagement and customer loyalty. Additionally, demand for premium cards are services which command higher fee income remains robust.
• On the cost side, consolidated expenses increased by 10% yr/yr to $12.5 bln, driven by higher variable customer engagement costs on higher card member spending. These costs include card member rewards, business development and card member services expenses. Rising usage of travel-related benefits and reward redemptions have pushed these expenses higher.

AXP delivered strong 1Q25 results featuring healthy spending growth driven by younger customers with premium products, while maintaining solid credit quality amid a volatile and unpredictable macro environment. The company also reiterated its FY25 outlook, calling for revenue growth of 8-10% and EPS of $15.00-$15.50, despite rising expenses and the intensifying macro headwinds.