American Express profit rises 28% yet 3,500 jobs are going. What is AXP trying to fix?

American Express Company (NYSE: AXP), the New York-based premium payments, card and financial-services group, reported record third-quarter revenue of $20.06 billion, up 9% year over year, while net income increased 28% to $3.71 billion and diluted earnings per share rose 31% to $5.42. Adjusted earnings per share reached $4.68, ahead of the approximately $4.48 Wall Street expectation cited by Reuters, and management increased its 2026 adjusted EPS outlook to $17.60 to $17.90. Yet the stock fell around 2.5% after Chief Executive Officer Stephen Squeri disclosed that American Express plans to eliminate about 5% of its global workforce, equivalent to roughly 3,500 positions.

The contrast is striking because the restructuring does not follow an obvious collapse in customer spending or credit quality. Billed business increased 8% to $454 billion, travel and entertainment spending rose 10%, airline spending increased 13% and restaurant purchases climbed 9%, demonstrating continued resilience among the affluent customers around whom American Express has deliberately built its model. The harder investor question is therefore why a company producing record revenue and improving earnings sees a need for a workforce reduction substantial enough to affect one employee in twenty.

Management’s answer centres on organisational efficiency rather than emergency cost cutting. Squeri told analysts that American Express has good momentum but needs to become more agile and efficient, while consolidated expenses increased 9% year over year to $14.5 billion as the company invested in marketing, customer benefits and growth initiatives. That creates a familiar late-cycle corporate challenge: strong revenue can support high spending for a while, but shareholders eventually demand evidence that incremental sales produce operating leverage rather than being consumed by an equally fast-growing cost base.

Why is American Express cutting jobs when card spending is still growing?

The simplest explanation is that strong demand does not remove the need to redesign an organisation. American Express has invested heavily in card benefits, marketing, digital capabilities and younger customer acquisition, particularly among millennials and Generation Z, creating substantial expense growth even while revenue expands. A restructuring can therefore be offensive rather than defensive if management believes processes, management layers or duplicated work can be simplified before economic conditions deteriorate.

The company has not said that artificial intelligence alone is responsible for the 3,500 planned reductions, so describing the programme as an AI layoff would overstate the evidence. The announcement does arrive during a broader period in which banks and other large corporations are automating routine work, and financial institutions including Barclays have explicitly connected some workforce changes with technology adoption. American Express itself has framed the latest action more broadly around agility and efficiency, leaving the precise contribution of automation, ordinary restructuring and organisational simplification undisclosed.

That distinction matters because job reductions driven by weaker demand imply something very different from job reductions intended to protect future margins. American Express is still adding customers and increasing spending volumes, suggesting the current programme is better understood as an attempt to prevent costs from scaling linearly with the business. If management can maintain growth while operating with a leaner organisation, the savings could improve future earnings leverage without requiring a consumer downturn to reverse.

The financial benefit has not yet been quantified publicly in enough detail to calculate a reliable payback period. Investors should therefore wait for future expense guidance and restructuring disclosures rather than assuming that cutting 5% of staff automatically translates into a similar reduction in the company’s overall expense base.

What does $454bn of quarterly card spending say about the affluent consumer?

American Express has deliberately differentiated itself from mass-market credit-card issuers by concentrating on higher-income customers, premium travel products and businesses with greater spending capacity. That strategy appears to be working during a period when lower-income consumer sentiment is much weaker, because billed business still expanded 8% and travel and entertainment remained one of the strongest categories. Reuters cited an investor describing the absence of obvious stress at the upper end as a marked contrast with conditions among less affluent households.

The airline number needs context because higher ticket prices partly inflate transaction values. American Express Chief Financial Officer Christophe Le Caillec told Reuters that average ticket size and airline price increases contributed to the 13% growth in airline spending, meaning the figure should not be interpreted entirely as a 13% increase in physical travel activity. Even so, customers continuing to accept higher airfares indicates meaningful purchasing power within the cardholder base.

Restaurant spending increasing 9% provides another useful signal because dining is discretionary and can weaken quickly when consumers become cautious. The combination of travel and restaurant resilience supports American Express’ premium-customer thesis, particularly at a time when broader U.S. consumer confidence remains under pressure.

This creates a valuable macroeconomic read-through. American Express is showing that the U.S. consumer is not moving uniformly, with affluent households still spending at levels capable of supporting substantial payments growth while stress is concentrated more heavily elsewhere in the income distribution.

Are expenses becoming the bigger risk than credit losses?

Third-quarter consolidated expenses increased 9% to $14.5 billion, matching the rate of revenue growth. That relationship helps explain why investors remain focused on efficiency despite excellent top-line performance, because sustainable operating leverage generally requires expenses to grow more slowly than revenue over time. Marketing and enriched card benefits can strengthen customer retention, but those investments must eventually produce enough incremental spending and fee revenue to justify their cost.

Credit performance, meanwhile, appears comparatively manageable. American Express reported approximately $1.0 billion of provisions for credit losses during the quarter, down from about $1.3 billion in the year-earlier period, while September data for one major lending trust showed a net annualised default rate around 1.0%. These figures do not eliminate credit risk, particularly if unemployment rises, but they do not currently point toward broad deterioration among the company’s customer base.

This shifts management attention toward controllable costs rather than emergency balance-sheet protection. A premium lender can tolerate considerable marketing investment when customer quality remains strong, but shareholders may question spending that fails to generate proportional revenue or retention.

The workforce reduction therefore fits a company preparing its expense structure for a less forgiving environment even though current credit metrics remain relatively healthy. That can be prudent capital management if executed without damaging service quality, which is one of the principal reasons premium customers pay annual fees for American Express products.

Why did AXP shares fall despite the earnings beat?

The share-price decline shows that investors were evaluating the entire earnings package rather than simply adjusted EPS. Revenue of $20.06 billion was marginally below some market estimates around $20.1 billion, while expense growth and the unexpected restructuring announcement complicated the otherwise strong earnings picture. American Express shares had also underperformed the S&P 500 during 2026 before the report, indicating investors already had concerns around cost growth and the sustainability of premium-card economics.

Another issue is that reported GAAP EPS of $5.42 benefited from items that make adjusted EPS of $4.68 the more useful measure for comparing recurring quarterly performance. The company itself provided both numbers, meaning investors should not mix the 31% GAAP EPS increase with the lower adjusted growth rate without explaining the difference. Adjusted EPS still increased 13% year over year, which remains strong but is less dramatic than the headline GAAP number.

The new full-year adjusted EPS range of $17.60 to $17.90 is supportive because its midpoint sits above the consensus figure Reuters cited before the results. Markets nevertheless appear to want clearer evidence that American Express can grow earnings while containing marketing, rewards and organisational expenses.

The workforce programme potentially provides that path, but the company has not yet disclosed enough information to calculate the eventual recurring savings. Investors may therefore be waiting to see whether 2027 expense guidance validates the restructuring rationale.

Can American Express keep growing by targeting younger affluent customers?

American Express has been investing deliberately in millennial and Generation Z customers because winning a profitable consumer early can create decades of spending, travel and financial-services revenue. Younger customers can initially generate less income than older affluent households, but they may become extremely valuable if the company retains them as careers and household spending expand.

Premium benefits are central to that strategy. Airport lounges, dining credits, travel services and other perks make cards more attractive but increase programme costs, forcing management to continuously balance customer acquisition with economics.

This helps explain why expense control cannot simply mean cutting benefits indiscriminately. If American Express weakens the value proposition, premium customers have abundant alternatives from JPMorgan Chase, Capital One, Citigroup and other issuers. The better efficiency opportunity lies in lowering internal cost per customer while preserving the external benefits customers actually value.

The latest results suggest that customer demand remains strong enough for management to make those internal changes from a position of strength. That makes the restructuring strategically more interesting than a conventional recession-driven layoff.

What should investors watch after the 3,500-job announcement?

The first measure is the actual recurring expense saving once American Express quantifies it. Investors need to compare restructuring costs with annual savings and determine whether expense growth begins running below revenue growth during 2027. Without that operating leverage, the workforce reduction would have less financial significance than the headline suggests.

The second measure is cardholder spending, particularly travel, restaurants and other discretionary categories. Affluent customers have remained resilient, but sustained fuel prices, slower economic growth or weaker asset markets could eventually affect even premium households.

Credit losses provide the third indicator because current quality is supporting profitability. A meaningful deterioration in delinquencies or write-offs would change the investment equation by forcing American Express to absorb higher provisions at the same time it is trying to improve efficiency.

The October quarter therefore leaves American Express with an unusually clear investor question. The company does not need to prove its customers are spending, because $454 billion of quarterly billed business already answers that. It needs to prove that a premium payments franchise growing revenue by 9% can become structurally more efficient instead of requiring costs to rise almost just as quickly.