By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
Despite strong billed business growth, American Express's (AXP) reliance on affluent consumers and fee income makes it vulnerable to economic downturns and inflation. The key risk is margin stability in a downturn, while the deposit pivot is seen as a potential hedge but may not be enough to offset credit losses.
Risk: Margin stability in a downturn
Opportunity: Deposit pivot as a hedge against credit deterioration
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Strong spending and retention among Platinum Card members supported its Q1 performance.
The company’s credit quality remains in line with what it's been over the past several quarters.
When inflation was surging in 2022, American Express reported a robust 25% net revenue gain.
This year hasn't been a smooth ride for American Express (NYSE: AXP) investors. The credit card company's shares are down about 16% in 2026, lagging the overall S&P 500 index by a wide margin.
But investors shouldn't let the financial stock's disappointing performance overshadow its underlying fundamental strength. American Express saw its billed business, a measure of card spending, jump 10% year over year in the first quarter. This was the fastest pace of growth in three years.
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Can affluent consumers keep it up and continue driving the company's success?
During the three-month period that ended March 31, American Express reported billed business of $428 billion. Of note, retail spending overall increased 11%, while spending at luxury retail merchants was up 18%. These trends clearly aren't representative of typical consumer behavior, as many households are concerned about the state of the economy right now.
Attention should go to the Platinum Card, which posted an acceleration in spending growth during Q1. The leadership team highlighted strong retention rates, even with a higher annual fee being introduced last year.
And across the entire product portfolio, 73% of new card accounts were for fee-paying products. There remains robust demand for American Express's premium offerings, especially among the Millennial and Gen Z cohorts.
The Consumer Price Index rose 3.8% year over year in April, a nearly three-year high. Consequently, the biggest question shareholders probably have, particularly for a company that's dependent on the health of the consumer, centers around the impact of inflation on the spending behavior of American Express's card members.
In 2022, the last time inflation was surging, American Express registered year-over-year growth in billed business of 25%, leading to a 25% net revenue gain. Inflation these days isn't nearly at the same level as it was earlier this decade.
"While the macro and geopolitical environment remains uncertain, we believe we are well positioned to continue delivering strong results given our focus on premium customers, our spend‑ and fee‑centric model, and very strong portfolio quality," said CEO Stephen Squeri on the Q1 2026 earnings call.
That portfolio quality is supported by a net write-off rate of 2% in the first quarter. This was an improvement from 2.1% in the year-ago period.
For now, investors should have confidence that the fundamentals will remain intact. As the current valuation looks reasonable, American Express's stock performance shouldn't be negatively impacted by inflationary pressures. That's the benefit of targeting an affluent customer base.
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American Express is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Amex's near-term upside hinges on durable premium-spend and travel demand among affluent consumers; if macro weakens, earnings won’t be sustained despite current strength."
American Express reported 10% YoY billed business growth in Q1, with Platinum-card spend accelerating and a high share of new accounts paying fees. That read sounds bullish, but it’s a cyclical premium story: the health of the affluent consumer and travel demand drive much of Amex’s growth, and both are vulnerable to inflation, unemployment, and sentiment shifts. A 2% net write-off rate is healthy, yet could rise if a downturn hits. The real risk is margin and revenue mix—fee income and rewards costs may not keep pace with a slowing top line, leaving valuation dependent on a durable luxury-spend cycle rather than a broad secular trend.
Even if affluent spending holds, a downturn could quickly erode premium-fee revenue and raise delinquencies; the stock may be pricing that risk already.
"AXP’s reliance on a younger, premium-tier demographic creates a hidden tail risk if the labor market softens, as these cohorts have less historical experience navigating a credit tightening cycle."
AXP’s 10% billed business growth is impressive, but the narrative ignores the 'wealth effect' fragility. While the article highlights 18% growth in luxury spending, this cohort is highly sensitive to equity market volatility and interest rate pivots. With AXP shares down 16% in 2026, the market is pricing in a 'normalization' of credit quality that the 2% write-off rate currently masks. If the labor market softens, the Millennial/Gen Z cohort—who are newer to the credit cycle—will likely be the first to default, disproportionately impacting AXP’s premium-but-leveraged model. The valuation looks attractive, but only if you assume the consumer is immune to a sustained 'higher-for-longer' rate environment.
The strongest case against this is that AXP’s premium customer base effectively functions as an 'economic bunker,' showing lower beta to recessionary shocks than the broader retail banking sector.
"Strong spending growth among affluent cardholders is real, but the article provides no valuation anchor or forward earnings estimate to determine whether AXP's 16% YTD underperformance reflects justified skepticism or a buying opportunity."
AXP's 10% billed business growth is genuinely strong, and the 2% net write-off rate shows credit quality hasn't deteriorated despite macro uncertainty. The luxury retail +18% and 73% fee-paying new accounts suggest the affluent segment is insulating the business. However, the article conflates spending growth with *profitability* growth—it never discusses net margins, return on equity, or whether AXP's valuation already prices in this resilience. At -16% YTD while S&P 500 is up, the market is clearly skeptical. The CEO quote about 'well positioned' is boilerplate; it doesn't address whether affluent consumers can sustain this pace if rates stay elevated or recession fears intensify.
If affluent consumers are spending 10% faster partly *because* of inflation (nominal spending bump, not real volume), and if credit quality only looks good because write-offs lag actual defaults by quarters, AXP could face a sharp earnings miss in H2 2026 when macro cracks show up in the data.
"10% growth looks strong but lacks the margin of safety the article claims once inflation and potential wealth erosion are factored in."
American Express's 10% billed business growth to $428B in Q1, led by 18% luxury retail spend and Platinum acceleration, underscores its premium focus. Yet the article underplays how this outperformance occurred against a still-elevated 3.8% CPI print and while shares already lag the S&P 500 by 16% YTD. Retention of fee-paying cards at 73% of new accounts is positive, but the 2% net write-off rate offers little cushion if unemployment ticks higher among high earners. The 2022 precedent of 25% revenue growth during peak inflation may not repeat at current levels, leaving AXP exposed to any wealth-effect reversal in equities or housing.
Even if macro conditions worsen, the affluent cohort's balance sheets and low sensitivity to everyday prices could sustain spend far longer than the market expects, preserving the current trajectory.
"The real risk is margin compression in H2 if unemployment rises and equity markets fall, even with 2% write-offs today."
Responding to Gemini: I’d push back on the 'economic bunker' claim. Premium customers can be resilient, but AXP’s growth relies on new fee-paying accounts and marketing spend—both margin-sensitive in a downturn. Even with a 2% write-off rate now, delinquencies can rise with unemployment and weak equity markets, compressing profitability before billed growth pain is visible. The stock pricing may already reflect this risk; the real test is margin stability in H2.
"AXP's transition to a deposit-funded model provides a structural margin hedge that offsets potential credit losses."
Gemini and ChatGPT are missing the structural shift in AXP’s funding. Unlike traditional banks, AXP is aggressively pivoting toward high-yield savings deposits, which now fund a significant portion of their loan book. This lowers their cost of funds compared to wholesale borrowing. If rates stay 'higher-for-longer,' this net interest margin expansion acts as a massive hedge against the credit deterioration risks you all keep citing. You are analyzing a credit card company, but they are becoming a deposit-gathering machine.
"Deposit funding is a structural advantage only if deposits remain stable during stress; no evidence yet that AXP's affluent depositors won't flee to treasuries in a downturn."
Gemini's deposit pivot is material, but it's a *liability* story masking an *asset* problem. Higher deposit funding costs (competing with money market funds at 5%+) eat margin gains if credit losses accelerate. The real question: does AXP's deposit base grow fast enough to offset potential loan losses in a downturn? If affluent consumers pull deposits during equity volatility, that 'hedge' evaporates. We need deposit stickiness data, not just funding mix.
"AXP's deposit shift won't hedge against spend-driven revenue declines because fee income dominates over interest margins."
Gemini's deposit pivot understates AXP's structural reliance on fee and rewards economics over net interest income. High-yield savings may cut wholesale funding costs, but they add rate-sensitive liabilities competing at 5%+ money market levels. Any slowdown in the 10% billed business or 18% luxury spend from equity volatility would compress fee revenue faster than NIM gains can offset, repeating the 2022 pattern where nominal spend masked volume weakness.
Despite strong billed business growth, American Express's (AXP) reliance on affluent consumers and fee income makes it vulnerable to economic downturns and inflation. The key risk is margin stability in a downturn, while the deposit pivot is seen as a potential hedge but may not be enough to offset credit losses.
Deposit pivot as a hedge against credit deterioration
Margin stability in a downturn