AMEX earnings: how Gen Z is making things difficult for American Express

American Express AXP stock is in focus this morning after the credit card company reported its fiscal Q2 earnings that told a familiar story of premium strength.

AMEX came in ahead of Street estimates with an 11% year-on-year increase in earnings per share (EPS) to $4.53, while the firm's overall revenue went up 10% in the recent quarter to US$19.6 billion (approx. $34.4 billion).

However, underneath the glittering headline figures lies an increasingly costly structural evolution, one that’s weighing rather significantly on American Express stock on Friday morning.

AMEX added 3 million new proprietary cards during Q2 – with over three-quarters signing up for high-margin, fee-based accounts.

A massive slice of those additions continues to be Gen Z and Millennial consumers.

Yet, as younger cardholders flock to the brand, their enthusiastic adoption of “premium benefits” is turning into a double-edged sword for the company's operational margins.

Note that American Express shares are currently down over 13% versus the start of this year (2026)

How Gen Z is weighing on AMEX stock

American Express’s aggressive push to court younger demographics through refreshed Platinum and Gold card offerings has yielded millions of tech-savvy, lifestyle-focused customers.

However, Gen Z and Millennial cardholders operate differently than legacy members; they actively maximize every credit, travel pass, and dining stipend attached to their accounts.

This drove total quarterly operating expenses up 12% year-over-year.

Customer engagement and variable reward costs surged as airport lounge visits, hotel credits, and lifestyle perks were claimed at record volumes.

The average card member spent $6,759 in the second quarter – up from $6,393 last year – showing high engagement.

However, fulfilling those lifestyle promises requires huge capital. AMEX has successfully hooked a new generation, but funding their premium lifestyle is proving significantly more expensive than anticipated.

Why American Express stock is in the red today

Despite beating quarterly profit expectations, AMEX shares dropped more than 5% following the announcement as investors focused heavily on the 12% expense hike.

The read for investors was simple: in a market where financial firms are expected to tighten belts, American Express is actually “accelerating” expenditure to defend its turf against competitors like JPMorgan Chase and Capital One.

Sure, the net write-offs remained comfortably low in the second quarter at 2%, proving credit health remains pristine – but narrowing margins due to a 50% increase in “Card Member Services” costs is becoming harder to ignore.

Market participants are concerned that if younger consumers continue rinsing the perk allowances while broader macroeconomic spending cools, expense growth could persistently beat transaction volume gains.

How Wall Street recommends playing AXP shares

The ultimate fallout from this costly acquisition strategy was felt in AMEX’s forward guidance.

Strong first-half momentum prompted management to raise its full-year revenue growth outlook to about 10%.

Yet, notably, executives refused to raise the profit target, leaving EPS outlook frozen at $17.30 to $17.90.

That said, Wall Street hasn’t thrown in the towel on AMEX stock, though. Heading into the earnings print, the consensus rating on American Express stood at Overweight with a bullish $378 average price target.