Premium cards shine, commercial still lags
- Q1 2026 revenue grew 11%, helped by higher spending, card fees, and interest income.
- Net card fees grew 18%, a key sign that premium card demand and retention remain healthy.
- Commercial Services is the weak spot, with billed business up only 4% in Q1 2026.
- International Card Services is the fastest grower, with billed business up 20%, or 13% after currency moves.
- The stock still needs proof that growth can stay high while new capital rules may limit buybacks.
Premium wins, with two drags
American Express is still proving that rich benefits can support high fees. In Q1 2026, total revenue net of interest expense grew 11%, EPS rose 18%, and Card Member spending grew 10%. Net card fees grew 18%, which matters because fee income is a clear signal that customers still see value in the cards.
The best part of the story is the premium consumer base. U.S. Consumer Services billed business grew 10% in Q1 2026. International Card Services grew even faster, with billed business up 20%, or 13% after currency moves. Management also said it is putting Q1 profit upside back into marketing and technology instead of raising full-year guidance, which points to confidence in future demand.
The bear case is not gone. Commercial Services billed business grew only 4%, and pretax segment income fell 2% in Q1 2026. Management now has a clearer plan, including 8 new or improved commercial products and capabilities in 2026, but the main payoff is not expected until 2027.
The other watch item is regulation. American Express expects to become a Category II bank holding company in Q2 2026 because cross-border activity crossed the $75 billion threshold on a trailing average basis. Category II status means tougher capital and liquidity rules. That could matter for dividends, buybacks, and the price investors should pay.
A closed loop with fees
American Express runs a closed-loop payments network. That means it issues cards to customers, signs up merchants, and runs the network that moves the payment. Visa and Mastercard mostly run networks. American Express also takes more of the customer and merchant relationship itself.
The company earns money in three main ways. It collects discount revenue from merchants when a customer uses an Amex card. It earns net interest income when customers carry balances. It also collects net card fees, which are annual fees paid by cardholders.
The model works best when customers spend a lot, pay their bills, and keep paying annual fees. That is why American Express focuses on premium consumers and businesses. These customers tend to spend more and usually have better credit quality.
The model can break if rewards and lounge benefits cost too much, if merchants push back on fees, or if credit losses rise. A slow commercial business also limits the whole company, because business cards and expense tools are a major growth target.
Cards, merchants, and membership
U.S. consumer cards
This is the core premium engine. The refreshed U.S. Platinum portfolio is driving spending, fees, and engagement among high-income customers.
Commercial cards and payments
Commercial is the main turnaround project. American Express is rolling out 8 new or improved products and capabilities in 2026, including cash back and expense management tools.
International card services
International is the fastest-growing segment by billed business. Growth is helped by spending across countries and customer types outside the United States.
Merchant and network services
This segment runs the global payments network, signs merchants, and works with third-party issuers. It supports the closed-loop model and earns from network volume.
Travel, dining, and lifestyle assets
Resy, Tock, lounges, travel services, and dining benefits help make annual fees feel worth paying. They also raise the cost of keeping premium customers happy.
Center expense management
Center adds software for business expense management. It is important because American Express wants to offer more than cards to commercial clients.
Where revenue comes from
Segment mix is based on Q1 2026 total revenues net of interest expense across the four reportable segments. Corporate and other items are not included in the mix, so shares are normalized across the four segments.
What could go wrong
Category II capital rules
High impact · High oddsAmerican Express expects to become a Category II firm in Q2 2026. That status brings higher capital, liquidity, and prudential requirements after transition periods. If the new rules require more capital to be held inside the company, buybacks could be lower than investors expect.
Commercial turnaround takes too long
Medium impact · Medium oddsCommercial Services is growing more slowly than the rest of the company. In Q1 2026, billed business grew 4%, and pretax segment income fell 2%. New products could help, but management has said the larger impact may not show up until 2027.
Credit losses rise from a low base
High impact · Medium oddsAmerican Express has high-quality customers, but it is still a lender. Q1 2026 net write-off rates and delinquency rates were stable, yet provisions rose 9%. A weaker economy could push more customers into late payments and reduce earnings.
Merchant fee pressure
Medium impact · Medium oddsDiscount revenue is the largest revenue line, so merchant economics matter. Laws, lawsuits, surcharging, steering, or lower competitor pricing can pressure the fee American Express keeps from each transaction. The Q1 filing also flags ongoing payment regulation and antitrust matters.
Premium benefits cost too much
Medium impact · Medium oddsPremium cards need rewards, lounges, dining, and travel perks to justify high fees. In Q1 2026, Card Member services expense rose sharply because of new U.S. Platinum benefits and higher use of benefits. If benefit costs rise faster than revenue, margins can suffer.
In one breath
How does American Express make money?
It earns discount revenue when customers use cards at merchants, net interest income when customers carry balances, and net card fees from annual card fees. Its closed-loop network lets it control more of the payment process than many rivals.
Why do investors care about net card fees?
Net card fees show whether customers are willing to pay for premium benefits. In Q1 2026, net card fees grew 18%, which supports the bull case that the Membership Model still has pricing power.
What is the main weakness at American Express?
Commercial Services is the main weak spot. Billed business grew only 4% in Q1 2026, far below International Card Services and U.S. Consumer Services.
What does Category II mean for American Express?
Category II is a tougher U.S. bank regulatory category for large firms with major cross-border activity. American Express expects to enter it in Q2 2026, which may raise capital and liquidity demands and could affect buybacks.