American Express Q2: Fee Revenue Surge Signals Strength

American Express (AXP) reported second-quarter earnings on July 24, with earnings per share of $4.53 beating expectations, but revenue net of interest expense of $19.64 billion narrowly missing estimates. Shares dropped over 4% following the announcement.

However, the headline numbers don't tell the whole story. The key highlight was fee revenue, which grew 15% year over year, making it the company's fastest-growing revenue item. Management expects this growth to accelerate over the next two quarters, exiting 2026 at a high-teens rate.

This growth comes after American Express raised the annual fee on its flagship Platinum Card from $695 to $895 at the beginning of 2026. The fact that customers have accepted this increase demonstrates the brand's pricing power.

Additionally, the Platinum portfolio is now the fastest-growing consumer group in the United States, and Millennials and Gen Z account for approximately 65% of new consumer accounts added in Q2. 75% of all new accounts were fee-paying products, indicating strong demand for premium offerings.

American Express's performance is a key indicator of the health of the premium consumer segment. Despite broader U.S. consumer sentiment declining roughly 20% over the past year, AXP's affluent cardholder base remains strong.

The company's net write-off rate held firm at 2%, and the percent of card balances at least 30 days past due actually declined from 1.3% to 1.2%. This shows that premium borrowers are more resilient to economic downturns.

By winning over younger generations, American Express is securing long-term growth. Analysts estimate the company will grow earnings by an average of 14% annually over the next three to five years.

The stock trades at 19 times its 2026 earnings estimates, which may seem high, but the high-margin fee revenue and strong brand loyalty justify the valuation. The Q2 earnings reinforce that AXP's business model is durable and capable of delivering consistent returns.