American Express Q3 Shines: Buffett's $48B Stake Still Winning

American Express reported third-quarter results that beat expectations, with net revenue up 9% year over year to $20.1 billion. Billed business, a key metric of payment volume, rose 8%, and the company added 3.1 million net new card members. Spending per user also increased by 5%, indicating healthy engagement from its affluent customer base.

Credit quality remained excellent, with a net write-off rate of just 1.8%. This low rate reflects the company's focus on high-credit-quality customers who are less likely to default. The strong credit performance helps keep the company's risk profile low and supports consistent profitability.

Management raised its full-year profit outlook, now expecting adjusted earnings per share (EPS) of $17.60 to $17.90. At the midpoint, that represents a 15% increase from 2025. The company also highlighted its strong return on equity, which was 38% for the first nine months of the year, on pace for its best year since at least 2010.

CFO Christophe Le Caillec emphasized the company's spend and fee-based model, which benefits from high loyalty, lower credit risk, and operating leverage. He noted that over the past decade, American Express has more than doubled revenue, more than tripled EPS, and reduced its share count by over a quarter.

Looking ahead, American Express is focusing on younger customers, with two-thirds of new card members coming from Gen Z and Millennials. The company is also investing in AI, including a partnership with OpenAI to integrate Resy reservations into ChatGPT and develop an Amex plugin for cardmember offers.

The strong quarterly results demonstrate that American Express's business model remains robust and its competitive advantages are intact. The company's ability to grow revenue and attract new customers, especially younger ones, suggests a long runway for future growth. This is crucial for a mature company and supports the stock's long-term appreciation potential.

The raised guidance signals management's confidence in the business, which often leads to positive analyst revisions and can boost the stock price. Additionally, the exceptional return on equity and low write-off rates highlight the company's efficiency and disciplined risk management, which are key drivers of shareholder value.

For Berkshire Hathaway, which owns 22.5% of American Express, the continued success of the investment adds significant value to its portfolio. American Express is Berkshire's second-largest holding after Apple, representing 13.1% of its portfolio. As American Express thrives, it reinforces Berkshire's investment acumen and contributes to its overall performance.

The focus on younger demographics is particularly important because it ensures the company's relevance and growth for decades to come. By capturing Gen Z and Millennial customers early, American Express builds long-term loyalty and spending potential. This strategic move helps mitigate the risk of customer attrition and positions the company for sustained success.

Moreover, the AI initiatives show that American Express is not resting on its laurels but is actively seeking innovative ways to enhance customer experience and operational efficiency. This forward-thinking approach could lead to new revenue streams and further differentiate the company from competitors.