# How American Express makes money

CXProWealth Business Lens · American Express (AXP) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-23 with the SEC (accession 0000004962-26-000409): https://www.sec.gov/Archives/edgar/data/4962/000000496226000409/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $20.1B (+8.9% on the year)
- Operating income: — (operating margin —)
- Net income: $3.7B (net margin 18.5%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: $4.4B (22.1% of revenue)
- Cash conversion (operating cash flow / net income): 1.45x
- Capital expenditure: 4.7% of revenue

## Where the money goes (Q3 FY2026)

- Net interest income → Total revenues net of interest expense: $4.9B
- Non-interest revenues → Total revenues net of interest expense: $15.1B
- Total revenues net of interest expense → Total expenses: $14.5B
- Total expenses → Business development: $1.8B
- Total expenses → Salaries and employee benefits: $2.6B
- Total expenses → Other, net: $1.3B
- Total expenses → Card Member rewards: $5.1B
- Total expenses → Card Member services: $2.0B
- Total expenses → Marketing: $1.8B
- Total revenues net of interest expense → Total provisions for credit losses: $985.0M
- Total revenues net of interest expense → Pretax income: $4.5B
- Pretax income → Income tax provision: $819.0M
- Pretax income → Net income: $3.7B

## Where the revenue comes from

### Segments (Reportable Operating Segments (Details))

| Member | Value | Share |
|---|---:|---:|
| Uscs | $9.8B | 49.0% |
| CS | $4.6B | 22.7% |
| ICS | $3.7B | 18.4% |
| Gmns | $2.1B | 10.4% |

The members sum to total revenue.

### ConsolidationItems (Reportable Operating Segments (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating Segments | $20.2B | 100.5% |
| Corporate and Other | -$96.0M | -0.5% |

The members sum to total revenue.

## Key insights

### Richer benefits are costing more than the higher fees bring

Card Member services cost rose 35.8% in a year, faster than card fees, so more of each fee now goes back as benefits.

Net card fees were $2.97B, against $2.55B a year earlier, and the average fee per card reached $136 on an annualised basis, against $119. Card Member services cost $2.01B, against $1.48B, a 35.8% rise that took the line to 10.0% of revenue. The cost line grew by more dollars than fees did: services equalled 67.6% of Net card fees, against 57.9% a year earlier. _(from the filing)_
The filing ties the fee rise to higher average fees on its premium cards after product refreshes, and names the new U.S. Platinum benefits and higher usage of Card Member benefits as the cause of the cost increase. The company says it expects growth in these costs to moderate once the refresh appears in both comparison periods. _(from the filing)_
A refresh collects the higher fee in advance and recognises it over the year, but pays for benefits only as members use them, so the cost line can run ahead of fees early on. The test is whether services growth slows toward fee growth from here. If usage keeps climbing, the higher fee buys less profit than it appears to. _(analysis)_
Among its stated uncertainties, the company lists rewards and benefit enhancements made "potentially in a manner that is not cost-effective," alongside competition for premium customers, attrition, and whether Card Members keep wanting to pay higher card fees. _(from the filing)_

### One-off items lifted profit well past revenue growth

Revenue grew 8.9%, but a reserve release, a stake-sale gain and a lower tax rate lifted net income much further.

Provisions for credit losses fell 23.5% to $985M, against $1.29B a year earlier. The filing attributes this mainly to a reserve release driven by "enhancements to the models that estimate expected credit losses," against a reserve build a year earlier, partly offset by higher net write-offs. _(from the filing)_
Other, net fell 26.1% to $1.32B, which the filing attributes to the gain on selling its stake in Global Business Travel Group, partly offset by higher legal reserves. Tax took 18.1% of pretax income, against 24.1% a year earlier, on discrete benefits from resolving prior-period items. _(from the filing)_
Some costs ran the other way: salaries and employee benefits rose 14.8%, mainly on restructuring costs. Pretax income rose 18.5% to $4.53B. Diluted earnings per share were $5.42, against $4.14, rising faster than net income partly because diluted shares fell to 674M from 693M as the company bought back stock. _(from the filing)_
A reserve release from re-estimating losses, a stake-sale gain and a discrete tax benefit do not recur on a schedule. The cleaner measure is whether revenue keeps growing faster than rewards, services and partner costs combined, since that spread, not the one-offs, is what the card business itself produces. _(analysis)_

### Cheaper deposits widened the spread on card lending

Interest paid fell while card interest income rose, so net interest income outgrew the 8.5% rise in non-interest revenue.

Interest on Card balances and Other loans rose to $6.39B from $5.97B, on growth in revolving balances. Total interest expense fell to $1.92B from $2.13B, which the filing attributes to lower interest rates paid on customer deposits, partly offset by deposit growth. Net interest income reached $4.94B, 24.6% of revenue. _(from the filing)_
Deposits are the main funding source: interest paid on deposits was $1.24B, against $1.37B a year earlier, and made up 64.8% of total interest expense. Interest on long-term debt and other fell to $676M from $760M. _(from the filing)_
Savings deposits gathered directly from consumers reprice with market rates, so funding costs fell quickly while card interest kept growing with balances. The same link works in reverse: if market rates rise, deposit costs would climb faster than the yield on existing balances. _(analysis)_
The filing names governmental moves to cap credit card interest rates as a risk that could reduce net interest income. _(from the filing)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of American Express (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what American Express's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- American Express 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/4962/000000496226000409/ (2026-10-23)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03