American Express (AXP) Q2 2026 earnings call transcript

I will now turn the call over to Karthik Ramachandran, head of investor relations. Please go ahead. Thank you, Donna, and thank you all for joining today's call. Today's discussion contains forward-looking statements about the company's future of business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to defer materially from these statements are included in today's presentation slides and in our reports on file with the SEC.

Today's discussion also contains non-gapped financial measures. Comparable gapped financial measures are included in this quarter's earnings materials as well as the prior period earnings materials discussed today. All of these are posted on our website at IR. AmericanExpress. com. We will begin today with Steve's query, Chairman and CEO, followed by Christoph Likayak, Chief Financial Officer. After their remarks, we'll move to Q&A.

With that, I'll turn it over to Steve. Thanks.

Thank you, Karthik. Good morning, and thanks for joining us today. We delivered another excellent quarter with 10% revenue growth and EPS at $4.53. Our results continue the momentum we've seen over the last few quarters and reinforce the confidence that we have in our strategy for sustaining long-term growth. Based on our better than expected performance you get a date, we are raising our full-year revenue growth guidance to 10% and we plan to reinvest this outperformance in growth initiatives across our business.

We continue to expect full-year EPS of $17.30 to $17.90. I'm sure the question on your mind right now is if you're outperforming your expectations and you are raising your revenue guidance, why aren't you also raising EPS guidance? I'll answer it. We have a choice. We can either drop the overperformance to the bottom line and buy back more shares or we can invest to grow the business further through the wide range of attractive growth opportunities we have across our business, both in the U. S. and international.

We've chosen the latter because in the long run, it is the one that creates the most value for our shareholders as demonstrated by our high ROE. That is what we have consistently done over the past several years. As we're at the halfway point of the year, let me take a step back and walk you through how we approach this year and how our results reflect the strength of our business model and the strategic decisions we've made to position the company for long-term success.

Over a year ago, consistent with our strategic focus on strengthening our leadership in the premium space, we made the decision to make a significant investment in enhancing our flagship platinum products in the U. S. While I've said this before, it's worth repeating. When we invest in a product refresh, we expect to realize the full benefits a year or two after launch.

First, we anticipate increased customer engagement as well as strong demand and spend growth. Then, as we lack the investments and as the new fees kick in over time, we expect fee revenues to increase and VCE expense growth to moderate. And by focusing on bringing in high credit quality premium customers, we expect to see consistently strong credit performance, which supports strong earnings growth.

With that in mind, as we entered 2026, our plan was to follow us, make the upfront investments in the platinum value propositions, which we anticipated would continue to drive the high pace of revenue growth, maintain strong credit risk management, and drive operating leverage across our marketing and operating expenses. The combination of high revenue growth, strong credit performance, and disciplined expense management were key elements of our plan for driving mid-teens EPS growth for the fourth consecutive year.

Six months into the year, we're seeing stronger momentum than we expected. The investments we made in our value propositions have driven accelerated spend and revenue growth. And our platinum portfolio is now the fastest growing in our U. S. consumer business. Our credit performance is also better than we expected. Retention rates remain very high, and we continue to track the large number of high credit worthy customers with 65 percent of new consumer accounts coming from millennials and Gen Zs.

Importantly, we've continued to deliver strong revenue and earnings growth, while at the same time being able to invest more in customer acquisition and technology. Over the course of the year, as we capitalize on the growth opportunities that position the company for long-term success.

In looking to the second half of the year, we've great momentum. We expect hard-speed growth to accelerate, credit to continue to be very strong, and variable car member engagement growth to decelerate as we laughed the platinum refresh of last year.

As the platinum refresh has shown, the key to our growth momentum over the past several several years has been our focus on investing in innovating our membership-based value propositions to attract and engage premium customers across generations and geographies.

Creating compelling premium value propositions that are competitively differentiated is not just about reward points. It's about enabling spending power, providing access to highly desirable travel, dining, entertainment and exclusive experiences. Forging relationships with world-class partners who provide additional value and having talented dedicated colleagues who back our customers and merchant partners when issues arise. In essence, a great premium value proposition is not just a product.

It's a multifaceted relationship between the brand and the customer. This is what our membership model delivers, and it is very difficult to replicate on a global scale.

To build deep, enduring relationships with our premium customers, we've leaned in to adding benefits and value, and where they spend, like travel, which is why we continue to expand our lounge and luxury hotel networks, and dining, which is why we acquired Resi-Top and our proposed acquisition of the fork, a leading online restaurant booking platform, which would be the best. It's also why we've added new sports sponsorships, like the NFL and Fanatics, and provide access to a wide variety of exclusive membership only experiences around the world.

Deepening the engagement with our premium customers is also why we continue to introduce new digital payment capabilities, such as the recent announcement that card members can redeem membership reward points directly within Apple Pay, giving them greater flexibility to use their points on everyday purchases. A core element in designing our value propositions is working with world-class partners who value the opportunity to reach our high-spending premium card members.

We're expanding partnerships with many of the premier companies in the world across a range of industries that further enrich the value of membership and drive customer engagement. In fact, just a few days ago, we announced a new global partnership with Allacore, the booking and loyalty platform for a core's portfolio of 45 worldwide hotel brands, which include Raffles, Fairmount, and Sulfatel.

Importantly, our approach to creating value propositions is not a one-size-fits-all exercise. It is tailored to meet the needs and preferences of different customers and in different locations.

For example, the Platinum Card is designed for customers who value premium, travel, and lifestyle perks, like airport lounge access, luxury hotel benefits, and one-of-a-kind experiences. The Gold Card, on the other hand, is designed for those who do some traveling for prioritize their spending on dining, grocery, and other everyday benefits. Likewise, our co-grant cards each have their own value propositions with benefits that appeal to their specific customer basis.

And our value propositions for small and medium-sized business customers are designed to fit the different payment and financial management needs of their businesses. For example, in the second quarter, we introduced the $300 Chat TPT Business Annual Statement Credit for our U. S. Business Platinum and Gold Card members, and we launched the pilot of our new expense management platform to an initial group of middle-market customers.

We've been executing the same strategy internationally, creating premium value propositions with benefits, partnerships, and experiences that are tailored to the customer needs and local dynamics in each geography at price points that are typically higher than in the U. S. Since 2003, we've refreshed our Platinum Card in approximately 80 percent of the countries where these cards are issued, which has helped to drive 20 percent, as I've suggested, growth of international Platinum Card spending this year. Furthermore, around 70 percent of new consumer Platinum Card accounts outside the U. S. are coming from millennials and Gen Zs.

This approach to innovating our premium value propositions has served as well, and we plan to continue implementing this successful playbook across our business. As a result, we have built a business that compounds earnings more durably and at a faster pace than in the past. When compared to our historical performance, we now have more momentum in both the top and bottom lines, a more premium fee-paying customer base with strong loyalty, less credit risk, including when it's under stress, and more younger customers who represent greater lifetime value.

In sum, we are competing for a position of strength. We are tracking ahead of the expectations we set at the beginning of the year, generating momentum that enables us to invest more in 2026 than we initially planned in opportunities that drive long-term growth. In fact, our proposed acquisition of the Ford is one of those great opportunities. We did not have it originally in our plan at the beginning of the year, and will require investment in the second half of the year.

As our strong performance has shown, we are winning with the next generation of premium customers, and we have significant growth opportunities across our businesses and around the world. Taken together, this gives us confidence in our long-run way for sustainable growth and our ability to continue delivering attractive returns for our shareholders. I'll now turn it over to Kristall for details on the quarter.

Thanks, Steve, and good morning, everyone. We had another strong quarter with revenue growth of 10% and EPS up 11% year-to-year. Pre-tax income was up 15%, while net income was up 8% due to prior-year tax discretes. The strength of our premium customer base combined with the success of our product strategy has driven accelerated momentum in the first half of the year. Spend growth stepped up to the highest level we've seen in three years, up 9% effects adjusted in both Q1 and Q2. And balanced growth continued to keep pace with spending.

Demand for our premium products remained strong, with over 70% of new accounts acquired on fee-based products this year. And car fees have now grown at a double digit rate for 32 consecutive quarters. Importantly, our focus on premium products continues to drive improvements in credit performance. The strengthening we have seen in our credit performance is a deliberate outcome of our strategy to invest in value propositions that attract customers with high credit quality.

As a result of that strategy, both delinquency and rider rates remain below 2019 levels. And delinquency rates have been between 1.2% and 1.3% for over three years.

The combination of top-line momentum, excellent credit, and discipline expense management have together supported 11% revenue growth and 14% EPS growth through the first half of the year, even as we have invested in our US Platinum Value Group positions. These results demonstrate the strength of our model and give us confidence in our ability to drive sustainable growth in line with our long-term aspiration.

Turning to build business trends for the quarter on slide four, overall spend was up 9.4% effects adjusted, almost a point higher than Q1. Growth was broad days across categories with goods and services spending up 9% and T&E up 10%. Restaurant spending, our largest T&E category was up 10%. End-line spending, picked up further from the strong growth we saw in Q1, also up 10% year over year. Our customers are showing strong demand for travel with global MX travel bookings up 22% year over year in the quarter.

US consumer spending was up 11%, the highest level of growth since Q1 2018, excluding periods impacted by the pandemic. And we continue to see good engagement from our younger customers. Millennial and Gen Z, which make up the largest share of US consumer spending, remained our fastest growing cohorts this quarter. Commercial spending picked up to 5% with both US SME and large and global customers growing at the same pace.

We are still in the early stages of our commercial product roadmap, but we are encouraged by recent trends. At the same time, we do expect to see impacts from the sale of the small business core portfolios in the balance of year, which I will get to a bit later when I discuss our outlook.

International also delivered another strong quarter, with spend up 12% effects adjusted. Growth remains broad based across consumer and business customers and across geographies with four of our tough five countries growing at a double digit rate.

Turning to new card acquisitions, we acquired 3 million new cards in the quarter, with continued momentum in acquiring younger customers and attracting new customers onto our fee-paying products.

Looking at balance growth and credit, total balance increased 9% over year effects adjusted in line with bill business. We have now lapped the roughly 1% point impact on balance growth from when the small business core portfolios were classified as health to sale over a year ago. As a reminder, although these two portfolios were classified as health to sale, we continue to earn economics until the transfer of the portfolios to the new issuers. One portfolio transfer happened in April, this year, and the second one is expected in Q3.

Credit performance continues to be very strong. The Q2 rate of rate was flat versus last quarter, while the delinquency rate declined.

Provision expense of $1.1 billion included a reserve release of $191 million, mostly reflecting further strengthening of portfolio credit performance.

The strength of our model also holds in a stressed environment, as demonstrated by the Feds recently released Seacal Results. We show that under a severely adverse scenario, we have the lowest projected credit card loss rate across all banks and a pre-tax ROE of 3.8% over 9 quarters.

Turning to revenue on slide 13, revenue was up 10%, marking our fourth consecutive quarter of double-digit revenue growth. Net card fees reached record levels in once again our fastest growing line, up 15.4%. We continue to see good momentum in attracting customers onto our premium products, with 75% of new accounts acquired on fee-paying products in the quarter, the highest level we have seen since we increased our focus on premium products.

Net interest income was up 11% this quarter. We saw around a 1% point impact to Euro-Bier NII growth from the sale of one of the small business core brand portfolios. We continue to grow balance, balances largely in line with spending, while driving higher NII growth by expanding the margin earn on balances.

We are also seeing demand for our deposit products, with balances from our US consumer and small business banking deposit products up 9% over Euro. The majority of deposits come from our con members, deepening their engagement with our membership model, and with around 10% of our US card members currently holding a deposit account with us, we see a long runway for growth, turning to expenses on slide 18, marketing and topics each grew 6% in the quarter, and the VCE to revenue ratio was 44.6%.

The step up versus the first half of last year reflects the investment we made in the value group positions of our US platinum cards when we refreshed these products in September last year.

As we discussed at the start of the year, the VCE to revenue ratio is linked to the level of con member spending. Through the first half of the year, we have seen stronger spend than we expected coming into the year, including in categories like airlines, where customers earn and use rewards. These factors are contributing to a slightly higher VCE ratio than we originally expected.

Moving on to capital, we return 2.9 billion of capital to our shareholders, including 0.6 billion of dividends and 2.2 billion of shared purchases. Our business continues to generate very strong returns, with an ROE of 36% this quarter. Our strong ROE enables us to return high levels of earnings to our shareholders, over 75% over the past three years.

Turning to our 2026 outlook, let me spend a few minutes on how we're thinking about the balance of year. Starting with Billings and Revenue, we expect to see impacts from the sale of the two small business corporate portfolios. The transfer of the portfolios are staggered across Q2 and Q3 building to the full impact by Q4. Starting in Q4, we expect a quarterly impact of around 1 percentage point to spend growth and around 2.5 percentage point impact to net interest income, until we last the portfolio sales. But together, the total revenue is about a 1 percentage point.

I would note that the portfolio sales will have a negligible impact to pre-tax income, and these impacts were incorporated in the guidance we provided for the year. On card fees, we expect growth to accelerate in Q3 and to exit the year in the high teens. And we continue to expect credit metrics to be generally stable throughout the year.

Turning to expenses, we expect marketing to be up by around 10% year over year in the second half of the year, driven by increased investments in customer acquisition. We continue to expect operating expenses to grow in the mid-single digits for the full year, including the additional investment in technology we previously discussed.

On the VCE ratio, given the higher level of spendings we have seen this year, we now expect the ratio to be between 44% and 45% for the full year. We will have the impacts of the platinum refresh starting in Q4, resulting in lower growth in VCE expenses. We feel really good about our momentum and our results halfway through the year, having delivered 11% revenue growth and 14% EPS growth, as well as the opportunities for continued growth ahead. Given the momentum in the business, we are raising our revenue guidance and now expect full year revenue growth of 10%. And as we increase investments in new customer acquisition and technology development, we are maintaining our full year EPS guidance of 1730 to 1790.

The guidance does not include the potential impact from the sale of our equity interest in global business travel group that we previously announced. We expect the transaction to close in the second half of the year and we'll provide more detail then.

With that, a turn the call back over to Karthik and we'll take your questions.

Thank you, Kristoff. We will now start the Q&A session. We ask that you please limit yourself to just one question. Thank you for your cooperation. Operator?

Hey, good morning Sanjay. So on USCS billing, so you're absolutely correct. So it's up to 11.4%. We went back in time to see when was the last time we saw such a growth. And if you're strip out the discontinuity of COVID, you have to go back to Q1 2018. So it's truly an impressive performance. One of the biggest contributor to the acceleration is the platinum refresh. It is by far the biggest product we have. It has the fastest growth rate. There's truly a lot of momentum. We see that momentum coming from new card member acquisition, as well as either tenured card members that are increasing their spend, as well as people who have either another card in their wallet and a grading to platinum card.

And so platinum is definitely pulling a lot of a lot here in the acceleration. If you go back to Q1, we quantify that acceleration and I talked about it wasn't a Q1 number, but we talked about a 600 basis point acceleration across the entire platinum portfolio in US consumers. So it's truly coming from a lot of tenured card members that are just consolidating their spend because they enjoy their new value proposition.

Yeah, I, Sanjay, let me just add a couple of points. I think with the refresh engagement has been really accelerated. And that's driving a lot of the spend. And when you start to dig into the numbers, we saw a 22% increase in travel bookings. And that, you know, I mean, we put that into the value proposition. You look at restaurant spend was up 10%, but when you look at resi restaurant spend, it's double that. So again, I think, you know, what we've, what we've hit on really, I think well here with this, especially with the platinum refresh, is, you know, we're stepping up engagement. So I think it's, you know, it's a kind of, it's a combination of, you know, new acquisition, but it's also, it's also the engagement that we're getting with existing card members.

And it is, it is very impressive to be at 11% for us at this stage of the game.

And to their second part of your question about the geopolitical, you know, you know, events out there. So when you look at a granular data, you do see, right? You do see gas fan, you know, increasing significantly. Now, it's around 2% of the total billing. So it's not meaningful in terms of impact to the overall numbers. You do see as well, you know, travel to the Middle East, go through the Middle East, you know, like an impact, as you would expect.

But travel globally is up 10%. And, you know, this is the highest number. Oh, hell, I mean, it's up 10%. And this is the highest number we've seen in the last six quarters, right? So, so there is, you know, there is like some impacts, but there's no, you know, evidence of a general slowdown and people are offsetting these transactions with, you know, all the transactions in all the categories. So, you know, it's, it's not really visible that they're out of macro level.

Hey, good morning, guys. Good morning, Ryan. So Steve, you know, you noted the decision to reinvest the upside in revenue growth. Maybe just talk a little bit more about the areas that you're investing in. I know you referenced customer acquisition and technology. And maybe just talk a little bit about what you think this will do in terms of your ability to sustain these types of top line growth levels into 2027. Thank you. Okay. Thanks for the question.

Look, I think, you know, we've gotten to a point where, you know, the company's got quite large and to continue the revenue growth, it requires us to continue to invest. And those investments come across a wide range. The one thing that I did call out was, obviously, we've acquired, we're going to acquire the fork, all things, you know, working out the way we hope they work out. And that will look, you'll be deal cost, integration costs, things like that.

You know, we were investing in technology. And when you think about our company, you know, we've got international business, U. S. business, corporate corporate business, small business, we operate in so many different countries, we have emerging or enhancements or refreshes that need to occur. And so across a wide range of technology platforms, we're able to pull some of those investments into the second half of the year. And so to be able to get to things quicker is a huge advantage for us, because we're going to have to make these investments over time. And why not make those investments sooner rather than later to update the platforms and so forth. The other thing that is still out there is there are still card acquisition opportunities.

And to my point about sustaining the growth, you know, you need to continue to invest in acquiring, you know, high revenue generating card holders and high spending card holders to continue the, you know, the really good revenue growth that we've seen, you know, over the last few years. And so, you know, that's where you can think about these investments occurring there. It's in technology a little bit in the fork and also in card acquisition.

And then you've seen, we've announced a number of things that we're participating in from an agentic commerce perspective. And, you know, that requires investment as well. And those things weren't on the, you know, weren't on the docket at the beginning of the year. So, you know, it's not a, it's not a stagnant business. And it's not a business that you don't need to put gas in a tank. And so, that's what we're doing. And I think it's a strategy we've employed for a number of years. I think it's really served us well. I mean, we've been consistently growing the last four years, double digit revenue growth, mid-teens EPS growth. And, you know, we don't look at just a year.

We look at it the medium to long term. And we think this is the best strategy for us and for our shareholders.

Okay. Thanks for the question, Don. Look, I think, you know, we announced a very aggressive, you know, commercial card roadmap earlier in the year. I think you're seeing a little bit of a bounce back. I mean, we were at, you know, 5% from an SME perspective, 5% from a large and and global perspective. And look, I mean, from a middle market space, you know, ramp and brex have been out there and center, which is our expense management system, which we just launched. I think this will help us not only retain business, but actually win new business as well. It's middle market where we have seen the softness. Small business has been very strong and large and global and corporate, you know, has been moving along, I believe, very nicely.

So, you know, my perspective is we've seen an uptick in SME buildings over the last two quarters. And, you know, I think the roadmap that we have and this financial, you know, the launch of the middle market expense management software will certainly help us. As far as agentic, I think, you know, the closed loop, we've talked about the closed loop for many, many years. We've talked about it from a, you know, a physical perspective and then we talked about it from an e-commerce perspective. And I think we're even more advantaged from the e-commerce perspective, both from a fraud and data. But when you think about agentic commerce and you think about just how potentially fraud it is with not only fraud, but also with hallucinations that can occur, I think by understanding what a card member truly wants to have and sort of intense and having that data, being able to go out and then match that purchase data, will enable us to provide and back our customers a lot better, which is why we announced, you know, months ago now, the agentic insurance product where I think we're going to have a huge advantage from a trust service and security perspective over our competitors, you know, in the marketplace because we have the data from both sides.

We know what the customer want, we'll know what the customer wanted to do, and we'll also know, you know, what the merchant delivered. And I think, you know, people, we're in the, you know, people say you're in the early innings. We're sort of in the pre-season. We didn't even get to the early innings of the regular season yet. And I think people are, you know, a little bit nervous. They're nervous about interacting in this space.

And what we hope is because of our knowledge of both sides of the equation, that as this begins to take off, they will choose us because of our ability and our historical, you know, track record of backing our customers. And so I think that's our advantage. And I think, you know, we've talked about the advantage in a physical world. We've seen it play out there. We've seen it play out in the e-commerce. I think it's going to play out even more over time. But as I said, really, we're not even in the pre, we're not even in the early innings.

And when you grow over it next year. And additionally, we talked about higher client incentives and business development expense. Can you talk about those trends considering the big, the big wins you've had recently with the NFL fanatics and so on? Thanks. Okay, I'll take the U. R. R. question. So, you know, we, the U. R. R. , for those who are not familiar, is part of the, you know, key element of our membership rewards program. We evaluate and quantify the ultimate rate of redemption. From an accounting standpoint, you know, we book, we expense the cost of those rewards when they are earned. And we make an assumption about how many of those points ultimately are going to be redeemed.

So, it's a fairly complex calculation. So, on a regular basis, we update the models. We try to make it better. We improve the data that feeds the model to be more accurate. And as you can imagine, there's a lot of, you know, reviews and, you know, a lot of, you know, work that goes into any revision of that, of that assumption. And so, when we did that, we came up with a slightly lower ultimate rate of redemption, but it really hasn't changed it much. I think, you know, we report externally the ultimate rate of redemption is like 96 percent rate. And it really hasn't changed that much. So, it has a small benefit in the quarter, in terms of the MR cost.

But at the foodier level, it's just going to be, like, mean, it's going to be the minimum. So, you know, it's not, it's more hygiene and making sure that we have the right accounting process more than anything else.

Yeah. Thanks for the question, Greg. When, when we think about the NFL fanatics and, you know, look, the other sponsorships that we have, the, the NBA Formula One, the USGA, Wimbledon, and, you know, US Open Tennis. Sponsorships are really all about access for our card members, experiences, special things that we can do, which is also why we have, you know, our, our event event, stadium, benefits that we have as well, with over 50 different locations around the world. And so, what we're trying to do there is package up a group of experiences that are, that our card members really like, and that, you know, and you could throw music in direct to artists, things that we do as well.

Specifically with, you know, the NFL, I think with the NFL NBA Formula One, it gives us on a global basis access for our card members to events and to venues that they, that they want to go to. And fanatics sort of ties it all together for us, not only from an experience perspective when we have fanatics, but also the various things that, that they, that we will do with fanatics at the NFL Draft, NBA, all-star games, Super Bowl, et cetera. But also from a merchant perspective, and a collectibles perspective, and trading cards, and things like that. So, I think you tie that whole experience together. From a cost perspective, both fanatics and the NFL, when you think about our entire marketing budget is, is very, very tiny.

And they are in the plan. They're in the run rate. So when we talk about increased investments, that's not some of the things that we're investing in. But we really like the assets that we have, and we like how they work together, and you know how our card members really enjoy them.

Can we sort of think through what the one to two year retention rates are on new customers versus what you've seen historically, and also to the extent you get feedback when customers don't renew the card, what are the reasons that a customer might walk away? Hey, good morning, Rick. Other, you know, the executive summary that the answer to your question is we're not seeing anything on attrition. And I will send you back to a slide that we showed in Q1 that was actually pretty detailed on the platinum card where we raised the fee by $200, and either by the end of Q1, we had repriced if you want about a quarter of the US platinum portfolio, and the retention rate were not only through the roof, there were like flat year over year, and last year, there was like no pricing increase.

So we're not seeing anything on the attrition level. They remain very high. In terms of, you know, why the people that are trading or downgrading, sometimes people say, you know, I'm not, you know, I just retired, I just don't need, you know, that kind of benefit anymore, and I'm just going to downgrade vice versa. As a matter of fact, I was saying earlier on that we've seen on the platinum card as a result of the introduction of the new value proposition, a lot of con members upgrading. So either, but in general, attrition levels remain very consistent with what we've seen in the past.

And we've been, as you know, refreshing a lot of our new products, and we've been, you know, reprising a lot of the new con members. And the end result is that attrition level would have remained very, very constant and very low for, you know, the past few years.

Thanks for all those questions, Mark. Now, so I think that, you know, what's interesting here with Rezi with talk and the fork, you know, what we've really tried to do with Rezi and talk in the fork is to create many closed loops within our closed loop, right? So what we've done here is we're connecting our card members and we're connecting merchants. But what's also really important is to remember that Rezi, talk, and the fork are open platforms. So they're open also to non-card members, and that becomes useful for us from an acquisition perspective because what we'll do within those platforms is special offers for card members, you know, table access for card members and so forth.

So it's an opportunity for us to acquire card members in a cheaper way and also for them to experience the potential benefits of being a card member. When you look at Rezi, talk of the fork on a standalone P&L basis, we don't look at it that way. So because it's part of the value proposition. That's how we look at it. It's a benefit. And I think when a restaurant looks at Rezi, the top, and again, we'll look at the fork, they will look at it from a perspective of I now have access to some of the best customers and the ones that are going to spend more money at my restaurant. And, you know, the proof is in the pudding.

I mean, it's 2X, the spending at Rezi restaurants, and our ticket prices are higher for card members versus non-card members in all restaurants. I mean, we have a higher ticket. As far as the plans, Rezi and talk will come together from a user experience perspective, especially from a front-end user experience perspective. And so that will give us a broader, more integrated look at restaurants from a card member perspective. And the fork, given it is European-focused, at this point, will stay as a standalone entity. And I think that works out. But importantly, our travel representatives will have access to both. So when you book travel, you book your hotel, you book your airline, you will be able to, they'll be able to also book restaurants for you.

And restaurants in Europe is the highest, one of the highest demand things that we have in that area. So we don't look at, you know, the P&L per se of Rezi talk. And we won't look at it before. I mean, we manage it aggressively, but it's not a revenue maker or profit maker in itself. What it is, though, is it does help card member retention, customer acquisition, merchant satisfaction. And it drives Fenn. And that's what's really important. And it integrates very, very well with our travel business as it adds the capability for our travel representatives to just have that at their fingertips.

Hey, good morning, Terry. So let me explain what's what's happening here. So we're growing card fee at 15%. What I said in my prepared remark is that we expect that card fee growth rate to accelerate in Q3 and to exit in Q4 in high teams. The key driver of that acceleration, you can track it back to the platinum refresh. That's their, you know, of course, a lot of things that are impacting that number across the world. But the single biggest contributor to that inflation point is platinum. The reason why it takes a while to hit the P&L is because as you know, we started, you know, reprising card members from January only. And when we move card members to the new price point, we amortize it over 12 months.

So it's kind of like a slow process. And that's why either the impact if you want is delayed. It is also because of that delayed impact that you've seen this kind of declining momentum because you have to go back to the refresh of the delta card and the gold card. And you'll see that kind of like acceleration on the card fee line. And we're now in the declining kind of like growth rate as a result of that. So, you know, there is inertia in that number, in that growth rate. And it takes, you know, from beginning to end, something like two years to find its way into the P&L. That's why you have this kind of like cycle.

But to be clear, because that's the most important thing, we expect that either card fees are going to exist this year with a growth rate in the high teens.

Yeah, hi. So let me clarify this because there is indeed a bit of a, you know, noise in those numbers. First, let me start with the balance sheet and the growth of balances, right? We're reporting this quarter growth rate of 9%, which is in line with the billing growth of 9%. Last quarter, the balance growth rate was 7%. So there's step up, you know, the biggest contributor, the roundings doesn't help here, but the step up is a function of the classification of those two small business corporate portfolios that we reclassified as health to sale over a year ago. And we just let that kind of like reclass. And that's why you align specifically. Despite the fact that those two portfolios were classified as health to sale, the economics were flowing through our P&L.

But in Q2, specifically in the month of April, we transferred one of these portfolios, the lowest portfolio to be specific. It's not a large portfolio, but it was large enough to impact the NII growth rate by about 1 percentage point. So the decline you see in the growth rate from 12% to 11% is largely attributable to the transfer of that portfolio to the new issuer. And as you think about the balance of your, either there will be another transfer, the Amazon portfolio in Q3. And so by the time you get to Q4, both portfolio will be out of our system if you want. And the impact to the NII line is going to be two and a half percent.

And you know, this would be a headwind until we lap it. Now, what's important to understand is that although it impacts NII, the impact to net income and earnings is really negligible. And so it's not only negligible, it's also completely baked in in the original guidance that we gave at the beginning of the year because this was a slow train coming. We knew exactly what would happen. So knowing back to guidance, knowing back to earnings, but it does create some discontinuity both in terms of the balance sheet balance growth and in terms of the NII growth rate.

Hope that was useful.

Darren, thanks for the question. And let me ask Kristoff to talk about sort of what we look at the rest of the year from an operating leverage perspective. And then I'll talk about, I'll come back and talk about AI. Yeah. So, you know, the way we define operating leverage is to be clear because I don't know whether we got the same definition. But we look at all banks as a ratio of revenue.

And either outbacks for us analyze like between 16 and 17 billion dollars. And as you can imagine, there's a variety of things that hit that line. And the one thing I will say is just to be very careful that looking at a quarter specific off X number, because there's always discrete item, one off, you know, that hit that line. But if you take a step back, and I know you know this, but I think it's worth repeating. If you take like a giant step back and look at over many years, you know that we've been very effective at driving operating leverage in terms of that ratio of outbacks to revenue. And we are committed to doing that again.

And AI is going to play a critical role in that. And it's part of the reason as well that we are investing so much in strategy. And so in terms of how and what to expect in the balance of Europe, we are expecting operating expense this year to be in the mid-teens. Mid-single digits, oh, sorry, not mid-teens. Mid-single digits this year. And we're tracking well against that. I think this quarter is that 6% and either we're going to be in that range by the time we get to the end of the year.

In terms of the specific, maybe I'll let Steve talk about what we were talking about. Yeah, so let me talk a little bit about AI. And I think every company out there is engaged with this at this particular point in time. I'm not so sure how many companies have really committed to actual in P&L savings in the, you know, for 2026 and probably not even for 2027.

I think what we look at it, one of the first places that we have deployed it and we've deployed it in multiple places in the business right now is technology. And from a technology perspective, what we're seeing is anywhere from a 30 to 40% decrease in cycle time from a coding perspective. Now that's really not a savings because what that does is allows us to do more. And so that's what we're doing. So we are, remember early on I mentioned that we, you know, have a large backlog of technology projects and so we're getting to more things quicker. From a servicing perspective, both from a travel and from a card servicing perspective, we've equipped our customer service and travel agents with AI-powered tools.

And so what we've seen there is a lack of acceleration in hiring of more travel representatives, more customer service reps, even as the business continues to grow. And, you know, if you look at, you know, how many customer travel, how many representatives that we had servicing our customers, that number really hasn't grown. And we would expect over time for that number to decrease. And I think that will normally decrease from a nutrition perspective.

From a marketing perspective, we're really using AI right now to streamline some of our marketing campaigns so that we're getting out the marketing campaigns a lot quicker and that gets you time to, you know, time to money. And I think that's critically important. And look, we've used AI and credit and risk and fraud for, you know, 15, 16 years. But now what we're doing is how do you implement, you know, sort of, you know, unstructured data, agentic in that to help make the decisions a little bit better. So, you know, look, we're investing in it. I think one of the things, and, you know, other companies will talk about this as well. As you look to integrate AI within existing systems, you need to either, as you redo them, embed it within, or you need to put a layer above so that you can, you know, you can integrate these systems in a seamless way.

And by doing that, what you're doing is making it a lot easier. I mean, we just launched a servicing portal for our, for our CCPs, our Card Member Service Representatives, where we've embedded it within, and it'll reduce the handle time for them and enable them to give our customers a much better experience. So, you know, a lot more to come on this. Again, I think, you know, we're further along on this than I would say we are an agentic commerce.

This is more in the early innings, but, you know, like every other company, I mean, we have high hopes that this will streamline, make us more efficient, make us more productive, and eventually hopefully drive more top-line revenue growth and more earnings growth as we move on.

Well, thank you. So I'm finishing up 41 years. So I've been around a little bit longer than Kristoff. But I think, you know, when we when we take a step back, I think what's changed is I think we've committed more to truly understanding what our customer needs and where our customers going. I think that's fundamental is that we've done, I think, a much better job as a team understanding the customer because this business is all about the customer. And the customer doesn't stay stagnant.

The customer continues to evolve. And so that's why product refreshes are so critically important because customer needs are changing. One could argue on a daily basis. We can't we can't change products on a daily basis. I think the other thing that we have done is really we have expanded our aperture of who our customer is. And fundamentally, we believe and we've always believed, but we still believe that our customer is a high, high spending, high credit worthy, premium aspirational customer. I think where we've pivoted is that before the pivot, we define that as a specific cohort. And the reality is whether you're a boomer, a gen X, a millennial or a gen Z, there are those types of customers in every single cohort.

What we've created now from a durability perspective is a flywheel and an ecosystem that we can adapt to the next cohort of customers that come through the pipeline versus attempting to fit our one size that's all product into multiple customer sets. We now are able to modify that product. So the product is very expandable because if you look at just look at the platinum product, that's a product that can play well with boomers, gen X, millennial and gen Z and the next generation along because we'll continue to add value to it that'll have applicability across a wider set.

I think the other thing that we've done and what we've really leaned into here is we work a lot more with partners. Not only from a co-brand perspective, where we create specific co-brand opportunities that allow us to go into a joint customer base, but I also believe our premium partners really want access and are willing to provide benefits to our card holders. So if you look at not only the value propositions that we have, but if you look at the limited time offers that we offer, the ability for our partners to access this base, I think that's been critically important. The other thing that I would say, and I'm sorry for going on, but you have opened up the door here, is that our focus on international has completely changed.

From an international perspective, we've really leaned into coverage. We've really leaned into premium. And what we've also done is we're not treating all of the countries we operate from a proprietary perspective the same. We've leaned into the UK, Mexico, Canada, Australia, and Japan. That has played out really, really well for us. And so when you think about this, and I've only talked about the consumer side here, but when you think about this durability from a consumer perspective, you now have a machine that is able to go after different types of cohorts. We're able to go up to those cohorts with various offers that make sense to them, with various products that make sense to them, and also to integrate with our premium customers extra value.

You then do that on a global basis, which we've done, which is why the fork acquisition is going to be so important for us, because it brings in, we already have travel, now it brings in restaurants. And then so you look at that, and then you bring the experience layer that we have. And then the investment that we've made in lounges and in fine hotels and resorts, and so you create this premium ecosystem that our customers are going to live in, and it's durable. And the durability is reinforced by the growth that we continue to have, whether it be lounges, whether it be restaurants, whether it be fine hotels and resorts, because our partners want to play in here.

And you know, look, I think that that's what makes it different. And when we look at the flywheel and we look at the opportunity to reinvest some of our over-delivery that we've had this year, we feel confident because we know we can access the type of customer we need to access on a global basis, and there are more out there for us to access, and we think that's going to continue into the future. So again, I could speak hours on how I think the company is different, and how we approach product development, and what have you, and how innovation is critical, and how we've really integrated technology. But I think that's what's different, and part of that is because our scale is so much bigger.

If I go back just to 2017, we're $30 billion revenue company, and now we're $70 billion this year, and we're looking at 10% revenue growth, so almost an $80 billion revenue company, potentially by the end of the year, you have more scale, and you have more ability to operate in the environment. So I think that's what's different.

Yeah, maybe it was a long answer, but you know, I'll add a quick finance overlay on top of that. First, I can assist in some younger than Steve. I'm only getting to 30 years with the company.

But the key point that I wanted to make are this. There is a lot more momentum now than say 10, 15 years ago. You see that in the pace of the product refreshes, you see that as well in the revenue momentum, billing growth. Many of our metrics are moving at a faster clip today than there were 10, 15 years ago. The second thing, when I look at the balance sheet, the resilience of the portfolio is much, much stronger now. One piece of evidence that you can go to is when you look at the reserve rate that we have, just between the end of 2019, and where we now, we lowered the credit reserve rate from 2.9% to 2.7%.

That's, you know, an outcome of focusing on premium con members. The other proof point is you look at some metrics that prove that the con member base is getting more premium, you look at the role of car fees, that line has grown at 17% over the last kind of like seven years, right? And that's because they're just like a lot more con members paying fees. And the final point I'm going to make on this is that when you, you know, when you look at, you know, the stress testing that the Fed did, you can see as well that through the cycle, one day there will be an economic cycle, we have, you know, much lower ride of rate, peak ride of rate than any of our competitors, and we have, we remain profitable through the cycle.

And finally, sorry, the last thing is that the focus on younger con member gives us a lot of confidence in our ability to sustain growth going forward. They come with a lower, you know, income initially, but we're going to grow with that. And they're going to grow with us. And there's a lot of embedded growth that comes with the focus on younger con members.

So thank you, Mihir, for the question. So we're not going to get into trying to guide on billing going forward. But we are a momentum business, right? And so you can expect that a lot of the good momentum we've seen is going to continue in the balance of year. And you know, the investments we're making, the increase in the investments we're making, the goal is to support that momentum. Now, it's too, it's not significant enough to kind of like we expect that momentum to continue. Bear in mind though, that as we transfer those two small business portfolios, they're not very large. They're not contributing to earnings. But there was a lot of, there was some bill business associated with those, with those cards.

And that will put about a 1% headwind to, to those billing numbers. So you're going to see a little bit of a slowdown as a result of that. But you know, expect, or you know, that's our expectation, is that the momentum is going to, is going to keep going in the balance of you.

With that, we will bring the call to an end. Thank you for joining us and for your interest in American Express.