American Express Made $3.7 Billion and Still Plans 3,500 Job Cuts. Here Is the Strategy

NEW YORK: American Express delivered the kind of quarter that usually supports a celebration. Net income reached $3.71 billion, up 28 percent from a year earlier, while revenue climbed 9 percent to a record $20.1 billion. The payments company also raised its full-year earnings forecast. Then came the harder number: a restructuring plan expected to eliminate about 5 percent of its global workforce, roughly 3,500 jobs. Strong profits and large cuts are not contradictory in the company’s current strategy. They are two parts of the same push for growth with tighter operating costs.

The results show why American Express remains unusually exposed to affluent consumers. Card-member spending, interest income and annual fees all helped revenue grow. The company said billings remained strong, card retention was healthy and credit quality was excellent. That customer base gives AmEx more protection than a lender dependent on households already pulling back. It also raises expectations. When premium customers keep spending, investors want the company to convert that activity into faster earnings growth.

American Express reported record quarterly revenue while preparing its first major workforce reduction in roughly a decade. Image: Tdorante10 / Wikimedia Commons / CC BY-SA 4.0

The refreshed U.S. Platinum Card is central to the story. American Express raised the annual fee from $695 to $895 while adding benefits. The increase tested whether customers would pay another $200 for a bundle of travel, dining and lifestyle credits that can require planning to use fully. Early retention was strong, according to the company. Net card fees increased by more than $400 million from the prior year, evidence that the premium model can still expand without a mass departure.

Spending offered another encouraging signal. The average customer charged $6,735 during the quarter, about 5 percent more than a year earlier. Travel and entertainment spending rose 10 percent, including a 13 percent increase in airline-ticket spending. Some of that growth reflects higher prices, particularly for fuel-sensitive travel. Transaction counts also increased, however, suggesting the gain was not produced by inflation alone.

The job cuts address a different line of the income statement. American Express recorded restructuring costs as it prepared what reporting described as its first major workforce reduction in about a decade. Chief executive Steve Squeri told investors the plan was intended to improve efficiency, not signal a collapse in demand. That explanation will be tested by where the positions disappear, how service levels change and whether savings are reinvested or simply retained.

Rewards have become an expensive arms race. JPMorgan Chase, Capital One and other issuers compete for the same high-spending customers with airport lounges, statement credits, dining access and transfer partners. A larger annual fee is valuable only when customers believe the benefits justify it. The issuer must therefore spend to keep the card attractive while controlling the administrative and technology costs behind those perks. Cutting staff during a strong quarter suggests management wants to reset that balance before growth slows.

The New York connection is material, not decorative. American Express is headquartered in the city and sits inside a financial sector where profitable companies are redesigning work around automation, digital servicing and narrower management layers. The effect reaches beyond one corporate payroll. Well-paid finance jobs support office demand, restaurants, transit and professional services. A reduction of 3,500 positions globally will not land entirely in New York, but the decision belongs to a broader question about how the city’s largest employers grow without adding people at the same rate.

Wall Street’s recent rally has rewarded companies that can defend margins, even when the human consequences of restructuring are severe. Investors will now watch operating expenses as closely as card spending. A one-time reduction can improve the cost base. Repeated cuts may instead reveal that the promised efficiency is not arriving. The company’s customer-service reputation makes execution especially important because a premium fee creates premium expectations.

American Express raised its adjusted full-year earnings range to $17.60 to $17.90 per share. The official quarter also included a gain from selling its stake in Global Business Travel Group, which is why adjusted earnings provide a cleaner view of the operating result. Credit-loss provisions fell to $1 billion from $1.3 billion a year earlier. That strength contrasts with the caution still visible in Hong Kong small-business confidence, underscoring how uneven the global business cycle remains.

The central business lesson is uncomfortable. A company can be healthy, earn billions and still decide that thousands of roles no longer fit its target cost structure. For American Express, the premium-card strategy is working well enough to raise prices and forecasts. The workforce plan shows that success is being measured against an even higher efficiency bar. The next few quarters will reveal whether customers notice any loss of service and whether the savings create durable growth rather than a temporary improvement on paper.