1 Important Thing Investors Need to Know About How American Express (AXP) Makes Money

American Express (AXP) has demonstrated strong market outperformance, delivering a 233% total return over the past five years, driven by its unique business model. The company primarily targets affluent charge cardholders, generating significant revenue from merchant discount fees, which totaled $9.4 billion in the latest quarter, and annual card fees, contributing $2.5 billion in the same period. These two core revenue streams, less reliant on interest payments, collectively accounted for 66% of AXP's total revenue in Q2, underscoring its distinct profitability drivers.

Analysis

American Express (AXP) has demonstrated significant market outperformance, generating a 233% total return over the last five years, substantially exceeding the S&P 500. The company's unique business model, which targets an affluent customer base with charge cards, reduces its dependency on net interest income relative to industry peers. Its primary revenue drivers are discount revenue, which totaled $9.4 billion in Q2 2025, and card membership fees, which contributed another $2.5 billion in the same period. These two streams collectively accounted for 66% of the company's total revenue, underscoring the model's reliance on high consumer spending and the appeal of its premium card benefits. While the historical performance and fundamental model appear robust, it is noteworthy that at least one prominent analyst service did not include AXP in its recent list of top recommended stocks, introducing a layer of caution regarding its forward-looking prospects versus its past success.

Key Decisions for Investors

• Investors should view American Express as a direct play on high-end consumer spending, given that its fee-based model, representing 66% of Q2 revenue, is highly correlated with transaction volumes from its affluent cardholder base.
• Monitor key performance indicators such as discount revenue and card fee growth, as these are more critical to AXP's profitability than the net interest margins that typically drive competitor performance.
• Despite the stock's strong 233% five-year return, the noted omission from an analyst 'buy' list suggests it may be prudent to evaluate the company's current valuation and future growth expectations against the backdrop of its recent outperformance.