American Express is laying off 5% of its global workforce to control costs while navigating a $350 million regulatory fine. Although the company surpassed third-quarter earnings expectations, it missed revenue targets due to partnership changes. Investors are now assessing whether these efficiency measures will be enough to offset rising operational expenses and aggressive marketing spending.
American Express has announced a workforce reduction of 3,500 positions, representing approximately 5% of its total global staff. Chief Executive Officer Steve Squeri stated the decision is part of a broader strategy to simplify the company’s internal structure and speed up decision-making as the business faces a challenging financial environment. This move comes at a time when the financial services firm is dealing with increased competition and higher spending on customer rewards and marketing.
Financial Performance and Revenue Miss
While the workforce reduction grabbed headlines, the company’s recent financial results presented a mixed picture for shareholders. American Express reported an adjusted earnings per share of $4.68 for the third quarter, which outperformed the analyst expectation of $4.49. Based on this performance, management also raised its full-year earnings guidance to a range between $18.30 and $18.60 per share.
However, the company missed expectations regarding its total billed business. The reported figure of $454 billion fell short of the $456.9 billion projection. Management explained that this shortfall was largely due to the company exiting certain small-business co-brand partnerships, which naturally reduced the volume of transactions processed through those channels.
Operational Costs and Regulatory Challenges
The company is also grappling with rising costs. Operational expenses increased by 9% to $14.5 billion during the third quarter. Much of this spending is tied to keeping premium customers through enhanced benefits, such as the company’s recent luxury lodging partnerships with Airbnb, and sustained marketing efforts that are expected to continue through the rest of the year.
Adding to these financial pressures, the company has faced a $350 million regulatory penalty. Federal authorities, specifically the Office of the Comptroller of the Currency and the Federal Reserve, imposed the fine due to identified deficiencies in the company’s anti-money-laundering systems. Although the company has stated that this penalty will not alter its updated earnings guidance, the fine highlights the ongoing compliance hurdles that major financial institutions face.
Following these disclosures, the company's stock experienced a 1.8% decline, contributing to a year-to-date drop of approximately 14%. Investors will likely focus on whether the cost-cutting measures, including the job cuts, can effectively balance the high expenses associated with customer retention and regulatory compliance in the coming quarters.