2026-10-24

American Express Beats Q3 EPS ($4.68 Adjusted) and Raises Guidance - So Why Did AXP Stock Drop? Inside the First 5% Workforce Cut in a Decade

Written & reviewed by the TradeSmrt editorial team · 2026-10-24

In this article

What Happened
Why the Layoff Headline Outweighed the Earnings Beat
What to Take Away From This
FAQ
Sources

What Happened

American Express (NYSE: AXP) reported third-quarter 2026 results before the opening bell on Friday, October 23. On the surface, it was a clean beat. Revenue came in at $20.06 billion, up 9% year-over-year, with management noting growth would have run roughly a percentage point higher excluding the wind-down of several small-business co-brand card partnerships. GAAP earnings per share jumped 31% year-over-year to $5.42 from $4.14, but that figure was inflated by a one-time $982 million pre-tax gain tied to the sale of the company's stake in Global Business Travel. Stripping out that gain, adjusted EPS landed at $4.68, ahead of the roughly $4.50 Wall Street consensus. On the back of the quarter, American Express raised its full-year 2026 guidance, lifting reported EPS guidance to $18.30-$18.60 and adjusted EPS guidance to $17.60-$17.90, while holding full-year revenue growth guidance at roughly 10%. Taken on its own, the print was another reminder that Amex's premium cardholder base keeps spending.

But the earnings release landed alongside a second announcement that overshadowed it: American Express said it would cut approximately 5% of its global workforce. With headcount sitting around 77,000 to 78,000 employees, that works out to roughly 3,500 to 4,000 jobs - the company's first reduction of this scale in about a decade, going back to a 5,400-person cut in 2013. CEO Steve Squeri framed the move as an effort to build a leaner, more agile organization that can innovate faster over the next several years. CFO Christophe Le Caillec went further on the earnings call, explaining that the real goal is to flatten management layers and widen each manager's span of control first, so the company is structurally ready to capture the benefits of artificial intelligence later. He added a pointed caveat: automating a poorly designed process doesn't actually help - the organizational redesign has to come before the automation does. American Express booked a $336 million pre-tax restructuring charge in the quarter tied to the plan.

Despite the beat-and-raise, investors sold the stock. Reports on the size of the decline varied by the hour - some trackers showed shares down as little as 1.7% intraday, while others pegged the regular-session close at a 3.7% drop, which would make American Express the single worst-performing stock in the Dow Jones Industrial Average that day. Shares traded as low as the $319 range at points during the session. The timing compounded the damage: the Dow itself fell 652.82 points (1.23%) to close at 52,215.16, snapping a six-session winning streak, and American Express's decline was reportedly the single largest contributor to that drop among all 30 Dow components. The S&P 500 slipped 0.52% to 7,623.68 and the Nasdaq Composite eased 0.21% to 25,955.34. In other words, a quarter that beat on adjusted earnings and came with raised guidance still ended with the stock as the day's biggest Dow laggard - a sign that the market weighted the layoff story far more heavily than the earnings beat.

Why the Layoff Headline Outweighed the Earnings Beat

The first thing to understand is that not all job cuts carry the same signal. A company cutting staff because revenue is deteriorating is telling investors one story: performance is weak, so costs have to come down. A company cutting staff while revenue is growing and guidance is going up is telling a different, more unsettling story: management believes a meaningfully smaller headcount can run the business just as well, or better, once AI tools are layered in. That is precisely the message American Express sent. Because the quarter's actual numbers were solid, the cuts can't be explained away as "the business is struggling" - which paradoxically makes the AI framing more exposed. Investors are left pricing a question Amex itself admitted it hasn't fully answered yet: how much of the company's future cost base, service quality, and customer experience actually depends on the AI productivity gains management is promising, rather than already delivering.

Timing made the story louder. American Express wasn't operating in isolation - just one day earlier, on Thursday, October 22, UK-based Barclays announced its own plan to cut roughly 5,000 jobs, also citing AI adoption and organizational streamlining as the rationale. Two large financial-services employers announcing AI-linked cuts on back-to-back days gives the market a much bigger narrative to trade than either company's results alone would justify: that AI-driven headcount reduction is becoming a structural trend across the financial sector, not an isolated cost-cutting decision at one firm. A single company's layoff news, paired with a clean earnings beat, might normally wash out in the stock reaction. Two similar announcements in two days instead got reinterpreted as the start of a sector-wide pattern, and markets tend to price trends more aggressively than one-off events.

The quality of the beat itself mattered too. Revenue of $20.06 billion came in slightly below the roughly $20.12 billion analysts had modeled, meaning the headline 9% growth rate, while respectable, wasn't quite enough on its own. And the most eye-catching number in the release - 31% EPS growth - wasn't organic; it was a byproduct of a one-time stake sale rather than the core card business accelerating. Once that gain is excluded, the "real" result is a more modest adjusted-EPS beat of about 4%, not the blowout the headline GAAP figure implied. A modest beat combined with a structurally uncertain layoff announcement, on a day when oil prices were already spiking toward six-month highs on renewed Iran tension and pressuring the broader market, left the stock with little cushion. The scale tipped toward the layoff story, and the stock followed.

What to Take Away From This

Why a company is cutting jobs matters more than how many. Defensive layoffs (tied to weak results) and offensive restructuring (tied to a strategic bet on AI replacing labor) can look identical on a spreadsheet but get priced very differently. A "we're preparing for AI" rationale can raise more long-term uncertainty than it saves in near-term costs, even when the underlying business is healthy.
Watch what peer companies announce in the same week. Barclays' layoff news the day before almost certainly shaped how investors read American Express's own announcement. When analyzing a single stock's reaction, check whether a same-industry headline from days earlier is doing some of the work.
Always separate GAAP EPS from adjusted EPS. A 31% EPS jump sounds dramatic, but most of it came from a one-time asset sale rather than the core business. The adjusted figure, which strips out one-off items, is the better gauge of how the underlying business is actually performing quarter to quarter.
Raised guidance doesn't automatically protect a stock. When a company lifts its full-year outlook and shares still fall, it's often a signal that the market is weighting a forward-looking structural question - here, what an AI-driven workforce cut means for execution risk - more heavily than the quarter that just closed.

FAQ

How many jobs is American Express actually cutting?

The company said it would reduce its workforce by approximately 5%. Based on CEO Steve Squeri's cited headcount of roughly 78,000, that implies about 3,500 positions; based on the company's year-end 2025 headcount of around 77,000, estimates run closer to 3,800-4,000. American Express has not released a final, confirmed number or a specific timeline for the cuts.

If earnings beat estimates, why did the stock fall?

Adjusted EPS of $4.68 beat the roughly $4.50 consensus and full-year guidance was raised, but revenue of $20.06 billion came in slightly below the roughly $20.12 billion analysts expected. More importantly, the same-day announcement of a 5% workforce reduction - explained as preparation for AI rather than a response to weak results - introduced new uncertainty about the company's future cost structure that investors weighted more heavily than the quarter's earnings beat.

Is this connected to Barclays' layoffs?

Yes, at least in terms of market narrative. One day before American Express's announcement, Barclays said it would cut about 5,000 jobs, also citing AI adoption and efficiency gains. Two major financial firms announcing AI-linked layoffs on consecutive days encouraged investors to treat the news as evidence of a broader structural shift across the financial sector rather than an isolated decision at a single company.

Sources

This article is an original synthesis and analysis based on the reporting below, not a reproduction of the original articles. Please check the sources directly for the latest exact figures.

⚠️ This article is for informational purposes only and is not investment advice. Market conditions change constantly, so please verify the latest data before making any investment decisions.