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American Express (Amex) shares closed 3.62% lower on Friday, a decline that followed the company’s announcement of a significant workforce reduction and a $336 million restructuring charge. The stock movement occurred despite the credit card company exceeding its third-quarter profit estimates, signaling a disconnect between headline earnings and investor sentiment regarding the firm’s operational trajectory.
Workforce Cuts for AI Readiness
The company stated it plans to cut approximately 5% of its 77,000 global employees to prepare for the integration of artificial intelligence. This move is accompanied by a $336 million restructuring charge. Chief Financial Officer Christophe Le Caillec outlined three primary objectives for the reduction: to make the organization leaner, to increase its agility, and to prepare the infrastructure for AI adoption.
Le Caillec emphasized the necessity of structural changes prior to automation. “You don’t want to automate processes that are not optimally structured. So what we’re doing here is to reduce layers and increase spans of controls, so that we can automate and take advantage of AI in the coming quarters and the coming years,” Le Caillec said.
Earnings Quality and Market Reaction
While Amex’s earnings per share rose 13%, its underlying pretax profit grew by only 1.6%. The divergence suggests that much of the reported earnings growth was driven by a lower tax bill and share buybacks rather than core business performance. Additionally, the company’s revenue missed Wall Street expectations.
Amex raised its annual profit forecast, but the increase was largely attributed to a one-time gain from the sale of a business stake. Excluding this one-time gain and the associated restructuring costs, the company’s outlook improved only slightly. Investors appeared to focus on the slower growth of the underlying business, which contributed to the stock’s decline alongside uncertainty about the AI restructuring and a broader market sell-off.
Broader Banking Sector Trends
The workforce reduction at American Express aligns with recent actions by other major financial institutions. A day before Amex’s announcement, Barclays confirmed it would cut 5,000 jobs, representing about 5% of its workforce, as part of a technology-driven cost reduction strategy. Similarly, six of the largest U.S. banks shed 15,000 employees while increasing their first-quarter profits by 18% to $47 billion.
Frequently Asked Questions
Why did American Express stock fall despite beating profit estimates?
The stock declined due to a 5% workforce reduction for AI preparation, a $336 million restructuring charge, and revenue that missed expectations. Investors also noted that underlying pretax profit grew only 1.6%, suggesting slower core business growth than headline earnings indicated.
How many jobs is American Express cutting?
American Express plans to cut about 5% of its 77,000 global workforce. The company is taking a $336 million restructuring charge associated with this plan.
