American Express (AXP): Merchant Expansion Powers Revenue, but Cash Flow & Balance Sheet Tell a Complex Story

Opening: Growth and a Tension Point — Revenue Up, Cash Flow Down#

American Express [AXP] closed FY 2024 with revenue of $74.20B, up +10.16% year-over-year, and net income of $10.13B, up +21.03% —a material improvement in profitability that validates the company’s network and premium-card strategy. At the same time, free cash flow contracted to $12.14B (-28.59% YoY) and net debt widened to $10.54B at year-end, reversing a multi-year decline in net leverage. That juxtaposition—strong earnings expansion alongside significant cash flow compression and rising net debt—frames the central investment story for American Express in 2024–25: growth driven by merchant expansion and premium economics is real, but execution is consuming cash and shifting balance-sheet dynamics in ways investors must parse carefully.

Overview: [AXP] at a glance and the strategic pivot to ubiquity#

American Express has been explicit about converting a historical weakness—merchant acceptance—into a strategic growth lever. The company cites merchant acceptance in excess of 160 million locations, and management points to that expansion as a primary driver of billed-business growth and higher discount and fee revenue. The operational story is straightforward: broaden acceptance, increase use occasions for premium cardmembers, capture more transaction volume and higher take rates, and reinvest in premium products and partnerships that deepen retention and wallet share. That flywheel shows up in top-line and profitability metrics but also in the company’s cash conversion patterns.

The rest of this report ties the merchant-expansion strategy to quantified financial outcomes—where it has accelerated top-line and profit growth—and then evaluates the emerging tensions on cash flow, leverage and capital allocation.

Financial performance: revenue, profit and the cash-flow disconnect#

American Express’s FY income-statement trajectory from 2021 through 2024 shows a clear top-line acceleration followed by a moderation in growth rates and a meaningful improvement in net income conversion. Revenue rose from $44.43B (2021) to $74.20B (2024), while net income expanded from $8.06B (2021) to $10.13B (2024). The last fiscal year delivered solid operating margins—operating income of $12.89B (operating margin 17.38%)—and a net margin of 13.65%.

Below I present the historical income-statement trend and YoY growth rates calculated from the company’s published annual figures.

(All figures taken from American Express fiscal results and computed from the company’s published annual figures; revenue and profit changes are calculated as the percentage change from the prior fiscal year.)

Two observations stand out from the table. First, revenue growth accelerated strongly in 2022–2023 as acceptance expanded and billed business recovered post-pandemic, then moderated to +10.16% in 2024 as the base grew larger. Second, profitability improved: operating income and net income expanded meaningfully in 2024, reflecting both volume growth and operating leverage.

Yet while the income statement improved, cash flow and balance-sheet moves injected a note of caution. Free cash flow declined from $17.00B (2023) to $12.14B (2024), a fall of -$4.86B (-28.59%), even as net income rose by +$1.76B (+21.03%). On the balance sheet, net debt moved from $2.63B (2023) to $10.54B (2024) — an increase of +$7.91B (+300.76%). Those shifts reflect material uses of cash in investing and financing activity in 2024, including changes in investments, share repurchases, and financing flows.

Balance sheet and cash flow detail: where did the cash go?#

To understand the net-debt swing and FCF drop, it helps to look at the balance-sheet and cash-flow line items. The company’s consolidated figures show cash and cash equivalents fell from $46.53B (2023) to $40.55B (2024) (a decline of -$5.98B), while total assets increased to $271.46B and total liabilities to $241.20B, leaving total stockholders’ equity of $30.26B at year-end 2024.

The cash-flow statement shows the mechanics: operating cash flow remained positive ($14.05B in 2024), but net cash used in investing activities was large in 2024 (-$24.40B), and financing activities provided $4.44B of cash. Major drivers in investing were swings in short-term investments and securities positions (reflected in the large investing outflows), while financing flows reflect dividends and substantial share repurchases (common stock repurchased was -$6.02B in 2024) offset by other financing items.

The upshot: the company generated strong operating cash but deployed sizable cash into investments and returns, which together compressed free cash flow and increased net leverage. Those are deliberate strategic and capital-allocation choices rather than a deterioration in operating fundamentals, but they materially affect financial flexibility.

Merchant expansion and the growth flywheel—how strategy shows up in the numbers#

American Express’s merchant-expansion initiative is the strategic centerpiece of management’s growth thesis. The company reports merchant acceptance exceeding 160 million locations—a multi-year increase intended to reduce the friction that historically limited AmEx ubiquity and to pull more transaction volume onto its rails. Management links acceptance gains to billed-business growth; in recent quarterly disclosure management reported billed-business growth of roughly +7% (FX-adjusted) and total revenues for Q2 2025 of $17.86B (+9% YoY)—figures that mirror the expected benefit of greater acceptance and use occasions [see Q2 release].

Expanded acceptance converts into two principal revenue streams for AmEx: discount revenue (merchant fees tied to transaction volumes) and fee revenue (card fees, network and ancillary services). Because AmEx’s card base skews premium, higher acceptance often yields higher-average-ticket transactions than a commoditized network, amplifying revenue-per-transaction economics. That dynamic is visible in the company’s revenue mix and the improved net income conversion in 2024.

(For the company’s Q2 2025 billed-business and revenue metrics, see the Q2 earnings release and merchant-expansion datasets linked in the source list.)

Competitive positioning: closed-loop advantage vs. scale players#

AXP’s competitive thesis is to pair its closed-loop issuer-acquirer model and premium card economics with improved ubiquity. Unlike Visa and Mastercard (open-loop networks), American Express issues cards and acquires merchant transactions in many cases, giving it first-party data, tighter control of product economics, and higher take rates per transaction.

The trade-off has always been ubiquity: Visa and Mastercard win on sheer acceptance and interchange volume, while AmEx wins on per-customer economics and revenue per transaction. By dramatically expanding merchant acceptance to 160M+ endpoints, AmEx is attempting to narrow that ubiquity gap without sacrificing premium economics. The financial evidence—strong billed-business growth, improving operating margins and rising net income in 2024—indicates the strategy is working, quantitatively, at the revenue and profit lines.

However, competing at scale requires investments and distribution partnerships (acquirers, processors, fintech platforms) that carry integration and incentive costs. Those costs—some visible in higher investing outflows and share-repurchase cadence—partly explain the cash-flow dynamics noted earlier.

Capital allocation and balance-sheet metrics: computed ratios and discrepancies#

Investors watch leverage and capital allocation closely for a company that both invests in growth and returns capital to shareholders. Using the consolidated end-of-year figures, I compute several key metrics and call out differences versus some TTM metrics reported elsewhere in the dataset.

First, total debt-to-equity using year-end totals is 51.09 / 30.26 = 1.69x, or 168.80%. The dataset includes a TTM debt-to-equity figure of 184.75%; the discrepancy likely reflects alternative debt definitions (e.g., including off-balance-sheet items, different debt measures, or timing differences). I prioritize the balance-sheet end-of-period totals for the simple debt/equity computation and explicitly flag the difference.

Second, the current ratio computed from total current assets and total current liabilities at year-end 2024 is 41.51 / 156.79 = 0.26x. The dataset reports a TTM current ratio of 0.36x—again, differences arise from timing and component definitions (cash & short-term investments vs. broader current-asset measures). The low current ratio is typical for card issuers that operate with large current liabilities (card liabilities and funding flows) that are not necessarily a liquidity concern in the conventional corporate sense, but it is important context when assessing short-term flexibility.

Third, return on equity (ROE) using 2024 net income over end-2024 equity is 10.13 / 30.26 = 33.48%, which is broadly consistent with the TTM ROE of 32.87% reported in the dataset. This underscores the company’s ability to convert capital into earnings at a high rate.

I raise these computed figures because they affect the assessment of financial flexibility: AmEx earns attractive returns on equity but operates with a balance-sheet structure and cash-flow profile that reflect active reinvestment and sizable financing uses.

Risks, headwinds and the quality of earnings#

Three risk themes emerge from the data and strategic picture. First, the cash-flow profile: free cash flow declined -$4.86B (-28.59%) in 2024 despite higher net income, indicating that operating profits are translating into less distributable cash in the short run due to investing and financing choices. Sustained compression of cash conversion would reduce optionality for buybacks, dividends and opportunistic M&A.

Second, leverage volatility: net debt rose by +$7.91B (+300.76%) in 2024. While the level of net debt remains moderate versus enterprise scale, the swing signals material deployment of cash into investments and/or timing mismatches in securities and short-term investments. A renewed increase in credit stress or a capital-markets shock could make this more consequential.

Third, SMB and macro sensitivity: merchant acceptance expansion improves addressable market, but near-term billed-business growth among small and medium enterprises (SMBs) has been muted in periods of macro stress. The company’s strategic bet assumes that when SMB activity normalizes, AmEx will capture disproportionate upside; that is a multi-year call tied to macro recovery and the effectiveness of channel partnerships.

On the quality of earnings, the company demonstrated operating profitability improvement and consistent operating cash flow (positive $14.05B in 2024), but the divergence between net income and free cash flow requires close monitoring. The primary accounting risk would be if revenue growth masked rising credit losses or if one-time items inflated operating margins; current public data do not indicate a material deterioration in credit performance, but investors should track credit metrics closely in subsequent quarters.

What This Means For Investors#

Investors should parse the AXP story into two linked but distinct elements: the operational flywheel and the financial plumbing that funds it. Operationally, the move to expand merchant acceptance toward 160M+ locations is delivering real volume and revenue benefits: billed-business growth and higher discount/fee income contributed to FY 2024 revenue of $74.20B (+10.16%) and net income of $10.13B (+21.03%). That validates the flywheel: acceptance → usage → revenue.

Financially, the company’s choices to invest and return cash have compressed free cash flow and increased net debt in 2024. That reduces near-term balance-sheet optionality and elevates the importance of future cash conversion. If AmEx can sustain operating margins and return to stronger FCF generation while maintaining disciplined capital allocation, the combination of high ROE (computed ROE ~33.48%) and expanding revenue would be a powerful long-term formula. If cash conversion remains weak, investors will need to weigh the trade-off between aggressive growth/acceptance investments and financial flexibility.

Important: This section frames implications—no buy/sell advice is provided.

Key takeaways#

American Express presents a mixed but coherent strategic and financial picture. The company is executing its merchant-expansion strategy, which shows up in sizable revenue and net-income gains: FY 2024 revenue $74.20B (+10.16%); net income $10.13B (+21.03%). Profitability metrics and ROE remain robust (ROE computed at ~33.48% on year-end equity). However, free cash flow weakened to $12.14B (-28.59%), and net debt increased to $10.54B, tempering the narrative of unfettered capital returns and raising questions about short-term cash conversion.

Strategically, the company’s closed-loop model and premium card economics remain durable competitive advantages; merchant acceptance gains amplify that moat by diminishing a longstanding friction point. The financial consequences of scaling acceptance—investments, partnerships and incentives—are real, and they compressed cash availability in 2024.

Conclusion: an execution story with clear progress and measurable trade-offs#

American Express’s numbers and strategy tell a clear story: the growth flywheel is operating. Expanded acceptance and partnerships are materially increasing billed business and translating into revenue and profit growth. At the same time, the company’s cash-flow and balance-sheet dynamics in 2024 reveal a meaningful trade-off between investing for ubiquity and near-term cash conversion. Investors and stakeholders should monitor upcoming quarterly billed-business metrics, discount-revenue trends, and free-cash-flow recovery as the primary signals that the operational gains are converting into sustainable, high-quality cash earnings.

For those focused on fundamentals, the relevant data to watch next are billed business growth (FX-adjusted), discount margin trends, quarterly free cash flow, and the trajectory of net debt. Together those items will determine whether American Express’s merchant-expansion investments compound into durable shareholder value or require recalibrated capital-allocation choices.

Sources: American Express fiscal statements and quarter disclosures (company filings, Q2 2025 earnings materials), merchant-acceptance datasets and company investor commentary cited in the source list. Specific FY figures and balance-sheet items are taken from the company’s published 2024 financials, and Q2 billed-business and revenue figures referenced in investor materials American Express Q2 2025 Earnings Release and merchant-expansion research AXP Merchant Expansion Research.