Capital One’s earnings miss raises a bigger question: Is the consumer finally giving in?

Now that the peak of earnings season has finally passed, investors and analysts are focusing on analyzing what the first-quarter results say about the market and the economy. The main one of these messages? Most major tech companies involved in artificial intelligence (AI) are still firing on all cylinders.

However, evidence of the so-called “K”-shaped economy continues to accumulate. Specialist in high-risk credit cards. Capital One Financial‘s (NYSE: COF) The lack of results in the first quarter, for example, suggests that the average consumer is under increasing financial stress.

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And it’s not just Capital One who says it.

Red flags for some

Capital One turned $15.2 billion in revenue into adjusted earnings per share of $4.42 for the three months ended in March, down 2% from the top line a year earlier, when the company reported earnings of $4.06 per share. Worse yet, analysts were expecting sales of $15.4 billion and a bottom line of $4.55 per share.

Perhaps the real red flag in Capital One’s first-quarter numbers, however, is the portion of its loan portfolio that the company expects to deteriorate. The credit card issuer’s provision for credit losses totaled $4.07 billion, compared with estimates of just $3.77 billion, well above the prior-year comparison of $2.37 billion. Write-downs also increased from $2.74 billion in the first quarter of 2025 to $3.85 billion in the first quarter of this year.

Cardholders are spending more, but an even greater portion of this spending is ultimately turning into bad debt.

Body of evidence

If this had just been a stumble by Capital One, it might be disposable.

However, it is not something isolated. This is the second consecutive quarter in which Capital One missed analysts’ earnings expectations. pizza power Papa John’s (NASDAQ: PZZA) also missed last quarter’s revenue and profit estimates, with domestic same-store sales falling 6.4%, indicating that even the normally resilient pizza business isn’t immune to the economy’s current challenges.

Although it exceeded expectations for the last quarter, McDonald’s (NYSE: MCD) He relied heavily on his valuable meals during this stretch. CEO Chris Kempczinski noted that the current economic climate is “certainly not getting better,” adding that it “may be getting a little worse.”

We are also seeing the same message in other areas. credit bureau TransUnionFor example, it reports that the number of credit cardholders 90 days or more late on their payments slowly rose to a near two-year high of 2.53% in the first quarter. That’s still not catastrophic. But, with total credit card balances at a record high of $1.12 trillion at a time when average credit card balances per borrower have grown for four consecutive years, consumers are arguably at their breaking point.

Not all, but enough

For the record, it’s not all consumers. Rival card company American Express (NYSE: AXP) reported 15% earnings growth on a 9% improvement in last quarter’s billed business. This is largely because it caters to wealthier consumers who are still able to spend more and pay off debt. Notably, AmEx’s loss provisions aren’t suddenly skyrocketing.

Just don’t lose sight of the bigger picture. All companies eventually sell goods and services to consumers, or sell goods and services to consumer-oriented companies. If enough consumers are left out, sooner or later it will affect the bottom line of all corporations.

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American Express is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions and recommends American Express. The Motley Fool recommends Capital One Financial and recommends the following options: long January 2028 $320 calls on McDonald’s and short January 2028 $340 calls on McDonald’s. The Motley Fool has a disclosure policy.

Capital One’s earnings miss raises a bigger question: Is the consumer finally giving in? was originally published by The Motley Fool