Capital One is finally getting credit for a solid quarter, but the debate surrounding the credit card giant’s stock is far from settled. Shares of Capital One jumped roughly 4% on Wednesday after the company delivered better-than-expected third-quarter results , supported by resilient consumer credit, progress integrating Discover, and stronger net interest income (NII) — the difference between what a bank makes on loans, like credit card interest in the case of Capital One, and what pays out on deposits. The rally was welcome news for a stock that has struggled — down 13.5% year to date. The quarterly results and post-earnings conference call commentary Tuesday evening offered a clearer picture of Capital One’s earnings potential. But they didn’t resolve one of our biggest concerns: elevated spending. While a bit lighter than expected, total company marketing expense did rise 14% year-over-year to $1.6 billion. Management expects marketing costs to increase sequentially from the third quarter to the fourth quarter at a similar growth rate of 35.7% during the same quarter-over-quarter period last year — primarily driven by seasonality. On the call, CEO Richard Fairbank said Capital One plans to “lean harder” into marketing in 2027 as it pursues growth in premium credit cards, national banking, and the Discover franchise. The company did not disclose a marketing expense estimate for next year. “Our biggest competitors continue to invest heavily in marketing, and we need to be at the top of our game,” the CEO added. It’s a strategy we understand and recently wrote about : Capital One is investing to attract more affluent, high-spending customers. Those investments could create more profitable customer relationships over time, but they come at a near-term cost. Bank of America analysts said in a note Wednesday to clients that “the spend is right for the franchise, but with no efficiency guidance, COF [Capital One] must show it does not erode the earnings power it has just revealed.” Deutsche Bank echoed those concerns, lowering its 2027 earnings estimate to $22.25 per share from $22.50 due to anticipated marketing spending. That uncertainty was a major reason we trimmed our Capital One position Tuesday ahead of earnings and downgraded the stock to our hold-equivalent 2 rating . The sale wasn’t a prediction about the quarter but rather a reflection of our frustration with how much upfront spending has been required to unlock growth from the Discover and Brex acquisitions. “Expenses have been part of the issue that’s been hanging over the stock for the past year,” portfolio analyst Jeff Marks said during Wednesday’s Morning Meeting . In light of the rally, he added that Tuesday’s trim was a bit ill-timed. However, a profit is still a profit. The sale represented a roughly 13% gain on Capital One stock purchased in March 2025. COF YTD mountain Capital One YTD The good news is that the Discover integration is progressing faster than expected….
Read More: Capital One delivered a strong quarter. Why we’re not declaring victory