Capital One Financial Corp. (NYSE:COF) stock rose in Wednesday's premarket trading after the company reported third-quarter earnings that beat Wall Street estimates.

Capital One Beats Earnings and Revenue Estimates

Capital One reported adjusted earnings of $6.69 per share, beating the analyst consensus estimate of $5.50 by 21.6%, according to market data.

Revenue reached $16.34 billion, exceeding expectations of $16.26 billion.

Revenue increased 3% from the previous quarter, while noninterest expenses declined 2%. Together, these factors drove a 10% increase in pre-provision earnings.

The provision for credit losses fell 2% to $2.9 billion. This included $3.1 billion in net charge-offs, partially offset by a $225 million release of credit loss reserves.

The allowance for credit losses declined to $22.7 billion, while the portfolio coverage ratio fell 10 basis points to 4.92%.

Credit Card Spending and Interest Margins Strengthen

Capital One's net interest margin expanded 40 basis points from the previous quarter to 8.41%.

Higher domestic credit card yields and a $13 billion reduction in average cash balances supported the improvement.

Domestic credit card purchase volume increased 11% year over year, while loan balances grew 2%.

However, domestic card expenses rose 9%. Company-wide marketing spending also climbed 14% to approximately $1.6 billion.

Management expects marketing investments to increase further in 2027 as the company focuses on growth.

Consumer Banking Growth Offsets Credit Pressures

Capital One's consumer banking payment network volume jumped 25% to approximately $191 billion, while auto loan originations increased 22%.

Ending consumer loans grew $11 billion, or 13%, from a year earlier. Segment revenue rose 17%.

However, deposits slipped 1% from the previous quarter.

The auto loan net charge-off rate stood at 1.59%, while the delinquency rate reached 4.64%.

Meanwhile, commercial banking loans and deposits each increased approximately 1% sequentially. Revenue grew 6%, while noninterest expenses rose just 1%.

Commercial credit quality also improved. The criticized performing loan rate declined to 4.4%, while the criticized nonperforming loan rate fell to 1.22%.

Capital One Maintains Strong Capital Position

Capital One's liquidity reserves declined $10 billion to approximately $134 billion.

Ending cash balances fell $6 billion to $49 billion, while the market value of investment securities decreased approximately $3 billion.

Despite the declines, the company's preliminary average liquidity coverage ratio stood at 163%.

Its common equity Tier 1 capital ratio remained unchanged at 13.8%.

Net income was largely offset by $2.6 billion in share repurchases, along with dividends and balance sheet growth.

Discover Integration Delivers $1.8 Billion in Synergies

Capital One said its year-to-date results reflected approximately $1.8 billion in annualized combined synergies from the Discover acquisition, primarily driven by debit network conversion and operating expense savings.

The gains came primarily from debit network conversion and operating expense savings.

Management said it expects remaining integration synergies to roughly offset potential interchange revenue losses from the proposed Visa-Mastercard settlement, although the final financial impact remains uncertain.

The outlook highlights a potential headwind as Capital One continues integrating Discover and expanding its payments business.

CEO Compares AI Revolution to Fire and Electricity

During the third-quarter earnings call, CEO Richard Fairbank said artificial intelligence will fundamentally transform banking, reshaping how financial institutions operate and serve customers.

Fairbank described the pace of AI innovation as "breathtaking," comparing its impact to transformative breakthroughs such as fire and electricity.

He said advances in generative and agentic AI would change how businesses operate, adding that banking is "never going to be the same."

Capital One has spent more than a decade rebuilding its technology infrastructure to harness AI, positioning the company to capitalize on the shift.

COF Price Action: Capital One Financial shares were up 3.39% at $208.40 during premarket trading on Wednesday, according to market data.