The 2025 holiday shopping season delivered results that exceeded many retailers' cautious expectations, with both Visa and Mastercard reporting approximately 4.2% year-over-year growth in U.S. retail sales. The data, released in the final days of December, paints a picture of a consumer who remains willing to spend despite persistent inflation and economic uncertainty—though the composition of that spending reveals important shifts in behavior.

The Numbers Tell the Story

According to Mastercard SpendingPulse, U.S. retail sales excluding automotive increased 3.9% year-over-year from November 1 through December 21. Visa's Retail Spend Monitor, released December 23, showed overall holiday retail spending up 4.2% across all payment types, including cash and check.

While these figures represent solid growth, they also mark a slight deceleration from last year's 4.4% gain—and notably, are not adjusted for inflation, meaning real purchasing power growth was more modest.

"We are seeing consumers use AI in a big way in comparison shopping and then helping to narrow down that perfect gift. This is the first holiday shopping season where roughly half of consumers surveyed responded they would leverage AI for those tasks."

— Michael Brown, Principal U.S. Economist, Visa

Electronics Emerge as the Season's Star

Electronics and high-performance devices dominated holiday wish lists, with sales climbing 5.8% year-over-year—the top-performing category of the season. Visa attributed this surge to a "refresh cycle driven by high-performance devices in the AI era," as consumers upgraded laptops, smartphones, and smart home devices to keep pace with artificial intelligence capabilities.

Other strong performers included:

  • Clothing and accessories: Up 5.3%, reflecting continued demand for apparel despite promotional activity
  • Restaurant spending: Rose 5.2%, highlighting consumers' appetite for experiences and dining out
  • E-commerce: Online sales jumped 7.8%, with in-store still capturing 73% of total spending

The Categories That Struggled

Not every sector shared in the holiday cheer. Home-related categories continued to face headwinds from elevated mortgage rates and reduced mobility in the housing market:

  • Building materials and garden equipment: Down 1%, suggesting consumers prioritized gifts over home maintenance
  • Furniture and home furnishings: Essentially flat with just 0.8% growth

AI Transforms the Shopping Experience

Perhaps the most significant trend of the 2025 holiday season was the widespread adoption of artificial intelligence as a shopping tool. For the first time, approximately half of surveyed consumers reported using AI to help with holiday shopping—whether for comparing prices, finding deals, or receiving personalized product recommendations.

This shift marks a fundamental change in how Americans approach retail, with AI assistants now influencing billions of dollars in purchasing decisions. Retailers who invested in AI-powered discovery and recommendation tools likely captured a disproportionate share of wallet.

The Two-Speed Consumer

Beneath the headline numbers lies a more complex story about consumer health. While upper-income Americans spent freely on luxury items and premium gifts, lower-income households increasingly turned to credit to fund their holidays.

David Swartz, senior equity analyst at Morningstar, noted that "a lot of consumers continue to spend money that they may not exactly have." Credit card debt hit record levels heading into the season, and buy-now-pay-later services saw robust adoption among budget-constrained shoppers.

One telling data point: traffic at thrift stores jumped nearly 11% in the week before Christmas compared with last year, as value-conscious consumers sought deals on secondhand goods.

What This Means for 2026

The holiday spending data offers several insights for the year ahead:

  • Consumer resilience persists: Despite headwinds, Americans continue to prioritize spending, suggesting the economy's consumer engine remains intact
  • Electronics momentum: The AI-driven device upgrade cycle has legs and could continue to benefit tech retailers and manufacturers
  • Credit concerns linger: The reliance on debt to fund consumption bears watching, particularly if economic conditions soften
  • AI adoption accelerates: Retailers without robust AI capabilities risk falling behind as consumers embrace new shopping tools

For investors, the holiday data reinforces the narrative of a bifurcated consumer—one that remains willing to spend but is increasingly selective about where and how. Companies that can deliver value, convenience, and compelling products should continue to thrive, while those caught in the middle face mounting challenges.