Upstart Holdings, Inc.

What they do

Upstart applies proprietary AI models to underwrite loans, aiming to better separate credit risk than traditional FICO-based rules and thereby approve more borrowers at lower rates. Loans are originated through Upstart.com and auto dealership software, then purchased by institutional investors, retained or purchased by lending partners, or occasionally held on Upstart's own balance sheet. Revenue comes mainly from platform and referral fees paid by lending partners and institutional investors.

Revenue drivers

• Unsecured lending (personal, small dollar, Cash Line) — Revenue from fees was $326 million in Q2 2026, up 38% YoY, with contribution profit of $201 million and a 62% contribution margin.
• Secured lending (auto and home) — Auto and HELOC products generated a combined contribution margin of negative 35% in Q2 2026, improved from negative 176% a year earlier and negative 96% in Q1 2026.
• Institutional investor loan purchases — In the six months ended June 30, 2026, 61% of marketplace loan principal was purchased by institutional investors, versus 31% retained or purchased by lending partners and 8% held on balance sheet.

Recent performance

Q2 2026 originations were $4.2 billion, up 50% YoY, across 558,014 loans. Total revenue was $365 million, up 42% YoY, with revenue from fees of $348 million, up 45% YoY. Net income was $16.5 million, or $0.16 diluted per share, versus $5.6 million and $0.05 in Q2 2025. Contribution profit reached an all-time high of $193 million, though contribution margin slipped to 55% from 58%.

Strategy

Management is focused on re-accelerating growth in core personal loans while moving secured products, including auto and home, rapidly toward profitability. The company funds growth without adding equity capital and continues to build committed capital and co-investment arrangements, which now account for more than 50% of loan funding. It also retains certain loans for R&D to test AI models for newer products such as small dollar loans and auto secured personal loans. As products mature, they are removed from R&D classification, as happened for auto refinance, auto retail and HELOCs in Q2 2026.

Risks

• Funding concentration — In 2025, the top three lending partners originated 83% of loans facilitated on the marketplace and accounted for 61% of total revenue from fees.
• Macroeconomic and credit sensitivity — The company states its business has been and will continue to be adversely affected by economic conditions and other factors it cannot control.
• AI model effectiveness — Failure to improve AI models or to accurately reflect changing economic conditions on borrower credit risk would harm growth and results.
• Secured product profitability — Auto and home products still reported a negative 35% combined contribution margin in Q2 2026, meaning they are not yet profitable.

Outlook

For full-year 2026, Upstart continues to expect total revenue of approximately $1.4 billion and revenue from fees of approximately $1.3 billion. Management also expects adjusted EBITDA of approximately $294 million, a 21% margin of total revenue. The company does not provide a GAAP net income outlook in the excerpt.