Upstart’s third quarter was marked by solid year-over-year growth but drew a negative market reaction, as revenue modestly missed Wall Street’s expectations. Management attributed the results to conservative adjustments within its AI-driven credit decision models, which responded to macroeconomic signals by tightening loan approvals and raising interest rates. CEO David Girouard noted, “Our models responded to macroeconomic signals they observed by moderately reducing approvals and increasing interest rates,” leading to a lower conversion rate despite robust demand. The quarter also saw continued progress in new products, particularly in auto and home lending, yet the impact of model conservatism weighed on transaction volumes.
Is now the time to buy UPST? Find out in our full research report (it’s free for active Edge members).
Upstart (UPST) Q3 CY2025 Highlights:
- Revenue: $277.1 million vs analyst estimates of $280.6 million (70.9% year-on-year growth, 1.3% miss)
- Adjusted EPS: $0.52 vs analyst estimates of $0.42 (23.4% beat)
- Adjusted Operating Income: $51.82 million vs analyst estimates of $8.57 million (18.7% margin, significant beat)
- Revenue Guidance for Q4 CY2025 is $288 million at the midpoint, below analyst estimates of $306.6 million
- EBITDA guidance for Q4 CY2025 is $63 million at the midpoint, below analyst estimates of $67.43 million
- Operating Margin: 8.5%, up from -27.8% in the same quarter last year
- Market Capitalization: $3.77 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Upstart’s Q3 Earnings Call
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Dan Dolev (Mizuho): asked about reconciling strong application growth with lower transaction volumes. CEO David Girouard explained that application volumes were robust, but model conservatism limited approvals, highlighting a deliberate risk posture.
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Kyle Peterson (Needham): questioned the impact of auto sector credit events on Upstart’s expansion. Girouard said there has been no direct effect, but acknowledged increased diligence in the market due to recent fraud headlines, which has not materially altered Upstart’s strategy.
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Peter Christiansen (Citi): inquired about the quality of applications amid improved marketing channels. CTO Paul Gu confirmed that while application numbers rose, conversion fell due to conservative model adjustments—not a deterioration in applicant quality.
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Patrick Moley (Piper Sandler): asked about progress securing funding for R&D-stage products. CFO Sanjay Datta reported positive momentum, but noted that larger deal sizes and extended diligence have lengthened timelines, especially in auto.
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Mihir Bhatia (Bank of America): probed factors behind conversion rate changes. Girouard attributed shifts mainly to model conservatism in response to macro signals, while Gu detailed steps taken to reduce volatility in the metric going forward.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory analyst team will closely monitor (1) the pace at which Upstart onboards third-party funding partners for its new products, (2) the trajectory of conversion rates and whether recent model calibration improvements translate into more stable approval trends, and (3) continued automation in auto and home loan originations. Developments in competitive lending markets and Upstart’s ability to sustain credit performance will also be critical signposts.
Upstart currently trades at $38.88, down from $46.31 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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