Upstart Holdings Inc Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Upstart Holdings Inc's Q3 2025 earnings call highlighted rapid growth, profitability, and AI leadership, with a focus on credit performance and macro handling. The company reported strong consumer demand and growth in newer products like auto and home loans. Upstart also emphasized its strong funding position and AI capabilities in credit risk assessment.
Key Financial Results
Q3 revenue reached approximately $277 million, a 71% year-on-year increase and an 8% sequential increase.
Fee revenue totaled approximately $259 million, up 54% year-on-year.
Net interest income was approximately $19 million.
GAAP net income was approximately $32 million.
GAAP earnings per share was $0.23, based on a diluted weighted average share count of 110 million.
Adjusted EBITDA was roughly $71 million.
Adjusted earnings per share was $0.52, based on a diluted weighted average share count of 125 million.
Loan transactions totaled approximately 428,000, up 128% from the prior year and 15% sequentially, representing approximately 300,000 new borrowers.
The average loan size was approximately $6,670, 12% lower than the prior quarter.
Contribution margin was 57%, down approximately 1 percentage point from the prior quarter.
Business Segment Results
Newer products (small-dollar loans, auto, and home) accounted for almost 12% of originations and 22% of new borrowers in Q3.
Transaction volume for auto, home, and small-dollar each grew in the range of 300% year-on-year.
The auto retail business more than doubled the number of live lending rooftops on Upstart in Q3 compared to the prior quarter.
Transaction volume for auto retail also grew more than 70% sequentially.
Capital Allocation
Upstart is aiming to reduce its R&D-related balance sheet holdings, expecting progress in Q4 and continuing into 2026.
The company held approximately $1.2 billion of loans on its balance sheet at the end of Q3, up from just over $1 billion in Q2.
Industry Trends and Dynamics
Consumer demand for Upstart continued to grow rapidly, with more than 2 million applications submitted in Q3, up over 30% from Q2.
The company believes that AI models are better suited to navigating a complex and changing environment than human intuition.
Decelerating personal consumption growth is seen as a signal of improving credit health.
Competitive Landscape
Upstart's partnerships with banks and credit unions allow it to offer the best rates to the primest borrowers compared to other fintechs, by as much as 300 basis points.
Upstart has 100% retention of all private credit partners to date.
Macroeconomic Environment
Upstart's risk models responded to macroeconomic signals by moderately reducing approvals and increasing interest rates.
The Upstart Macro Index (UMI) ticked up modestly in July and August, influencing the model's response.
The company sees no material deterioration in consumer credit strength and has seen recent signs of improvement.
The models exhibited some recent caution in response to a UMI run-up of almost 0.2 points.
Rising repayment speeds limit interest income from current loans and require higher coupons to compensate.
Growth Opportunities and Strategies
Upstart is focused on process innovation in auto and home, expecting these to be real growth drivers in 2026.
The company is working on a hybrid product called an auto-secured personal loan.
Upstart is making rapid progress automating the process of getting a HELOC.
The company launched instant funding for small-dollar relief loans in September.
Upstart plans to begin dialing up its forward investment into customer lifetime value by slightly moderating take rates in exchange for higher origination volumes and higher repeat transactions in the future.
Financial Guidance and Outlook
For Q4 2025, Upstart expects total revenues of approximately $288 million, including fee revenue of approximately $262 million and net interest income of approximately $26 million.
Q4 contribution margin is expected to be approximately 53%.
Q4 GAAP net income is projected at approximately $17 million, with adjusted net income of approximately $52 million and adjusted EBITDA of approximately $63 million.
For the full year 2025, Upstart now expects total revenues of approximately $1.035 billion, including fee revenue of approximately $946 million and net interest income of approximately $89 million.
The full year adjusted EBITDA margin is expected to be approximately 22%, with GAAP net income of approximately $50 million.
