Upstart Holdings Inc Earnings - Q4 2025 Analysis & Highlights
Upstart Holdings reported strong Q4 2025 results with significant growth across all product categories, announced a leadership transition with Paul Gu becoming CEO, and provided ambitious three-year guidance targeting 35% compound annual growth rate while expanding into secured lending markets.
Key Financial Results
Total revenue for Q4 2025 reached approximately $296 million, up 35% year-over-year and 7% sequentially.
Full year 2025 revenue exceeded $1 billion, up 64% from 2024, with fee revenue of $950 million versus guided $920 million.
Net income flipped from negative $2.8 million in Q4 2024 to positive $19 million in Q4 2025.
Full year 2025 net income reached positive $54 million with a 22% adjusted EBITDA margin, compared to 2% margin in 2024.
Adjusted EBITDA increased more than 20x from $11 million to $230 million year-over-year.
Loan originations grew 86% year-over-year with approximately 456,000 loan transactions in Q4, up 86% from prior year and 6% sequentially.
Average loan size increased to approximately $7,000, up 5% from the prior quarter, reflecting increased mix of non-personal loan products.
Contribution margin came in at 53% in Q4, down 4 percentage points from prior quarter, reflecting increased weighting of lifetime value in pricing calculations.
GAAP earnings per share was $0.17 based on diluted weighted average share count of 112 million.
Business Segment Results
Personal loan originations grew 75% year-over-year and 41% in Q4 year-over-year, demonstrating continued market share gains in the company's core product in its 12th year of operation.
Auto originations grew 5x year-over-year with Q4 originations up 56% sequentially and 340% year-over-year, driven by doubling of live lending rooftops for the third quarter in a row.
Home originations grew 5x year-over-year with Q4 originations up 70% sequentially and 350% year-over-year, driven by tripling of HELOCs using automated underwriting.
Servicing revenue continued steady growth at 28% year-over-year, driven by higher origination volumes and improving servicing fair value marks.
Net interest income of approximately $31 million was ahead of guidance by $5 million, resulting from strong return performance on elevated loan balance during part of the quarter.
Capital Allocation
Balance sheet loans held directly decreased by 20% in Q4, with loans on balance sheet declining from $1.2 billion in Q3 to approximately $985 million in Q4.
70% of funding for auto and home loans originated in Q4 came from 11 different partners, with an additional 13 partners signed up for the coming year.
92% of Q4 auto originations were funded via third parties, supported by continued expansion of institutional and lender funding relationships.
In home lending, initial institutional and lender partnerships collectively took majority of Q4 HELOC production with expectation to attain third-party funding levels similar to auto segment in near future.
Industry Trends and Dynamics
The Upstart Macro Index (UMI) held steady at approximately 1.4 to 1.5 for most of 2025, indicating stable background consumer risk levels.
Consumer health is good with UMI values returning to post-COVID normalization, representing a long-term stable to downtrend since 2022.
AI-powered lending is expected to rapidly gain market share across unsecured home and auto segments, with AI-centric platforms likely to originate majority of loans in these categories over time.
The addressable market for secured products (auto and home) is many times larger than pure unsecured or personal loans.
Competitive Landscape
Upstart's personal loan product is competing extremely well on both rates and process, with competitiveness improving over time based on market intelligence.
The company believes it has built the very best team and technology in credit with a 12-year head start across data, algorithms, and infrastructure in AI lending.
Upstart's measured separation accuracy advantage over benchmark textbook model increased by approximately 1 percentage point to 172.2% on previously observed loans, with accuracy boost more than 100 times larger on loans not previously won.
The company does not feel threatened by broader AI advancements, as loan underwriting requires specific data and algorithms different from general-purpose language models.
Upstart's proprietary lending models are built over 12 years and are not directly built on top of anybody else's technology, requiring substantial modifications to general AI models.
Macroeconomic Environment
Management assumes a constant default risk environment with UMI holding steady at current value of around 1.4 to 1.5 and static interest rate environment for guidance purposes.
Q3 2024 detected a temporary increase in background level of consumer risk that has since faded, with models returning to broader normalization trend.
Looser economic policy that helps consumers, such as interest rate cuts and tax policy changes, tends to be beneficial to company volumes and business.
Growth Opportunities and Strategies
The company projects a compound annual growth rate of 35% for the next three years (2025-2028).
Upstart is pursuing an "everything-store for credit" strategy, officially beginning a new era with 70% of auto and home funding from third parties and 24 additional partners signed for 2026.
The company is investing in customer engagement and cross-sell capabilities, with significant low-hanging fruit remaining in selling additional products to existing borrowers.
Cross-sell of HELOCs to personal loan customers is a key strategy, with HELOC process automated to approximately 6 days versus industry average of 35 days.
Model improvements including Model 24 and Model 25 launched in Q4, with Model 25 adding significant number of consumers to training dataset by joining passed applicant data to similar loans outside Upstart.
Partnership models were redesigned and new data sources integrated into partner APIs, driving 24% more channel originations quarter-on-quarter while lowering latency by 34%.
Verification models were redesigned to lower default rates by 0.8% and first voice LLMs were launched for manual verification calls.
Training data crossed 100 million borrower repayment events for the first time in Q4, with next 100 million expected to come dramatically faster and include data on almost every major category of consumer credit.
Leadership Transition
Paul Gu, Co-Founder and Chief Technology Officer, will become CEO effective May 1, 2026, with David Girouard transitioning to Executive Chairman.
Sanjay Datta will serve as President and Chief Capital Officer, Andrea is joining as CFO, and Grant is returning as CTO.
Financial Guidance and Outlook
For 2026, the company expects total revenues of approximately $1.4 billion, fee revenue of approximately $1.3 billion, and adjusted EBITDA margin of approximately 21%.
The company expects to continue growing core personal loan business at healthy clip via consistent model improvements and growth wins.
As lifetime value weighting increases in loan pricing, take rates are expected to moderate, reducing current contribution margins in return for higher borrower volumes and lifetime profits.
Absolute contribution dollars from platform are expected to grow at robust rate, aiming to maintain within at least 5 percentage points of corresponding fee revenue growth.
New secured product categories in auto and home are expected to contribute over $100 million in fee revenue in 2026.
At mature scale and sell-through, secured products are anticipated to attain average upfront take rates of around 4%, plus average servicing rates of around 2% of outstanding balance, on average loan sizes of approximately $30,000.
For the three-year period spanning 2025 to 2028, the company is targeting 35% compound annual growth rate in macro neutral environment, with terminal adjusted EBITDA margin of around 25% in 2028.
The company expects to continue streamlining balance sheet and building new committed multiproduct relationships with lenders and investors.
Fixed cost discipline is expected to continue with improving operating leverage as profit base grows further.
Operating loss carryforwards are expected to continue being enforced for 2026, affecting tax rate expectations.
The company will publish monthly transaction volume at the beginning of each subsequent month and focus on providing annual guidance updated with each quarterly earnings report.
