Online lending platform provider Upstart reported earnings that exceeded analysts' forecasts for the first quarter, but analysts and investors seem concerned about the second quarter and beyond, given macroeconomic uncertainties.
Earnings per share were 30 cents, where analysts had expected 17 cents. Total quarterly revenue was $213 million, above analysts' consensus estimates of $199 million and a 67% increase over the same period last year. Loan volumes were up 102% year over year.
"The first quarter was a strong one [for Upstart], despite being our seasonally slowest time of the year," David Girouard, the company's co-founder, president, CEO and chairperson, said late Tuesday during an earnings call. "Platform originations grew 89% year on year, with model wins and improved borrower health combining with more competitive capital to drive meaningfully higher conversion rates."
Jefferies analysts were positive about the quarterly results, but cautious about Upstart's outlook. "The quarter's adjusted EPS was better than expected on loan volumes, conversion rate, and acquisition costs, offset by higher than expected servicing costs," the analysts wrote in a report. "Second quarter 2025 guidance points were below the street's across metrics and fiscal year 2025 guidance points stayed in place, which we view as conservative, but may fall short of expectations."
Immediately after Upstart reported earnings, its stock price dropped nearly 20%, and it stayed down Wednesday morning. The company projected revenue of $225 million for the second quarter, slightly below analysts' consensus expectations of $228 million. During the call, several analysts grilled Girouard about macroeconomic volatility.
Girouard said Upstart is being cautious about its projections for the year, given the many unknowns about the economy and tariffs. The company's underwriting models can respond quickly to macroeconomic changes, he said.
Girouard also said on the earnings call that Upstart was "right on the doorstep" of profitability, based on generally accepted accounting principles, in the first quarter.
"Just as importantly, home and auto [loans] continue their torrid growth pace, with the originations growing 52% and 42%, respectively, on a sequential basis," he said.
The company is growing in several areas. Upstart has signed a one-year agreement with Walmart's majority-owned fintech OnePay to make credit available to Walmart shoppers.
And on Tuesday, Upstart announced an agreement with Fortress Investment Group through which Fortress has agreed to purchase $1.6 billion of consumer loans made through Upstart's platform. Loans made on the platform are purchased by about 100 banks, credit unions and private investors.
Upstart should not be affected by the Trump administration's tariffs, Girouard said.
"While we're vigilant with respect to any disruptions that recent government trade policy might cause, we're also confident that our ability to adapt to changing macroeconomic conditions is miles better than it was just a couple of years ago," he said. "In the time of trade disruption, we're also happy that Upstart is a 100% U.S. business that's 100% digital."
The first three months of the year coincide with the start of President Donald Trump's second term in office. Investors are likely to be more interested in banks' outlooks amid swings in tariff policy than the first-quarter results.
Upstart's loans are now almost entirely automated, Girouard said. "We reached an all-time high of 92% of loans fully automated, meaning the entire process from rate request to loan closing is entirely driven by AI-powered software with no human intervention by Upstart. All else being equal, we believe a faster automated process selects for better borrowers."
In the first quarter, 32% of Upstart's loan originations went to people with credit scores higher than 720, the company said.
During his remarks Tuesday, Girouard gave a nod to cynicism about AI hype before making a pitch for the technology's transformative potential in the consumer credit market.
"I think much of the world has come down with the case of AI fatigue — there's just so much discussion and so many predictions about what AI will do or what it might do to the world, to our lives and to our children's lives," he said. "I admit, I roll my eyes at some of the debates and the discussions as well."
"But in Upstart's case, AI and its unique capabilities are unquestionably aligned with a better future for all when it comes to financial wellness. Improvements to our risk models and expansion of our product line mean we are reducing the price of credit for the world more and more each day."
