Here's our initial take on Upstart Holdings' (UPST -1.00%) first-quarter financial report.
| Metric | Q1 2024 | Q1 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Production-adjusted revenue | $127.8 million | $213.4 million | +67% | Beat |
| Adjusted earnings per share | ($0.31) | $0.30 | N/M | Beat |
| Adjusted EBITDA | ($20.3 million) | $42.6 million | N/M | n/a |
| Unit loan transaction volume | 119,380 | 240,706 | +102% | n/a |
Upstart's first-quarter financial results had a number of figures that looked good on a year-over-year basis. Loan origination volume in dollar terms was up 89% from last year's period to $2.1 billion. Revenue climbed 67%, while Upstart came close to breaking even under generally accepted accounting principles and reversed year-ago losses with positive adjusted net income and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Conversion rates rose from 14% a year ago to 19.1%, helping the number of loans completed using the Upstart platform more than double from the first quarter of 2024. Key figures were higher than investors had generally anticipated.
Upstart also had positive comments about its products and technology. New embedding algorithms are making the company's AI-powered personal loan underwriting more effective, and all but 8% of loans were fully automated on the platform. Upstart was also pleased to see more highly rated superprime borrowers take out loans, as those loans helped to balance Upstart's overall portfolio.
However, it appears that most of those following Upstart instead focused on a couple of things. First, even with the solid performance in the first quarter, Upstart didn't make major moves to its guidance for the full year. The company raised its revenue expectations by just $10 million, or 1%, and all of that gain will come from higher expected net interest income rather than fee revenue. In addition, when you look at the numbers compared to the fourth quarter of 2024, you can see a number of areas in which Upstart saw sequential downturns or more sluggish growth.
On the whole, Upstart shareholders were not happy about the company's future prospects. Shares plunged 18% in the first 30 minutes of after-hours trading following the release of the report. If those losses hold, then it would mean a greater than 50% drop since the stock's highest levels of 2025, set immediately after Upstart's positive fourth-quarter financial report in mid-February.
Investors in Upstart can't be happy about the continued uncertainty in the broader economy, and short-term traders aren't giving the company any credit for the incremental improvements it's making in its business. In addition, shareholders didn't seem particularly appeased by news that affiliates of Fortress Investment Group had agreed to purchase another $1.2 billion in consumer loans. That's surprising, because investors have wanted to see Upstart maintain a healthy market for those loans rather than keeping them on its own balance sheet.
What's increasingly clear is that Upstart will have to post much larger profits than it has managed to do thus far. With the share-price drop on Tuesday afternoon, investors are expressing their impatience that Upstart hasn't been able to put AI to better use thus far.
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