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Upstart Holdings, Inc. (UPST)·Q2 2025 Earnings Summary

Executive Summary

  • Upstart’s Q2 2025 delivered a clean inflection: revenue rose 102% YoY to $257.3M with GAAP net income of $5.6M and operating income of $4.5M; conversion rate jumped to 23.9% as originations hit $2.82B .
  • Results beat S&P Global consensus by a wide margin: revenue $257.3M vs $225.4M*, and adjusted diluted EPS $0.36 vs $0.25*, driven by improved conversion, model wins and funding breadth .
  • FY25 outlook raised: revenue to ~$1.055B (from ~$1.01B), fee revenue to ~$990M (from ~$920M), Adjusted EBITDA margin to ~20% (from ~19%); NII trimmed to ~$65M (from ~$90M), as mix tilts further off balance sheet .
  • Q3 guide: revenue ~$280M, contribution margin ~58%, GAAP net income ~$9M, adjusted net income ~$44M, adj. EBITDA ~$56M—slightly ahead of revenue consensus $279.6M* .
  • Near-term catalysts: sustained conversion uplift and “Model 22” rollout on core PL, accelerating Auto/HELOC growth, and capital actions (Aug 11–12 proposed/upsized $600M 0% converts with $224M buyback of 2026 notes) supporting funding scalability .

What Went Well and What Went Wrong

What Went Well

  • Triple-digit top-line growth and return to GAAP profitability: revenue $257.3M (+102% YoY), GAAP net income $5.6M, adjusted EBITDA $53.1M (21% margin). CEO: “you can see it in full bloom…reached GAAP profitability a quarter sooner than expected” .
  • Strong volume/throughput: 372,599 loans, $2.820B originations, conversion 23.9% vs 15.2% LY; 92% fully automated; contribution profit $140.5M at 58% margin (flat YoY) .
  • Broader product momentum and funding: newer businesses accelerated off Q1; Q2 post-print, company executed a $600M 0% convertible due 2032 and repurchased ~$232.6M of 2026 notes, reducing medium-term balance sheet risk .

What Went Wrong

  • Operating expense growth outpaced revenue QoQ: Q2 OpEx $252.7M vs $217.9M in Q1 as marketing and scaling activities accelerated .
  • NII trend softer sequentially: net interest and fair value adjustments, net were $16.5M in Q2 vs $27.9M in Q1 as fair value gains moderated; FY25 NII guidance reduced to ~$65M from ~$90M .
  • Liquidity draw in H1 to support growth: unrestricted cash fell to $395.9M vs $599.8M in Q1; H1 operating cash flow -$133.6M; loans at fair value on balance sheet rose to $1.0195B, highlighting the need to transition new products off-balance sheet .

Financial Results

Headline P&L vs Prior Quarters

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($M)218.964 213.371 257.291
Revenue from Fees, net ($M)199.276 185.475 240.777
Net Interest & FV, net ($M)19.688 27.896 16.514
GAAP Net Income (Loss) ($M)(2.755) (2.447) 5.607
GAAP Diluted EPS ($)(0.03) (0.03) 0.05
Adjusted Diluted EPS ($)0.26 0.30 0.36
Adjusted EBITDA ($M)38.775 42.577 53.053

Margins vs Prior Quarters

MetricQ4 2024Q1 2025Q2 2025
Operating Margin (%)(2%) (2%) 2%
Net Income Margin (%)(1%) (1%) 2%
Adjusted EBITDA Margin (%)18% 20% 21%
Contribution Margin (%)61% 55% 58%

Q2 Actual vs S&P Global Consensus

MetricQ2 2025 ActualQ2 2025 Consensus
Revenue ($M)257.291 225.396*
Adjusted Diluted EPS ($)0.36 0.254*
GAAP Diluted EPS ($)0.05 —

Values with asterisk (*) retrieved from S&P Global.

Fee Revenue Mix

MetricQ4 2024Q1 2025Q2 2025
Platform & Referral Fees, net ($M)165.758 150.975 202.845
Servicing & Other Fees, net ($M)33.518 34.500 37.932
Total Fees, net ($M)199.276 185.475 240.777

Operating KPIs

KPIQ4 2024Q1 2025Q2 2025
Loans Originated (#)245,663 240,706 372,599
Transaction Volume ($M)2,107.473 2,133.608 2,820.398
Conversion Rate (%)19.3% 19.1% 23.9%
% Fully Automated91% 92% 92%
Contribution Profit ($M)121.898 102.372 140.543

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)Q3 2025—~280 —
Revenue from Fees ($M)Q3 2025—~275 —
Net Interest Income ($M)Q3 2025—~5 —
Contribution Margin (%)Q3 2025—~58% —
GAAP Net Income ($M)Q3 2025—~9 —
Adjusted Net Income ($M)Q3 2025—~44 —
Adjusted EBITDA ($M)Q3 2025—~56 —
Total Revenue ($B)FY 2025~1.01 ~1.055 Raised
Revenue from Fees ($B)FY 2025~0.92 ~0.99 Raised
Net Interest Income ($M)FY 2025~90 ~65 Lowered
GAAP Net Income ($M)FY 2025≥0 (positive) ~35 Raised/Specified
Adjusted EBITDA Margin (%)FY 2025~19% ~20% Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prior-2)Q1 2025 (Prior-1)Q2 2025 (Current)Trend
AI/TechnologyLaunched Model 19 (PTM); calibration improvements; automation rising Introduced embeddings in underwriting; instant approvals milestone in Auto; single unsecured model Management referenced continued model advances; “Model 22” cited as driver of transactional revenue (IR call materials) Advancing
Macro/UMIUMI declining late-2024; planning assumes stability, no rate cuts Expect UMI ~1.4–1.5; no assumed rate cuts Steady macro assumptions maintained; inflation risk noted (IR call) Stable
Funding & CapitalExpanded committed capital; reduced balance-sheet loans; raised converts in H2’24 $1.2B forward-flow with Fortress; >50% committed funding; shelf/ATM in place Post-Q2: upsized $600M 0% converts; repurchased ~$232.6M 2026 notes Strengthening
Product performanceAuto/HELOC +~60% QoQ; SDL >100% QoQ Auto +42% QoQ; HELOC +52% QoQ; SDL +7% QoQ “Newer businesses accelerated” off Q1 momentum (Home/Auto) Accelerating
Mix & Take ratesCM ~61%; optimization ongoing CM 55% on super-prime mix; lower take rates in competed segments CM 58% (flat YoY); continued prime/super-prime mix shift Mix headwind moderated
ABS / At-willOpportunistic; not a dependency ABS deal oversubscribed; spreads somewhat wider Continued caution; focus on committed capital (IR call) Opportunistic

Management Commentary

  • “In addition to achieving triple-digit revenue growth, we reached GAAP profitability a quarter sooner than expected and our newer businesses actually accelerated off their amazing growth in the first quarter.” — Dave Girouard, CEO .
  • On funding breadth (Q1): “These committed partnerships are frankly behaving exactly as designed…no pullbacks from private credit partners or banks/credit unions.” — Sanjay Datta, CFO .
  • On conversion uplift drivers (Q1): “More accurate models lead to growth… and less friction via automation… that is the story of Upstart in 100 words.” — Dave Girouard .
  • Q2 call materials indicate continued model advances and intent to transition new product funding off Upstart’s balance sheet by year-end (subject to deal timing) .

Q&A Highlights

  • Funding strategy: Management reiterated preference for diversified capital with emphasis on committed partnerships; ABS remains opportunistic (prior call detail) .
  • Mix dynamics: As super-prime mix increases, take rates compress but dollar profits grow; focus remains on efficient growth and long-term profitability (prior call) .
  • Transition off balance sheet: Q2 materials emphasize moving Home/Auto funding to third-party capital over 2025, reducing NII reliance and balance sheet usage .

Estimates Context

  • Q2 2025 delivered a substantial beat vs S&P Global: revenue $257.3M vs $225.4M*, adjusted diluted EPS $0.36 vs $0.254* .
  • Q3 2025 guidance of ~$280M revenue is slightly above revenue consensus $279.6M*; management guided adjusted net income ~$44M, which implies meaningful non-GAAP profitability (share count ~105M guided) .
  • FY 2025 guidance raised for revenue/fees and margin, but NII reduced to ~$65M, signaling faster shift to off-balance sheet funding and less reliance on FV marks .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Conversion-led growth is compounding: higher approval rates at lower friction are expanding volumes and fee revenue while sustaining a ~58% contribution margin despite super-prime mix .
  • Profitability trajectory is intact: GAAP profitability arrived a quarter early; FY25 guide implies sustained adjusted EBITDA margin improvement to ~20% and GAAP net income of ~$35M .
  • Funding risk easing: $1.2B Fortress forward flow (May) and August converts plus 2026 note repurchase broaden/derisk capital, supporting continued scale and balance sheet transition .
  • Mix matters: super-prime success compresses take rates but is dollar-accretive and de-risks credit; investors should expect stable-to-slightly lower contribution margins near-term with higher absolute profits .
  • Watch NII and working capital: NII trimmed in guidance and H1 cash outflows/loan growth highlight the importance of executing external capital for new products in H2 .
  • Catalysts: continued model “wins” (e.g., Model 22 impact), Auto/HELOC scaling, and incremental bank/credit union partners; the narrative remains AI-led underwriting advantage plus capital resiliency .

Sources:

  • Q2 2025 8-K and press release, financial statements, KPIs, and guidance -.
  • Q1 2025 press release and call (prior quarter comparison and themes) - -.
  • Q4 2024 press release and call (trend context) - -.
  • Q2 2025 earnings call materials (IR PDF) and transcript access links .
  • Capital markets actions: proposed and upsized $600M 0% converts; repurchase of ~$232.6M 2026 notes - -.
  • Stock reaction note (post-release) .

Values marked with asterisk (*) are from S&P Global.