Upstart Q2 Earnings Call Highlights
Key Points
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- Upstart delivered strong Q2 growth and returned to profitability: Originations rose 50% year over year to $4.2 billion, revenue increased 42% to approximately $365 million, and GAAP net income reached $17 million. Contribution profit hit a record $193 million, with margins improving across unsecured and secured lending.
- Secured lending expanded while funding capacity strengthened: Auto and Home originations grew sharply, and Upstart expects secured products to reach contribution-margin breakeven by Q4. The company secured up to $5 billion in new institutional funding capacity and completed a $569 million securitization, while discontinuing auto refinance.
- Full-year guidance was maintained despite higher macroeconomic risk: Upstart continues to forecast approximately $1.4 billion in 2026 revenue and $294 million in adjusted EBITDA. The company also received conditional approval for its bank charter and aims to launch Upstart Bank in early 2027.
Upstart (NASDAQ:UPST) reported second-quarter 2026 results marked by accelerating loan originations, higher contribution margins and a return to GAAP profitability, while reaffirming its full-year financial outlook despite a higher macroeconomic risk indicator.
Chief Executive Officer Paul Gu said the company executed on priorities outlined last quarter: reaccelerating its core personal-loan business, improving the profitability of its Home and auto products, and expanding third-party funding without raising equity capital.
Total originations reached $4.2 billion, up 50% from a year earlier and 23% sequentially. Core personal-loan originations increased 27% from the first quarter, or by $526 million, while Total unsecured-lending originations rose 38% year over year and 20% sequentially. Upstart changed the name of its sole reportable segment to unsecured lending from personal lending; the change was administrative and did not alter disclosures.
Revenue, margins and profitability improve
Revenue totaled approximately $365 million, an increase of 42% year over year and 18% from the prior quarter. Fee revenue was $348 million, rising 45% from a year earlier and 26% sequentially. Unsecured lending generated $326 million of fee revenue, while secured products, consisting of Home and auto offerings, produced $22 million.
Chief Financial Officer Andrea Blankmeyer said fee-revenue growth exceeded origination growth because take rates improved in both categories. Unsecured take rate improved by about 24 basis points sequentially, while secured take rate increased by 81 basis points. Blankmeyer attributed unsecured improvement largely to a greater mix of higher-margin core personal loans and seasonal demand, while noting that the company is focused on contribution profit rather than maximizing take rates.
Contribution profit, defined by the company as fee revenue less variable costs for borrower acquisition, verification and servicing, reached a record $193 million. The figure was up 37% year over year and 41% from the first quarter. Total contribution margin was 55%, compared with 50% in the prior quarter.
- Unsecured contribution margin was 62%, up six percentage points sequentially.
- Secured-products contribution margin improved to negative 35%, from negative 96% in the first quarter.
- GAAP net income was approximately $17 million, producing a 5% net income margin and diluted earnings per share of $0.16.
- Adjusted EBITDA was approximately $77 million, up 45% year over year, with a 21% margin.
Blankmeyer said Upstart expects secured products to reach contribution-margin breakeven by the fourth quarter. The company said the improvement in those products reflected higher take rates and operational efficiencies across auto and Home lending.
Secured lending expands as Upstart sunsets auto refinance
Auto originations increased 264% from a year earlier and 62% sequentially, while Home originations rose 139% year over year and 14% from the first quarter. Gu said auto and Home accounted for about 14% of total originations during the quarter, compared with approximately 1% in the fourth quarter of 2021.
In its Home business, the company said it reduced the cost to originate a home equity line of credit by 15% from the first quarter and can close HELOCs in six days. Gu said the company’s HELOC rates are, on average, more than 200 basis points below competitors’ rates. He added that Home-specific distribution partnerships have not yet been established but are on the company’s roadmap.
In auto lending, Upstart said it began optimizing take rates in its auto-purchase business and improved its ability to identify consumers with eligible vehicles for auto secured personal loans. However, the company decided to sunset its auto-refinance business. Gu said the product was relevant for returning customers but did not have the same growth velocity or potential as other investments.
Funding activity and bank plans
Upstart said it closed three institutional funding deals since its May earnings call, including its largest-ever transaction, providing up to $5 billion in committed capacity. Year to date, the company has signed capital partnerships expected to add $10.8 billion in incremental capacity.
The company also completed an upsized $569 million asset-backed securitization, its largest issuance since 2021 and its tightest spreads in three years, according to Gu. Loans held on Upstart’s balance sheet ended the quarter at approximately $1.06 billion, up about $50 million sequentially. Yet those holdings represented 5.9% of total unpaid principal balance of Upstart loans outstanding, the lowest level in nearly two years.
Gu said the company has renewed every institutional capital partner since 2023. He said co-investment arrangements with funding partners are intended to secure longer-term committed capital rather than serve as a discount on loan sales.
Upstart received conditional approval from the Office of the Comptroller of the Currency in July for its bank charter. The company aims to launch Upstart Bank in early 2027 and said the bank is not expected to change its strategy of primarily using third-party capital to fund loans. Blankmeyer said Upstart believes it is sufficiently capitalized to launch the bank and expects to move the bulk of its loan originations through the bank relatively quickly after launch.
Outlook maintained amid higher UMI
Upstart reiterated its full-year 2026 outlook for approximately $1.4 billion in total revenue, $1.3 billion in fee revenue and $294 million in adjusted EBITDA, representing roughly a 21% EBITDA margin.
The outlook assumes that the company’s UMI measure, which it uses to assess the macroeconomic credit environment, remains around 1.50 for the remainder of the year. Blankmeyer said UMI was 1.50 as of the day before the call, up 9% from the beginning of the second quarter and at the top end of the 1.40 to 1.50 range underpinning the company’s original annual guidance.
Management said the higher UMI creates a modest headwind for originations and fair-value marks, but it expects business execution to offset that pressure. Fixed operating expenses are expected to rise at a low-single-digit sequential rate in both the third and fourth quarters, following investments in secured products, technology infrastructure, model infrastructure and bank preparations.
About Upstart (NASDAQ:UPST)
Upstart Holdings, Inc operates a cloud-based lending marketplace that leverages artificial intelligence and machine learning to assess borrower creditworthiness. The company partners with banks and credit unions, providing its proprietary AI models and underwriting platform to facilitate consumer credit products. By focusing on non‐traditional data points—such as education, employment history and other real‐time indicators—Upstart seeks to improve approval rates and lower loss rates compared with conventional credit scoring methods.
Upstart's core offering centers on unsecured personal loans, which borrowers can use for purposes such as debt consolidation, home improvements or major purchases.
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