Important Highlights

Upstart Holdings has recovered from its early 2020s slowdown, reflected in the AI lender's sustained robust loan origination expansion.
Yet margins fail to climb alongside rising revenue, and another potential obstacle looms.
Priced at 35 times forward earnings, investors should seek lower valuations or encouraging updates on major risks before purchasing.
10 stocks we like better than Upstart ›

During the past five years, Upstart Holdings (NASDAQ: UPST) has endured volatile share price swings. After an initial post-IPO surge, elevated interest rates combined with weaker loan demand triggered a sharp revenue decline and widening losses.

Since that period, the artificial intelligence lending technology company's revenue has rebounded strongly. Upstart has also turned consistently profitable. Nevertheless, with shares still more than 92 percent below their peak, the company faces a lengthy path to even partial recovery. Additional gains for this fintech stock appear possible, yet notable uncertainties persist.

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Upstart and its recent performance

On May 5, Upstart announced first-quarter results. Transaction volumes climbed 77 percent, while total originations reached $3.4 billion, marking a 61 percent rise from the same quarter last year.

Upstart functions as a marketplace where financial institutions use its AI models and cloud platform for loan underwriting and risk evaluation. The firm has not yet entered mortgages but supports auto loans, personal loans, and home equity lines of credit.

Beyond the solid quarterly figures, management reaffirmed its 2026 outlook, targeting $1.4 billion in revenue and $294 million in adjusted EBITDA. Those figures represent 34 percent and 27.5 percent growth, respectively, versus 2025 levels.

During the earnings call, CEO Paul Gu confirmed ongoing pursuit of a national bank charter while emphasizing reliance on third-party capital. Unlike certain fintech peers such as SoFi Technologies that became banks, Upstart seeks the charter mainly to operate nationwide and lower compliance and operational expenses.

Top risks to the bull case

Although revenue growth remained strong, Upstart posted wider operating and net losses. Operating losses totaled $7.5 million versus $4.5 million in the prior-year quarter, while net losses reached $6.6 million, nearly tripling from Q1 2025. Adjusted EBITDA also slipped slightly to $40.5 million from $42.6 million.

Short interest stays elevated near 32 percent of the float, underscoring doubts about future profitability. Upstart's AI underwriting models have not yet faced a severe economic stress test following the post-COVID period.

Only time will reveal whether margins expand with continued revenue growth and whether loan credit performance holds steady. At 35 times forward earnings the shares appear expensive. Investors should await lower prices or favorable news on these uncertainties before buying.

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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.