Upstart's Stock Is Getting Punished After Earnings. Here's the Big Gripe

Dow Jones05-06

Upstart's latest revenue topped expectations, but profit fell short.

Shares of Upstart were diving over 13% in Tuesday's extended session after the company posted its earnings results for the first quarter.

While Upstart (UPST) sees big opportunities around artificial intelligence, investors seem focused on near-term profit pressures, which management attributed to timing matters rather than structural changes to the business.

The company, which uses artificial intelligence to inform lending decisions, posted revenue of $308 million for the first quarter, up 44% from the prior-year quarter, and beating the FactSet consensus of $301 million. But Upstart's profit figures disappointed Wall Street.

Upstart reported adjusted earnings before interest, taxes, depreciation and amortization of $40.5 million, down from $42.6 million in the prior-year quarter. Analysts tracked by FactSet were expecting $57 million.

The company reported a net loss of $6.6 million for the first quarter, compared to a loss of $2.4 million in the prior-year quarter. Wall Street was expecting net income of $18 million.

Upstart CEO Paul Gu, who took over the position last week, said the shortfall could be the result of timing misalignments within consensus estimates. Since the company is maintaining its full-year outlook for $294 million in adjusted Ebitda, he thinks analysts may have failed to account for the fact that the first quarter tends to be weak for personal-loan vendors because that's when people get tax refunds, lowering their need for loans.

"Maybe market expectations didn't totally have the right seasonal factors baked in," Gu said. Operating expenses also played a role, but everything was "within the expected envelope of the plan."

Management also maintained guidance for its full-year 2026 revenue of approximately $1.4 billion, and Gu said the core driver of the company's revenue has been artificial intelligence.

"Every time AI gets better, we convert more people, we can reach more people and the business is bigger," he said.

He also said that the company saw especially strong growth in its home-, personal- and auto-loan segments during the quarter.

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