Upstart Holdings Inc. (NASDAQ: UPST) saw its shares plummet 13.9% to $26.84 in after-hours trading on Tuesday, as investors focused on the company's widening first-quarter net loss and disappointing adjusted profit margins, despite a 44% jump in revenue and a significant increase in loan volume. The stock had closed the regular session at $31.17.
The AI-powered lending platform reported a first-quarter net loss of $6.6 million, or 7 cents per share, compared to a loss of $2.4 million, or 3 cents per share, in the same period last year. Adjusted EBITDA, a non-GAAP measure of profitability, fell to $40.5 million from $42.6 million a year earlier. These figures fell short of analyst expectations, which had called for adjusted EBITDA of $57 million and net income of $18 million, according to FactSet.
The financial results came during CEO Paul Gu's first earnings report since taking over on May 1. Gu, a co-founder and former chief technology officer, succeeded Dave Girouard, who remains executive chairman. “Maybe market expectations didn’t totally have the right seasonal factors baked in,” Gu told MarketWatch, adding that “every time AI gets better, we convert more people.”
Despite the profit miss, Upstart posted strong top-line growth. Revenue reached $308.2 million, up from $213.4 million a year ago and above the $301 million consensus estimate. Loan origination volumes surged 61% to approximately $3.4 billion, while transaction volume rose 77% to 425,356 loans. The company maintained its full-year guidance of approximately $1.4 billion in revenue and $294 million in adjusted EBITDA.
However, margin compression was a key concern. The contribution margin fell to 50% from 55%, and the adjusted EBITDA margin dropped to 13% from 20%. Fee revenue rose 49% to $277 million, but the narrower margins signaled that the rapid expansion in loan volumes is not translating into bottom-line growth. “Volume is not enough if margins lag,” the market seemed to conclude.
Upstart's growth was broad-based across its product lines. Personal loan originations reached $3.0 billion, up 50% year-over-year. Auto loan originations grew to $263 million, roughly four times the year-earlier level, while home equity line of credit (HELOC) originations rose to $143 million, about 3.5 times higher. The company noted that 91% of loans on its platform were fully automated, with no human intervention.
The competitive landscape remains challenging. SoFi Technologies, another digital lender, saw its shares fall last week after maintaining its 2026 outlook despite record first-quarter loan originations, highlighting investor pressure on fintech lenders to demonstrate profit leverage rather than just loan growth. The broader market context suggests that investors are increasingly focused on profitability in the sector.
Looking ahead, Upstart faces risks from capital-market volatility and macroeconomic conditions. The company's Upstart Macro Index stood at 1.38 as of March 31, indicating that current conditions add about 38% incremental risk to repayment performance versus its baseline. If funding partners pull back or borrower credit quality deteriorates, the company's growth story could become more difficult to sustain.
For now, management is asking investors to look past a soft first quarter and trust the full-year guidance. But Tuesday's market reaction suggests that patience may be wearing thin. The next major test for Upstart will be whether it can convert its impressive origination growth into cleaner, more consistent profitability without relying on investors to wait too long.
