It has been about a month since the last earnings report for Upstart Holdings, Inc. (UPST). Shares have lost about 6.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Upstart due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Upstart Holdings, Inc. before we dive into how investors and analysts have reacted as of late.
Upstart Q2 Revenues Climb as Profitability Improves
Key Highlights
• Revenues: $364.7 million in second-quarter 2026, up 42% year over year.
• EPS: 16 cents, up 220% year over year from 5 cents in the prior-year quarter.
• Revenues from fees: $348 million, up 45% year over year, with platform/referral fees of $284.1 million, servicing/other fees of $54.8 million and loan sales fees of $9.1 million.
• GAAP net income: $16.5 million, up 195% year over year from $5.6 million in the prior-year quarter. Net income margin was 5% versus 2% a year earlier.
• Contribution profit: $193.1 million, up 37% year over year; contribution margin 55% compared to 58% in the prior-year quarter.
• Adjusted EBITDA: $76.9 million, up 45% year over year; adjusted EBITDA margin of 21% in second-quarter 2026.
• Originations: $4.2 billion, up 50% year over year; 558,014 loans originated, up 50% year over year.
Scale, Mix & Execution Drive Q2 Results
Top-line growth was driven by higher marketplace originations, stronger fee revenues and continued expansion beyond core unsecured lending. Total originations rose to $4.2 billion, while fee-based revenues reached $348 million, as platform/referral fees, servicing/other fees and newly separated loan sales fees all contributed to the second quarter.
Profitability improved despite higher operating costs. GAAP net income increased to $16.54 million, adjusted EBITDA reached $76.9 million and adjusted EBITDA margin was 21%. Contribution profit reached an all-time high of $193.1 million, though contribution margin declined to 55% from 58% a year ago as product mix continued to include faster-growing secured products with lower current margins.
Unsecured Lending Remains the Core Engine
Unsecured Lending, which includes personal loans, small-dollar loans and Cash Line, remained the largest contributor in the second quarter. Fee revenue rose 38% year over year to $326.3 million, while originations increased 38% year over year to $3.64 billion. Loan count reached 535,191 in the reported quarter.
Contribution profit in Unsecured Lending was $200.8 million compared with $147.3 million in prior-year quarter. Contribution margin was 62%, flat year over year and up six percentage points sequentially, supported by a larger mix of higher-margin core personal loans, lower customer acquisition costs as a percentage of originations and an expected seasonal pickup in demand.
Secured Products Continue to Scale
Secured products continued to grow rapidly, with fee revenue rising 465% year over year to $22 million. Secured originations reached $589 million, including $426 million from auto and $163 million from home products. Auto originations increased 264% year over year, while home originations rose 139%.
Margins in secured products remained negative but improved materially. Contribution margin was negative 35% compared with negative 176% in the prior-year quarter and negative 96% in the first quarter of 2026. Management attributed the improvement to better take rates, operational efficiencies, automation, funnel optimization and lower HELOC origination costs, which fell 15% sequentially.
Expenses Rise as Operating Leverage Emerges
Total operating expenses were $350.1 million, up 39% year over year and 11% sequentially. Management expects fixed expenses to grow at a low-single-digit sequential pace in the third and fourth quarters of 2026.
Funding & Balance Sheet Trends
Upstart ended the quarter with $456 million in cash and cash equivalents and $526.3 million in restricted cash. Loans at fair value totaled $1.06 billion, while beneficial interest assets were $545.9 million.
The balance sheet continued to reflect a capital-light marketplace model. Loans held on Upstart's balance sheet accounted for just 5.9% of total outstanding loans, the lowest level in nearly two years.
Management Commentary & Outlook
Management maintained full-year 2026 guidance for total revenues of approximately $1.4 billion, fee revenues of about $1.3 billion and adjusted EBITDA of $294 million, implying a 21% margin.
Management highlighted progress in reaccelerating core personal loans, improving the profitability of Home and Auto, maintaining capital efficiency and driving a rebound in overall profitability. The company also received OCC conditional approval for its national bank charter in July 2026, with additional regulatory approvals and operational work; management's targeted launch is in early 2027.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates review.
The consensus estimate has shifted -20.69% due to these changes.
VGM Scores
At this time, Upstart has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, Upstart has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Upstart is part of the Zacks Financial - Miscellaneous Services industry. Over the past month, Moody's (MCO), a stock from the same industry, has gained 1.2%. The company reported its results for the quarter ended June 2026 more than a month ago.
Moody's reported revenues of $2.19 billion in the last reported quarter, representing a year-over-year change of +15.1%. EPS of $4.68 for the same period compares with $3.56 a year ago.
Moody's is expected to post earnings of $4.26 per share for the current quarter, representing a year-over-year change of +8.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Moody's. Also, the stock has a VGM Score of C.
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This article originally published on Zacks Investment Research (zacks.com).
