Upstart Holdings, Inc. (UPST) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Upstart Holdings, Inc. operates an AI-powered lending marketplace connecting consumers with lending partners and institutional investors. The company facilitates unsecured personal loans, auto loans, and home equity lines of credit (HELOCs). As of July 28, 2026, there were 97,313,046 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Revenue | $364.7 million | $257.3 million | $672.9 million | $470.7 million |
| Revenue from Fees, Net | $348.0 million | $240.8 million | $625.1 million | $426.3 million |
| Net Income | $16.5 million | $5.6 million | $9.9 million | $3.2 million |
| Diluted EPS | $0.16 | $0.05 | $0.10 | $0.03 |
| Operating Expenses | $350.1 million | $252.7 million | $665.8 million | $470.6 million |
| Cash & Equivalents | $456.0 million (as of June 30, 2026) | |||
| Restricted Cash | $526.3 million (as of June 30, 2026) | |||
| Total Borrowings | $2.00 billion (as of June 30, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 42% year-over-year (Q2 2026 vs. Q2 2025), driven primarily by a 45% increase in revenue from fees, net. This was fueled by a 50% increase in loan originations (dollars) to $4.2 billion in Q2 2026.
- Profitability: Net income increased 195% year-over-year to $16.5 million. Income from operations improved to $14.6 million from $4.5 million in the prior year quarter.
- Expense Increases: Operating expenses rose 39% year-over-year to $350.1 million. Sales and marketing expenses increased 57% to $114.5 million, reflecting higher borrower acquisition costs. Engineering and product development expenses increased 36% to $93.9 million.
- Balance Sheet: Total assets increased to $3.17 billion from $2.97 billion at year-end 2025. Loans held at fair value increased to $1.06 billion. Borrowings increased to $2.00 billion, primarily due to higher utilization of warehouse credit facilities ($251.8 million outstanding).
- Accounting Changes: In Q1 2026, the company reclassified interest expense on convertible senior notes and dividend income on cash accounts from "Other income, net" to "Interest income/expense," impacting the presentation of the income statement but not net income.
Guidance, Outlook, and Risks
- Outlook: Management expects continued growth driven by AI model improvements and product initiatives. The company plans to continue reporting the "Conversion Rate" metric through the remainder of fiscal 2026 but does not intend to report it starting Q1 2027, deeming it less meaningful as the business evolves.
- Capital Allocation: The company repurchased 3.2 million shares for $100.1 million during the first six months of 2026. Approximately $122.1 million remains available under the share repurchase program. No shares were issued under the $500 million ATM program as of June 30, 2026.
- Key Risks:
- Macroeconomic Conditions: Elevated interest rates and economic uncertainty could reduce borrower demand and increase credit losses. The Upstart Macro Index (UMI) remained elevated at 1.50 as of June 30, 2026.
- Funding Constraints: Reliance on institutional investors and warehouse facilities exposes the company to capital market volatility. A significant portion of funding comes from committed capital arrangements with downside risk protection.
- AI Model Performance: Underperformance of loan vintages (specifically Q2 2023–Q1 2024 and Q4 2024) relative to target returns poses a risk to investor confidence and future funding.
- Regulatory & Legal: Ongoing securities class action litigation and regulatory scrutiny regarding AI lending, fair lending, and the "true lender" doctrine remain material risks.
Investor Verification Checklist
- Loan Performance: Verify the credit performance of recent loan vintages against target returns, specifically monitoring the underperformance noted in 2023-2024 vintages.
- Funding Stability: Assess the renewal status and terms of committed capital and co-investment arrangements, which fund over 50% of the platform.
- Debt Maturities: Review the maturity schedule of convertible senior notes, particularly the $66.5 million 2026 Notes due in August 2026, and the company's ability to refinance or convert them.
- Expense Efficiency: Monitor the trend of Sales and Marketing expenses as a percentage of revenue, which increased to 31% in Q2 2026 from 28% in Q2 2025.
- Legal Proceedings: Track developments in the consolidated securities class action litigation and derivative lawsuits, which could result in significant financial or reputational impact.