AI-lender Upstart pops 26% on impressive results, outlook

Upstart Holdings (UPST) delivered a standout earnings report for Q4 2024, exceeding analyst expectations on both earnings per share and revenue. The company posted adjusted earnings of $0.26 per share, a significant improvement from a loss of $0.11 per share in the same quarter last year and far ahead of the consensus estimate of a $0.04 loss. Revenue soared 56% year-over-year to $218.96 million, comfortably surpassing the $181.92 million analysts had forecast. One of the most significant takeaways is that Upstart was "very close to achieving GAAP profitability," according to Chief Executive Dave Girouard.

Upstart also provided strong forward guidance, fueling investor optimism. The company expects Q1 2025 revenue to be approximately $200 million, ahead of the $184.57 million consensus estimate. Even more impressively, Upstart is projecting full-year 2025 revenue of around $1 billion, well above analysts’ expectations of $839.6 million. The company also guided for Q1 adjusted EBITDA of $27 million and adjusted net income of $16 million, demonstrating its confidence in sustained profitability.

One of the most encouraging aspects of Upstart’s earnings report was the surge in transaction volume and conversion rates. The company originated 245,663 loans in Q4, totaling $2.1 billion, marking a 68% increase year-over-year and a 33% jump from the prior quarter. Additionally, Upstart’s conversion rate—measuring the percentage of applicants approved for loans—climbed significantly to 19.3%, up from 11.6% a year earlier. This improvement suggests that Upstart’s AI-driven lending model is becoming more efficient and effective, a key factor driving the company’s growth.

Investors reacted enthusiastically to the results, pushing Upstart’s stock up 26% in after-hours trading. The stock is now testing key resistance around the $85 level, which marks the December highs. This price level is crucial as a break above it could signal further upside momentum. The sharp rally is also being fueled by Upstart’s relatively small float of 78 million shares and high short interest of 22%, making it highly susceptible to a short squeeze.

Beyond the immediate earnings results, Upstart’s broader financial performance and strategic direction provide further reasons for optimism. The company achieved an adjusted EBITDA margin of 18% in Q4, compared to 0% in the same quarter last year. Adjusted EBITDA surged to $38.8 million from just $0.62 million a year earlier, reflecting improved operational efficiency and cost management. These metrics suggest Upstart is scaling profitably, a key differentiator in the competitive fintech space.

Despite the strong results, there are still some risks to consider. Upstart reported a GAAP net loss of $2.8 million for Q4, although this is a substantial improvement from the $42.4 million loss in the same period last year. Contribution margin declined slightly to 61% from 63% a year ago, indicating some margin pressure. Additionally, while Upstart’s AI-driven lending model has shown strong recent performance, its success remains closely tied to overall credit conditions and interest rate trends.

Looking ahead, Upstart is positioning itself for further growth, with management projecting significant expansion across all product categories. The company is also set to host its Upstart AI Day event on May 14, 2025, in New York City, where it is expected to showcase advancements in its AI lending model. This event could serve as a potential catalyst for investor sentiment, further reinforcing confidence in Upstart’s technological edge.

Overall, Upstart’s Q4 earnings report marks a major turning point for the company. Strong revenue growth, rising transaction volume, improved conversion rates, and robust forward guidance have all contributed to the stock’s sharp rally. However, with the stock approaching key resistance levels and high short interest, traders should expect continued volatility in the near term. If Upstart can sustain its current growth trajectory and successfully execute on its AI-driven lending strategy, the stock may have further room to run in 2025.