Chime Financial vs. Upstart: Which Fintech Stock Offers a Better Long-Term Investment in a Challenging Financial Landscape?

The fintech sector remains a focal point for investors seeking growth in an era of economic uncertainty. Two prominent players, Chime Financial and Upstart, have demonstrated divergent strategies and performance metrics in Q3 2025. This analysis evaluates their long-term investment potential by examining profitability trajectories, risk exposure, and market valuations, drawing on recent financial disclosures and industry trends.

Profitability Trajectory: Divergent Paths to Growth

Chime Financial reported a 29% year-over-year revenue increase to $544 million in Q3 2025, driven by a 65% surge in platform-related revenue, including its Outbound Instant Transfer (OIT) service. Despite this, the company posted a net loss of $55 million, reflecting ongoing investments in growth and operational scaling. Chime's gross margin of 87% and adjusted EBITDA margin of 5% highlight its disciplined cost management, though profitability remains elusive. The company raised its full-year revenue guidance to $2.173 billion and announced a $200 million share repurchase program, signaling confidence in its long-term potential.

Upstart, by contrast, demonstrated a sharper turn toward profitability. Its Q3 2025 revenue grew 71% year-over-year to $277 million, accompanied by a GAAP net income of $31.8 million-a stark improvement from a $6.8 million loss in Q3 2024. Contribution profit and Adjusted EBITDA also surged by 44% and 50 times, respectively, to $147 million and $71.2 million. Upstart's AI-driven lending model has enabled efficient cost scaling, with 80% year-over-year growth in loan originations. These metrics suggest a more mature business model, though its reliance on macroeconomic conditions introduces volatility.

Risk Exposure: Macroeconomic Sensitivity and Regulatory Scrutiny

Chime's risk profile appears more stable. Its credit risk metrics, including a default probability of 0.138% as of August 2025, remain favorable. The company's payments-centric model, which generates recurring revenue from active members (9.1 million as of Q3 2025), is less sensitive to economic downturns compared to lending-focused peers. However, Chime's dependence on future profitability and its high P/S ratio of 5.18 could make it vulnerable to valuation corrections if growth slows.

Upstart faces heightened macroeconomic and regulatory risks. As an AI-based lender, its performance is closely tied to consumer credit health. A recent bankruptcy of Tricolor, a subprime auto lender, has raised concerns about broader loan performance in the sector. Upstart's forward P/E ratio of 18.96 and valuation of 39 times forward earnings suggest investors are betting heavily on sustained growth, which could be derailed by rising defaults or tighter credit conditions. Additionally, the company's expansion into newer product lines (e.g., auto and small-dollar loans) introduces operational risks related to scaling and competition.

Market Valuation: Contrasting Multiples and Investor Sentiment

Chime's market capitalization of $7.28 billion as of Q3 2025 reflects a P/S ratio of 5.18, indicating a premium to its revenue but a discount to AI-driven fintech peers, which trade at 15x to 17x revenue. While its negative P/E ratio (-34.17) underscores unprofitability, the company's revenue growth and improving credit metrics justify optimism among investors.

Upstart's valuation is more compelling in some respects. With a market cap of $6.7 billion and a P/S ratio of 7.9, it trades at a lower multiple than Chime despite faster revenue growth. Its PEG ratio of 0.5x suggests undervaluation relative to growth prospects, though this metric assumes continued outperformance. The stock's 2.59% post-earnings dip in Q3 2025, despite beating EPS estimates, highlights market skepticism about its ability to sustain momentum.

Conclusion: Balancing Growth and Resilience

Chime and Upstart represent contrasting approaches to fintech innovation. Chime's payments platform offers a durable, high-margin business with a growing user base, but its path to profitability remains uncertain. Upstart's AI-driven lending model has achieved profitability and rapid revenue growth, yet its exposure to credit cycles and regulatory scrutiny poses significant risks.

For investors prioritizing resilience in a challenging financial landscape, Chime's improving credit metrics and diversified revenue streams may offer a safer bet. However, those willing to tolerate higher volatility for growth potential might favor Upstart, provided macroeconomic conditions remain favorable. Ultimately, both stocks require careful monitoring of their respective risk factors and execution of strategic initiatives.