Upstart's Q1 2025 Earnings Call: Unraveling Contradictions in Macroeconomic Impact, Risk Retention, and Strategic Partnerships

Macroeconomic influence on growth, risk retention in committed capital arrangements, Walmart partnership impact, macroeconomic impact on guidance, and impact of small dollar loans on AI model training are the key contradictions discussed in Upstart's latest 2025Q1 earnings call.



Revenue and Originations Growth:
- Upstart reported revenue growth of 67% year-on-year in Q1 2025.
- Platform originations grew by 89% year-on-year, with model wins and improved borrower health contributing to the increase.
- This growth was driven by increased conversion rates, reaching 19% in Q1, up from 14% a year ago, and a focus on offering competitive capital.

Higher Conversion Rates and Automation:
- Upstart's conversion rates improved from 14% a year ago to 19% in Q1 2025.
- This increase was supported by rapid improvements in underwriting and automated approvals, with 92% of loans being fully automated.
- The implementation of embeddings in the core personal loan model and cross-selling existing customers to reduce acquisition costs also contributed to this rise.

Expansion into Prime and Super Prime Borrowers:
- Super prime borrowers represented 32% of Upstart's originations in Q1, marking a significant increase from previous quarters.
- This shift was driven by a strategic focus on offering competitive rates and process improvements for high credit borrowers.
- The company aims to achieve best rates and processes for all borrower segments, leading to increased market share in the prime and super prime segments.

Funding Stability and Partnerships:
- Upstart's funding supply comprises over 50% of committed partnership agreements, ensuring resilience in the current market uncertainty.
- The company added 15 new lending partners in the super prime segment, increasing capital by 38% quarter-over-quarter.
- These partnerships provide stability and continuity, allowing Upstart to navigate macroeconomic changes while focusing on growth opportunities.