Upstart Aims for Record 2027 as Rates Weigh on Growth

Upstart booked a 48% year-over-year rise in third-quarter contribution profit (the profit left after variable costs on each loan), setting a record for the second consecutive quarter, Co-Founder and CEO Paul Gu said at a Citi Equity Research event. The growth came despite a nine-point average headwind from the Upstart Macro Index (UMI), the company's internal gauge of macroeconomic conditions.

Gu said he wants Upstart (NASDAQ:UPST) to grow its lending business and improve profitability in 2027, even as higher interest rates and pressure on consumers weigh on the outlook. Citi analyst Pete Christiansen noted that Upstart recently lowered its full-year revenue and adjusted EBITDA guidance as macroeconomic conditions pressured balance sheet income. Gu said the company raised its guidance for fee revenue and its implied outlook for contribution profit, while acknowledging the balance sheet remains particularly sensitive to macroeconomic changes.

What does rate sensitivity mean in practice?

Gu described Upstart as a business with strong company-specific growth drivers but significant exposure to the broader economy. Fair-value measurements on the balance sheet, he said, are more sensitive to changing conditions than the core operating business because they reflect expectations about future performance, discounted to the present.

Asked about slower October originations relative to the third quarter, Gu pointed to market interest rates as the largest factor. Upstart generally reprices loans about once a month, and increases in benchmark rates late in September passed through to October loan pricing.

Higher rates and a weaker consumer can push some borrowers above an applicable annual percentage rate limit, making them ineligible for approval. Gu characterized that effect as a headwind rather than a permanent cap on growth, arguing that improvements in underwriting and marketing can bring some borrowers back within approval limits.

Where is the margin improvement coming from?

Upstart's secured products turned contribution-positive a quarter ahead of the company's year-end goal, Gu said. Christiansen cited an improvement in secured contribution margin from roughly negative 35% to positive 17% in one quarter — a swing of more than 50 percentage points.

Gu attributed the progress to improvements across loan sales, deal economics and costs. Upstart plans to focus on growing secured products in 2027 after prioritizing their profitability in 2026.

Among those products, auto-secured personal loans connect closely to Upstart's existing personal loan business, while home equity lines of credit could require further investment in distribution partnerships. The company no longer offers its previous auto refinancing product; Gu said it lacked the scale to build demand for a product many consumers were not already seeking.

Gu identified contribution profit as the main measure investors should watch to assess whether underwriting improvements are creating value. He added that Upstart spends substantial effort managing computing costs and customer-facing latency as its models grow more complex.

Why pursue a bank charter?

Gu said Upstart's pursuit of a bank charter is intended to help it operate efficiently across all 50 states through direct regulatory relationships. He emphasized that third parties should still fund the vast majority of originations, rather than tying growth to Upstart's own equity capital.

A charter could improve loan economics by reducing the number of intermediaries, Gu said, but he did not describe it as a fundamental change to the company's profit and loss statement. Separately, he said reducing the equity capital used to support loan funding and co-investments is a major priority.

Looking to 2027, Gu said he wants Upstart to produce records across originations, contribution profit, adjusted EBITDA and GAAP net income, surpassing results from 2021. He presented that as a goal by which he would like the company to be judged, rather than a formal forecast.

What is Upstart?

Upstart Holdings operates an artificial intelligence–based lending marketplace connecting consumers seeking loans with banks and credit unions. Its platform uses machine-learning models and borrower data to help lending partners assess credit risk. Offerings include personal loans and technology for auto lending, including auto retail and refinancing. The company was founded in 2012 by Dave Girouard, Paul Gu and Anna Counselman.