Upstart Holdings (UPST) is having a good day. The AI lending platform reported second-quarter results that beat expectations, and shares are up nearly 12% in premarket trading. But the real story isn't just the beat; it's the momentum across the entire business, from loan originations to AI underwriting to a potential banking charter.
Let's start with the numbers. Adjusted EPS came in at 56 cents, beating the 53 cents analysts expected. Revenue hit $364.7 million, up 42% year-over-year and 18% sequentially, and that was ahead of the $351.5 million consensus. The growth was driven by higher loan originations and stronger fee revenue.
Fee revenue totaled $348 million, up 45% Y/Y and 26% Q/Q. That breaks down to $326 million from unsecured lending and $22 million from secured products, which grew a whopping 465% Y/Y and 86% Q/Q. So the secured lending business is really starting to ramp up.
Adjusted EBITDA increased 45% Y/Y to about $77 million, representing a 21% margin. Contribution profit hit a record $193 million, up 37% Y/Y and 41% Q/Q, with the contribution margin improving to 55% from 50% in Q1 2026. That margin expansion came from a higher-margin personal loan mix, lower customer acquisition costs, and better economics across secured lending products.
Loans held on the balance sheet totaled about $1.06 billion, up 5% Q/Q, but balance sheet loans declined to 5.9% of total outstanding loans, the lowest level in nearly two years. That's a good sign for Upstart's asset-light model.
Loan Originations: A Record Quarter
Total loan originations reached $4.2 billion, up 50% Y/Y and 23% Q/Q. That's a record, and it was driven by growth across personal loans, auto, and home lending.
Core personal loan originations increased 27% Q/Q, adding $526 million in volume and contributing most of the growth in unsecured lending. Unsecured loan originations rose 38% Y/Y and 20% Q/Q, supported by renewed momentum in personal loans.
Secured lending products also expanded rapidly. Auto originations increased 264% Y/Y and 62% Q/Q, while home originations grew 139% Y/Y and 14% Q/Q. The company originated more than 558,000 loans during the quarter, and now about one in 13 U.S. adults has an Upstart account.
Interestingly, Upstart discontinued auto refinancing, saying it had lower growth potential compared with other strategic opportunities. But the auto business still improved unit economics, so it's not a retreat; it's a reallocation of resources.
AI Underwriting and Funding Capacity
Upstart continues to invest in its AI underwriting capabilities. In the quarter, it launched three new personal loan models, added more than 300 new underwriting variables, and improved median model processing speed by about 65% through a new distributed inference platform. That's a big deal for customer experience and scalability.
The results speak for themselves: the average return of Upstart's last 12 quarterly loan vintages exceeded U.S. Treasuries by approximately 660 basis points, with each vintage outperforming Treasuries by at least 425 basis points. That's a strong track record for investors in Upstart's loan products.
Funding capacity also expanded significantly. Upstart closed three institutional funding agreements providing up to $5 billion in new committed capacity, and it secured partnerships expected to add $10.8 billion in incremental capacity year to date. That's a lot of dry powder for future growth.
And in a major strategic move, Upstart received conditional approval from the OCC for its banking charter in July 2026. The company expects to launch Upstart Bank in early 2027. This could give Upstart more control over its funding and potentially improve margins.
Outlook: Steady as She Goes
For the full year, Upstart reaffirmed its FY2026 revenue guidance of $1.4 billion, which is slightly below the $1.42 billion analysts were looking for. The company also maintained guidance for fee revenue of approximately $1.3 billion and adjusted EBITDA of about $294 million, representing a 21% margin.
So the guidance is a bit conservative, but given the strong quarter, it's not a major concern. The market seems to be focusing on the positives: record originations, improving margins, expanding funding capacity, and the banking charter progress.
Upstart shares were up 11.81% at $33.90 in premarket trading on Wednesday, according to market data. It's a good day for Upstart, and the future looks brighter than it has in a while.
