Is Upstart's Diversification Strategy the Key to Lasting Growth?

Upstart Holdings UPST is broadening its reach well beyond personal loans, using its AI-powered lending platform to tap new segments like auto loans, home equity and small-dollar credit. In the second quarter of 2025, these newer businesses collectively drove nearly 20% of new borrowers on the Upstart platform, highlighting how diversification has become central to Upstart’s next growth phase. The expansion comes as the company more than doubled its revenues year over year and achieved GAAP profitability earlier than anticipated.

Auto lending remains a key driver, with originations jumping 87% sequentially to $114 million in the second quarter of 20255. The company’s Auto Retail software, now gaining significant traction with car dealerships, is fueling that growth. A sharper focus on simplifying financing has accelerated adoption, leading to rising volumes of dealer-driven loan requests and finalized agreements.

The home equity segment is also scaling rapidly, with originations up nearly ninefold year over year to $68 million. A breakthrough in instant property verification now enables borrowers to complete ownership and income checks in under a minute, demonstrating how Upstart’s automation capabilities are redefining the traditionally slow HELOC process.

Small-dollar “relief” loans add another leg to growth, climbing 40% sequentially as Upstart tests its AI models across a broader borrower base. The company’s latest underwriting model, Model 22, improved accuracy and conversion, providing a foundation for these new verticals.

To sustain this diversification, Upstart aims to move most Auto and Home loans off its balance sheet by late 2025, supported by third-party funding and strong partnerships with banks and credit unions.

Diversification at Other Fintechs: PayPal and Intuit

PayPal PYPL has steadily diversified its revenues beyond peer-to-peer payments by expanding into merchant solutions, digital wallets, and consumer credit through PayPal Credit and Pay Later. Moreover, the PYUSD stablecoin and crypto payment options position PayPal for emerging digital commerce trends. 

Meanwhile, Intuit INTU has evolved from tax and accounting software into a full financial ecosystem. Its Credit Karma unit drives consumer finance insights, while Mailchimp extends its reach into marketing automation for small businesses. Both PayPal and Intuit mirror Upstart’s strategy of broadening their core capabilities to strengthen platform engagement and reduce reliance on any single revenue source.

Upstart’s Price Performance, Valuation and Estimates

Shares of Upstart have climbed 16.8% in the past six months, underperforming both the broader industry and the S&P 500 composite.

From a valuation perspective, we note that Upstart shares are currently overvalued, as suggested by the Value Score of F.

In terms of forward 12-month Price/Sales (P/S), Upstart is currently trading at 3.77X, which is at a premium to the industry average of 3.52X.

While the full-year 2025 and 2026 Zacks Consensus Estimates for EPS have been revised downward over the past two months, the figures suggest significant increases year over year. 

Currently, Upstart carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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