Credit Unions Tap Upstart's AI Lending Platform: Can It Fuel Growth?

A growing number of credit unions are tapping Upstart Holdings UPST to modernize their lending operations. In recent weeks, both Peak Credit Union and Corporate America Family Credit Union (CAFCU) joined the roster of financial institutions adopting Upstart’s artificial intelligence platform. 

Peak Credit Union will deploy it for personal loans, while CAFCU is using it across personal loans, auto refinancing and HELOCs. Apart from these, partnerships with credit unions like Cornerstone and ABNB Federal have also bolstered funding stability. These moves show growing confidence in Upstart’s technology from community lenders seeking faster approvals and smarter underwriting. 

Behind these partnerships, Upstart’s numbers are improving. In the second quarter of 2025, it reported revenues of around $257 million, more than double the prior year, while loan originations reached about $2.8 billion, the highest in three years. The company returned to GAAP profitability with $5.6 million in net income, and contribution profit jumped to $141 million, reflecting margin improvement and higher conversion rates.

Upstart is also diversifying. Its auto lending business rose more than sixfold in the past year, its home segment grew nearly ninefold, and those emerging verticals now account for more than 10% of total volume. Its AI model “Model 22” reportedly increased risk-separation accuracy by 17 percentage points compared to a benchmark textbook credit model, and 92% of loans in the second quarter of 2025 were fully automated.

Still, the stock has suffered over the past three months as investors fret over softer credit conditions and turbulence in the used-car lending market. The bankruptcy of a subprime auto lender raised questions about downstream credit risk, and Upstart’s model, while advanced, remains sensitive to shifting credit-cycle dynamics and margin pressure in tightening environments.

UPST: Peer Moves

LendingClub Corporation LC recently reported a strong third quarter in 2025, with loan originations rising 37% year over year to $2.6 billion and total revenues increasing 32% to $266.2 million. The company achieved a 12.4% return on equity and 13.2% return on tangible common equity, reflecting solid profitability and credit discipline.

SoFi Technologies, Inc. SOFI reported record net revenues of $961.6 million, up 38% year over year, in the third quarter of 2025. Adjusted net revenues reached $949.6 million (+38%), and adjusted EBITDA was $276.9 million (+49%). Members grew 35% to 12.6 million, and products rose 36% to 18.6 million.

Upstart’s Price Performance, Valuation and Estimates

Shares of Upstart have climbed 2.2% 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 3.81X, which is at a premium to the industry average of 3.40X.

The Zacks Consensus Estimate for full-year 2025 and 2026 EPS has been revised marginally upward over the past months. However, 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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