Upstart's AI Lending: Can Its Underwriting Model Stay Ahead?

Upstart Holdings UPST has long maintained that credit underwriting should reflect real-time data and artificial intelligence rather than depend on static scorecards. With more than 98 million repayment events informing its system and roughly 105,000 more repayments due each day, its models keep sharpening its ability to distinguish between safer and riskier borrowers. This expanding dataset gives the platform a structural advantage as accuracy steadily improves.

In portions of the third quarter, the model picked up early signs of rising risk, prompting it to tighten approvals and raise pricing. That shift pushed conversion rates down from 23.9% in the second quarter to 20.6% in the third. While the resulting slowdown unsettled some investors, management emphasized that the model behaved as designed, responding faster than human underwriters and prioritizing credit performance ahead of near-term volume.

To lessen the noise around these adjustments, Upstart is refining its calibration tools, which it expects will reduce conversion swings by about half and create a steadier pipeline of approvals across different macro conditions. Lower pricing latency is also enabling support for larger, more complex models, improving precision as the data foundation scales.

Upstart is simultaneously expanding beyond unsecured personal loans. Auto, home and small-dollar products are growing quickly, aided by advancements like instant property valuations and multimodal AI for document verification that cut borrower friction and enrich the model’s learning loop.

Still, the market remains uneasy about approval volatility. Despite management’s confidence in the new calibrations, investors want to see steadier patterns. Meanwhile, the stock remains highly sensitive to macro trends, particularly interest rates, which adds another layer of volatility beyond company fundamentals.

UPST: Peer Moves

LendingClub Corporation LC delivered a solid third quarter in 2025, as loan originations climbed 37% year over year to $2.6 billion and revenues advanced 32% to $266.2 million. LendingClub’s disciplined credit management drove a 12.4% return on equity, highlighting the company’s strong profitability and efficiency, making LendingClub well-positioned for growth.

SoFi Technologies, Inc. SOFI posted record third-quarter 2025 net revenues of $961.6 million, up 38% year over year. SoFi’s adjusted net revenues reached $949.6 million, while adjusted EBITDA surged 49% to $276.9 million. SoFi also expanded its member base by 35% to 12.6 million, and products rose 36% to 18.6 million, reinforcing strong growth momentum across products and services.

Upstart’s Price Performance, Valuation and Estimates

Shares of Upstart have declined 22% 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), despite the share price decline, Upstart is currently trading at 2.95X, which is on par with the industry average.

While the full-year 2025 Zacks Consensus Estimate for EPS has been revised upward, the same for 2026 has undergone downward revisions over the past month. However, both figures suggest a significant increase 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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