Upstart's Q3 Growth Misses Amid Funding and Auto Loan Concerns

What happened

Upstart's Q3 2025 showed strong year-over-year growth with originations up 80% and revenue up 71%, but it missed Street expectations, indicating persistent execution challenges. This follows a return to profitability in Q2 2025, as noted in the DeepValue report, highlighting improved operational momentum from automation and funding recovery. However, the company remains highly dependent on institutional investors for over half its loan funding, exposing volumes and margins to capital-market volatility and macro credit stress. The new article raises specific alarms about auto loan risks, citing recent private credit bankruptcies that could pressure growth and guidance in this expanding vertical. Despite these improvements, valuation at P/S ~6.3 already prices in a robust rebound, while mix shifts toward super-prime loans may compress unit economics and limit upside.

Implication

Upstart's near-term prospects are constrained by its reliance on institutional funding, which is sensitive to macroeconomic conditions and could quickly tighten, capping originations. The shift towards super-prime loans, while reducing credit risk, may lower contribution margins and undermine the platform's profitability potential. Auto loan vulnerabilities, highlighted by recent bankruptcies, introduce additional uncertainty to the company's diversification efforts and could slow growth in this key vertical. Valuation leaves little room for error, requiring consistent demonstration of funding resilience and credit model outperformance to justify current multiples. Long-term, success hinges on scaling newer products like HELOC and small-dollar loans while securing committed capital to de-risk the model from external shocks.

Thesis delta

The new article reinforces the existing HOLD thesis by underscoring auto loan risks and macroeconomic headwinds that could impair growth. It confirms that while Upstart's model can scale profitably, sensitivity to funding and credit conditions remains a critical overhang. No fundamental shift is warranted, but vigilance on funding stability and credit performance is essential before any upgrade.