Upstart Holdings, Inc. · Q2 2026 call

To put that in perspective, our previous peak in contribution profit was in Q4 of 2021. Back then, the business benefited from a much easier macroeconomic backdrop and the financial profile of being concentrated almost entirely in a single mature product. […] The fact that we've reached a new profit peak in today's environment is a testament to the relentless power of compounding technology wins quarter after quarter, year after year.

Our model is now 2.74 times as accurate as a traditional model, and we're still early. 87.38% of the inaccuracy gap is left for us to solve. That's our runway.

At the same time, capital discipline means holding an extraordinarily high bar for investments. Because of that, we decided to sunset our auto refinance business this quarter. While we're proud of what the team built over the past few years, it did not have the same velocity or potential as the other bets in our portfolio.

Since our May earnings call, we've closed three major institutional deals, including our largest ever, which together provide up to $5 billion in new committed capacity. We've also kept our streak intact, renewing every institutional capital partner at a 100% rate since 2023.

In July, we received conditional approval from the OCC following a rigorous review of our credit compliance and business practices. […] The bank does not change our strategy of funding loans primarily with third-party capital, but we expect it to unlock major operational and regulatory efficiencies which will contribute to our financial goals over the coming years. We aim to launch in early 2027.

At AI Day last year, I told you that lending's oldest truism assumes the technology stays constant, that you can't have growth, credit performance, and profitability all at once. That's not the case for Upstart. This quarter, we delivered all three. We grew, our credit performed, and we expanded margins.

Our secured products contribution margin increased to negative 35%, an improvement of 61 percentage points from - 96% in Q1. This was driven by improved take rates and a greater operational efficiency across auto and Home. Given this trajectory, we expect our secured products to reach contribution margin breakeven by Q4 of this year.

As a percentage of the total unpaid principal balance of all Upstart loans outstanding, loans on the balance sheet fell to roughly 5.9%, the lowest it's been in almost two years.

Year to date, we've signed committed capital partnerships that are expected to add up to $10.8 billion in incremental capacity. We also completed three securitizations for roughly $1.7 billion in total collateral and increased the proportion of Home and auto loans funded via third parties.

Keep in mind, our guidance is informed by our most recent published read for UMI, which as of yesterday was 1.50, up 9% from the beginning of Q2, and at the top of the 1.40-1.50 range that framed our outlook when we initially shared our 2026 guidance in February. With UMI having trended higher over each of the last three months, and now at the top of the guidance range, we are maintaining our guide.

One of the things you may see in our earnings materials is that we like to note that we're going to be replacing the conversion rate metric and sunsetting that particular one just because it's so sensitive to the mixes that it's a little hard to interpret.

That represents a modest headwind on originations and our fair value marks. Sort of taking all of that in combination is the context in which we're maintaining our guide on a full-year basis.

I would say that all year really, there's probably been a bigger gap between how we at Upstart see the business and how the market sees us than we've ever experienced in our life as a public company. From our perspective, the business is stronger than it's ever been.

I think ultimately, the market will decide what it decides, but I think the good news is that with those focuses, almost no matter what kind of valuation framework the market wants to use for us, at the end of the day, all of them go up with profit. If the market at some point doesn't want to bet on our future, then we can just earn the profits to bet on our own.