AI Software & Applications
An AI-based lending platform that uses models to assess borrower credit.
{'verdict': '2 signals sit in the elevated band: operating leverage and organic-demand sustainability. This does not trip the convergence flag. Ranks 22nd of 68 on composite fragility (F\xa050.2), below Marvell and SoundHound AI.', 'as_of': '2026-07-11', 'source': 'engine-restatement (T1)', 'snapshot': {'composite_f': 50.2, 'n_elevated': 2, 'convergence': 'moderate', 'rank': 22, 'elevated': ['operating leverage', 'organic-demand sustainability']}}
Revenue grew 64% in FY2025. Contribution margin fell from 56% full-year to 53% in Q4. EBITDA margin fell from 20% to 13% between Q1 2025 and Q1 2026. Explain how a business gets less profitable as it grows faster.
The sheet names two causes. First, contribution-margin compression reflects marginal loans being funded at lower unit economics as volume scales — Upstart is expanding into riskier borrower segments (auto, home) that carry higher platform costs. Second, the fixed cost base is growing with the business. The Q1 2026 EBITDA margin of 13% vs 20% in Q1 2025 is a filed result — it's not disputed by the sheet.
You said the company lost $880M over 2022–2024, then made $53.6M in FY2025 — and $113.7M of that swing was fair-value mark-to-market reversals on loans you hold on balance sheet. What did the underlying business actually earn?
The cash flow statement shows a $238.7M swing between FY2024 ($125M in fair-value loan losses, non-cash) and FY2025 ($113.7M in fair-value loan gains, non-cash). The $182M net income improvement — from ($128.6M) to $53.6M — is partially explained by that accounting reversal. The operating cash generation needs to be disentangled from mark-to-market; the sheet flags this as the core Indicator 1 concern but does not supply the after-exclusion operating earnings figure. That figure is NOT SOURCED in this pull.
Your FY2026 guidance is $1.4B — 34% growth. That assumes the credit cycle stays accommodative. The Fed tightened 500 basis points in 2022 and your annual originations fell to $4.65B for the entire year. What does your guidance look like if the Fed reverses course?
The sheet does not model a rate-rising scenario — the $1.4B guidance is management's base case. The 2022 precedent is documented: peak quarterly originations collapsed to $4.65B full-year for all of FY2023. Top-3 lending partner concentration is 83% of originations in FY2025 — identical to FY2024 — meaning the same concentration risk that amplified the 2022 collapse is structurally unreduced. The bull case (100+ lending partners, auto/home diversification) did not move that 83% figure. In a rate-rising scenario, the $1.4B guidance is not supported by anything in the sheet.