It's Gu Time: Upstart Q4 2025 Earnings Review
- Henry Dierkes
- 2 minutes ago
- 4 min read
Upstart grew originations 86% in 2025, flipped to profitability, crushed the balance sheet concern, and just handed the keys to co-founder Paul Gu. The stock dropped 25%. Here's why the fundamentals have never been stronger — and why the selloff might be creating a massive asymmetric opportunity.
The Quarter That Was Supposed to Break the Thesis
Heading into Q4, Upstart had every chance to disappoint. After a confusing Q3 that involved a macro-driven tightening credit box, a ballooned balance sheet, and an unclear strategic direction, investors were ready to throw in the towel. Many were convinced Upstart was reverting to 2022 — plugging loans on its balance sheet as funding dried up.
That's not what happened.
Upstart posted $296M in revenue, GAAP net income of $18.6M, and $63.7M in adjusted EBITDA at a 21.5% margin. All metrics met or exceeded guidance. Full year 2025 tells the real story: $11B in originations (up 86% YoY), $1.0B in revenue (up 64% YoY), net income flipping from negative $129M to positive $54M. That's the trifecta of growth, profits, and credit performance — something management says has never been achieved simultaneously in lending.
And yet the stock dropped 25%.
The Balance Sheet Is No Longer the Problem
This was the concern. The big one. Could Upstart transition its R&D products — Auto and HELOC — off the balance sheet and back to their capital-light marketplace model? The answer was definitive. R&D loans fell 25.7% QoQ. The overall balance sheet dropped 19.9%. In Q4, 92% of Auto originations were funded by third parties, and 70% of all Auto and HELOC funding came from banks, credit unions, and private capital partners.
Eleven different capital partners funded Q4 originations. An additional 13 are signed for the coming year. Upstart didn't ink a single massive forward flow deal — the funding came from diversified relationships across multiple depository institutions and capital partners. That's arguably more durable, even if less headline-grabbing.
Co-investment value stood at $995M on an initial $903M investment — the highest unrealized gain since the initiative was formed. Credit performance isn't just holding — it's improving.
New Products Are Scaling at Ferocious Speed
Auto and HELOC now represent 13.6% of quarterly originations, up from 6.8% a year ago. Auto originations hit $200M in Q4 (up 344% YoY), with live lending rooftops doubling for the third consecutive quarter. HELOC originations reached $123M (up 355% YoY), with Upstart closing HELOCs in 6 days versus the industry average of 35. Management expects these products to contribute over $100M in fee revenue in 2026.
These new products carry thinner margins because they're secured, more competitive, and Upstart is deliberately passing model separation savings to borrowers rather than capturing it all. This is the Amazon and Costco playbook: win market share through price leadership, build the brand, then let cross-selling and retention do the heavy lifting over time.
New Captain, Same Ship, Sharper Course
Paul Gu takes over as CEO effective May 1, succeeding co-founder Dave Girouard. At 35, Gu is the engineer founder who built the models alongside Grant Schneider (now returning as CTO). Dave stays as Chairman and special advisor. Sanjay Datta moves from CFO to President and Chief Capital Officer — raising capital full time. Andrea Blankmeyer joins as the new CFO.
This is an entire leadership shakeup, and it's the right one. Gu as the face of Upstart turns the page. Dave's strategic involvement stays intact. Sanjay focuses on what he does best — funding. Each role now has clear ownership. Gu's $37M PRSU package vests based on Upstart's 4-year stock return versus the F-Prime Fintech Index. His incentives are aligned with shareholders.
What the Street Is Missing
Analysts are focused on the 100 bps adjusted EBITDA margin compression (21% in 2026 vs 22% in 2025). Citizens downgraded to Sell with a $20 target. The concern is that as new products scale with thinner margins and marketing spend ramps, earnings power at scale isn't clear enough.
Here's what that misses: Upstart is trading at 2.96x TTM sales and 67x TTM earnings with 34% guided revenue growth, a forward PEG of 0.30, and model accuracy that just hit 172.2% versus traditional benchmarks. They've guided for 35% revenue CAGR through 2028 with terminal adjusted EBITDA margins of 25% — and Gu said on the call there's room for margins to go much higher than that.
The margin compression is intentional. It's a tradeoff for market share in massive secured lending categories that management believes will become bigger than personal loans. The operating leverage in this business hasn't changed — the company is choosing where to deploy it.
Upstart also stopped issuing quarterly guidance (a practice that has repeatedly sandbagged the stock) and will now publish monthly origination volumes. More transparency, less noise. That's a win.
It's Gu Time
Upstart's full year 2025 originations of $11B roughly matched their 2021 peak of $11.8B — except UMI has nearly doubled since then, meaning the macro environment is significantly harder. They grew because the models are dramatically better, not because the macro was easy. That's the difference between 2021 Upstart and 2025 Upstart.
The balance sheet concern is resolved. New products have achieved lift-off. Credit performance is strong and improving. Leadership is upgraded and aligned. The long-term vision — becoming the everything store for credit with best rates, best process, for 100% of Americans — is the clearest it's ever been.
The stock is getting punished. The fundamentals say otherwise. It's Gu time.
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This communication is for informational and educational purposes only and should not be construed as investment, legal, tax, or other professional advice, nor as an offer to buy or sell any security. Views expressed are solely those of the author, Henry Dierkes, and do not necessarily reflect the views of Halter Ferguson Financial or Rebellionaire. Halter Ferguson Financial, Rebellionaire, their clients, and Henry Dierkes beneficially own shares of Upstart Holdings, Inc. (UPST) and may transact at any time without notice. rebellionaire.com