Upstart Holdings (UPST) Q2 FY26 earnings call: guidance and Q&A

What drove the uplift in take rate across products, specifically regarding mix shift or pricing adjustments?

The uplift was primarily driven by a re-acceleration of growth in the higher-margin core personal loan segment and significant improvements in the margins of secured products (Home and Auto), which was a key focus for the quarter.

“We said that really there are 2 important dynamics that are going to be happening through the rest of this year. One is we're going to be focused on re-acceleration growth in this core personal loan segment. That segment carries much higher margins, and because you can see in our results that that segment grew much more than it's been growing in earlier quarters, there definitely -- that's contributing to higher margin results.”

asked by Kyle Peterson · answered by Paul Gu

Why was the Auto Refinance business sunsetted, especially given its potential for repeat business?

The decision was a consequence of capital discipline, as the Auto Refinance business did not have the same velocity or potential compared to other products in the portfolio, leading the company to concentrate on higher-upside bets.

“But ultimately, we just looked at the growth rate of that business and its potential compared to everything else that we were doing, all the bets that we had out there, and we wanted to concentrate on the ones that had the highest velocity and the biggest upside. And so we decided to just concentrate a little more. And so that one didn't make the cut, just a necessary consequence of capital discipline.”

asked by Simon Alistair Clinch · answered by Paul Gu

What are the remaining opportunities for improving profitability in secured lending, and how should investors think about its future profitability?

Future profitability improvements will come from optimizing where economics are taken (e.g., varying take rates based on competitive intensity in Auto purchase) and making origination more efficient through data integrations, automation, and AI to reduce complexity and cost.

“The first bucket is improving and optimizing where we take our economics. And you can -- so for example, you can imagine that in the Auto purchase business, there is an enormous variation in how sensitive any particular customer, any particular car purchase deal is to the take rate that we have on it.”

asked by Simon Alistair Clinch · answered by Paul Gu

How should investors think about the growth algorithm for operating expenses and incremental margins over the longer term, given the 30% YoY increase?

Fixed cost growth this year is due to investments in newer products and infrastructure, and a one-time restructuring. These investments are largely made, and fixed expenses are expected to grow in low single digits sequentially in Q3 and Q4, driving operating leverage this year and in outer years.

“We made some of those investments in Q1, here in Q2, seeing the roll forward of some of those into Q2 as well as some incremental investments that we made in Q2 related to tech infrastructure and model infrastructure, as well as starting to look ahead for bank preparations. We also did a onetime restructuring in the quarter that had some severance expense associated with it.”

asked by William Nance · answered by Andrea Blankmeyer

Given the strong Q2 results, why is the full-year guidance not being raised, implying conservatism?

While pleased with Q2 results and strong underlying performance, the UMI is at 1.5, the high end of the initial guidance range (1.4-1.5), representing a modest headwind on originations and fair value marks. This context leads to maintaining the guide.

“So we are very pleased with the results that we saw in Q2 and are seeing very much kind of strong underlying business performance. And we are seeing UMI at the end of Q2 and as of the print yesterday around 1.5, which is at the high end of the range that we set when we set guidance at the beginning of the year of 1.4 to 1.5. And so that represents a modest headwind on originations and our fair value marks.”

asked by Dan Dolev · answered by Andrea Blankmeyer

How does Upstart quantify the advantage of co-investing with capital partners versus lower loan sale prices, given other fintechs use whole loan sales?

Co-investing is not seen as selling at a discount but as a strategic move to secure longer commitments (up to 24 months) from partners, providing predictability in funding supply immune to market changes. Skin in the game addresses partner comfort with future underwriting, and this arrangement is working well.

“For us, actually the essential calculus, the reason we switched to this type of deal structure where we would commit some co-invest is that we wanted to lock in longer commitments from our partners. And I think that's something that's relatively unique in the market is that we've got deals that are committed out 24 months in terms of the capital that investors are going to invest.”

asked by David Scharf · answered by Paul Gu

What explains the slowdown in originations growth in July (34%) compared to Q2 (50%), given no significant comp issues or UMI changes?

The July trend reflects the UMI context from Q2, where UMI increased by 9%. This uptick created a modest headwind for originations. The company remains focused on controllable levers like model improvements, customer experience, and marketing efficiency to drive sustainable growth.

“And so what we're seeing in July represents -- is inclusive of some of that modest headwind from the uptick of UMI from beginning of Q2, up about 9% by the end of the quarter and is reflective of that. And so that's kind of the UMI impact. And as we've alluded to before, to the extent UMI goes up, that has created some headwind for originations.”

asked by Robert Wildhack · answered by Andrea Blankmeyer