Upstart Q3 2026 Earnings: Fee Growth Drives Record Contribution Profit

Upstart (NASDAQ: UPST) reported Q3 2026 total revenue of $370.5 million, up 34% from $277.1 million a year earlier, while diluted EPS increased to $0.33 from $0.23. Net income rose 15% to $36.6 million, and record contribution profit reflected higher fee revenue and a three-percentage-point expansion in contribution margin. Secured products also reached positive contribution margin one quarter ahead of the company’s target.

Core Earnings Results

Marketplace activity was the main source of growth. Originations increased 44% to $4.12 billion, while the number of loans originated rose 34% to a record 574,089. Fee revenue grew faster than originations by loan count, reaching a record $364.0 million.

Profitability improved on a GAAP operating basis, with operating income rising 52% and operating margin expanding by about 1.2 percentage points. Non-GAAP adjusted EBITDA increased in dollars, although its margin declined because EBITDA grew more slowly than total revenue.

Contribution profit and adjusted EBITDA are non-GAAP measures. Upstart defines contribution profit as net fee revenue less borrower acquisition, verification, and servicing costs.

Business and Product Performance

Unsecured lending remained Upstart’s largest product category. Unsecured fee revenue increased 30% to $330 million, while contribution profit rose 35% to $212 million. Its contribution margin reached 64%, up from 62% in both Q3 2025 and Q2 2026.

Secured products, comprising auto and home lending, recorded a positive 17% contribution margin. That compares with negative 179% a year earlier and negative 35% in Q2 2026, representing a 52-percentage-point sequential improvement and reaching positive territory one quarter ahead of plan.

The origination mix also continued to broaden. Unsecured originations rose to $3.53 billion from $2.65 billion, while originations classified as “Other,” including auto lending and other products, increased to $586.4 million from $200.0 million. The latter nearly tripled year over year, although unsecured lending still represented most platform volume.

Not all operating indicators improved. Conversion rate declined to 18.6% from 19.4%, while the percentage of fully automated loans edged down to 90% from 91%. Upstart plans to stop reporting conversion rate beginning in Q1 2027.

The product-category figures do not represent Upstart’s complete operating segments under U.S. GAAP. Unsecured lending is a reportable segment, while secured products include separate auto lending and other operating segments.

Profitability, Cash Flow, and Balance Sheet

Total operating expenses increased 32% to $334.5 million, slightly slower than revenue growth. Engineering and product development expense rose 45% to $92.7 million, while sales and marketing expense increased 29% to $102.1 million. Revenue growing slightly faster than total operating expenses helped lift the GAAP operating margin.

The cash-flow statement provides nine-month figures rather than standalone Q3 cash flow. For the first nine months of 2026, operating activities used $289.7 million of cash, compared with $256.3 million a year earlier. Purchases and originations of loans held for sale exceeded related sale proceeds by approximately $683 million before principal collections and other adjustments.

Investing activities generated $212.1 million during the nine-month period, compared with a $308.9 million use of cash in the prior year. Financing activities provided $149.0 million, including $771.7 million of borrowing proceeds, partially offset by repayments and $100.1 million of stock repurchases.

Cash and restricted cash totaled $1.13 billion at September 30, 2026, up $71.5 million from the beginning of the year. Within that total, unrestricted cash declined to $461.5 million from $652.4 million, while restricted cash increased to $667.0 million from $404.6 million. Borrowings rose to $2.03 billion from $1.83 billion at December 31, 2025.

Fee Economics Improved, but Fair-Value Losses Limited Total Revenue Growth

Fee revenue increased 41%, but total revenue grew 34% because the net contribution from interest income, interest expense, and fair-value adjustments declined to $6.5 million from $18.6 million. Interest income was nearly unchanged at $56.6 million, while interest expense increased to $12.9 million from $8.8 million.

Fair-value and other adjustments produced a $37.2 million loss, compared with a $29.8 million loss a year earlier. The largest component was a $26.9 million unrealized loss on loans, charge-offs, and related fair-value adjustments. This balance-sheet-linked pressure reduced the amount of fee growth that flowed through to total revenue.

A similar distinction appeared in the non-GAAP margins. Contribution margin improved to 60% as fee economics strengthened, but adjusted EBITDA margin fell to 24% because adjusted EBITDA increased 26%, slower than the 34% increase in total revenue.

Earnings Guidance

Upstart provided full-year 2026 guidance for fee revenue, total revenue, and adjusted EBITDA. The 19% full-year adjusted EBITDA margin compares with 20% for the first nine months and 24% in Q3, consistent with management’s warning that macroeconomic conditions are pressuring the near-term outlook.

The company did not reconcile its forward-looking adjusted EBITDA guidance to a comparable GAAP measure, citing uncertainty around future adjustments.

Management’s View

Co-founder and CEO Paul Gu attributed the record contribution profit to advances in technology and marketing. He also emphasized that secured products became contribution-margin positive ahead of schedule and that Upstart supported platform growth with proportionately less equity capital. At the same time, Gu said macroeconomic pressure is affecting the company’s near-term outlook.

Recent Insider Transactions

The supplied insider data shows 12 purchases totaling 1,448,771 shares and 16 sales totaling 197,869 shares over the latest six-month period, resulting in net purchases of 1,250,902 shares. The latest 10 reported transactions, however, included eight sales, one purchase, and one derivative exercise or conversion; these views use different measures because the six-month summary is share-based while the transaction list reports dollar values.

The transactions show the reported activity only and do not establish insiders’ views about Upstart’s future performance.

Risks Investors Should Monitor

• Macroeconomic pressure: Management explicitly said macro conditions are weighing on the near-term outlook. Changes in borrower credit performance and loan demand could affect originations, funding, and fee revenue.
• Fair-value and interest pressure: The net contribution from interest and fair-value items fell sharply, limiting total revenue growth even as fee revenue increased 41%.
• Cash use and funding exposure: Nine-month operating cash use increased, while borrowings rose to $2.03 billion. Upstart’s access to securitizations, committed capital, whole-loan sales, and warehouse facilities remains important to platform activity.
• Uneven margin performance: Contribution margin expanded, but adjusted EBITDA margin declined by two percentage points. Continued expense growth or weaker revenue could create additional pressure on consolidated margins.
• Borrower-funnel efficiency: Conversion rate and the percentage of fully automated loans both declined modestly, even as originations reached record levels.

Summary

Upstart’s Q3 2026 results showed higher originations, record fee revenue, and improving product-level economics, led by unsecured lending and the move to positive contribution margin in secured products. GAAP operating profitability improved, but fair-value losses, operating cash use, higher borrowings, and a lower adjusted EBITDA margin tempered the progress. The main issues to watch are the effect of macro conditions on the full-year outlook, the durability of secured-product improvements, and whether fee growth can translate into stronger consolidated margins and cash generation.