Upstart Holdings Inc. delivered a lower-than-expected revenue forecast for the current quarter, but its chief executive expressed confidence in the performance and value of artificial-intelligence-driven lending.
Executives at Upstart, which uses artificial intelligence to inform lending decisions, expect $170 million in revenue for the third quarter, whereas analysts were anticipating $249 million.
For the second quarter, the company posted a net loss of $29.9 million, or 36 cents a share, whereas it recorded net income of $37.3 million, or 39 cents a share, in the year-earlier quarter. On an adjusted basis, Upstart posted per-share earnings of 1 cent, whereas it had logged adjusted earnings per share of 62 cents a year earlier.
Analysts tracked by FactSet had been projecting adjusted EPS of 3 cents.
Upstart’s total revenue rose to $228 million from $194 million, while the FactSet consensus was for $242 million. The company generated $258 million in fee revenue but saw the revenue total impacted by about $30 million in adjustments related to interest income and fair value.
When executives gave a preliminary update on the business in early July, they called for $228 million in overall revenue and a $27 million to $31 million net loss, both of which were significantly weaker than the company’s prior forecast.
“This quarter’s results are disappointing and reflect a difficult macroeconomic environment that led to funding constraints in our marketplace,” Chief Executive Dave Girouard said in a release Monday. “In response we’re taking the necessary actions to build a more resilient and committed funding model over time.”
He added in a blog post that the company’s outlook calls for a 25% drop in third-quarter revenue relative to second-quarter revenue, which reflects funding constraints. “A decline in revenue is obviously disappointing, and it’s natural to ask whether our AI-based credit model continues to work as designed,” Girouard said. “We’re confident it does.”
The company disclosed that it bought back 3.5 million shares, totaling about $125 million, in the second quarter.
The stock has lost 62% over the past three months, as the S&P 500
has inched up 0.4%.