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As detailed below, the complaint alleges that the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) Model 22 frequently overreacted to negative macroeconomic signals in performing its risk-separation processes; (2) accordingly, Model 22's overall accuracy and propensity to increase loan approval rates was overstated; (3) Model 22's overly conservative assessment of credit and macroeconomic conditions was having a significant negative impact on Upstart's revenue results, rendering the Company's previously issued FY 2025 revenue guidance unreliable and/or unrealistic; and (4) as a result, Defendants' public statements were materially false and misleading at all relevant times.
The truth began to emerge on November 4, 2025, when Upstart issued a press release reporting its financial results for the third quarter ("Q3") of 2025. Upstart reported, inter alia, Q3 2025 revenue of $277 million, missing its previously issued Q3 2025 revenue guidance of approximately $280 million, as well as consensus estimates by $2.62 million. Upstart also reported that it expected to generate revenue of only $288 million in the fourth quarter ("Q4") of 2025, significantly below consensus estimates of $303.7 million. Further, Upstart negatively revised its FY 2025 revenue guidance to approximately $1.035 billion, versus the $1.06 billion consensus estimate and its prior guidance of approximately $1.055 billion, as well as its expected FY 2025 revenue from fees, which it reduced to approximately $946 million from its prior outlook of approximately $990 million.
The same day, during a related earnings call, Defendants blamed Upstart's disappointing results on Model 22, which they revealed had "overreact[ed]" to macroeconomic signals in the quarter, reducing borrower approvals and conversion rates. Defendants also acknowledged that they had "knowingly" calibrated their AI model to be "more conservative on the credit side in earlier parts of the quarter", and that the negative impacts of Model 22's "overresponsive[ness]" to macroeconomic signals in the quarter would continue to negatively impact revenues in Q4 2025, resulting in Upstart's negatively revised FY 2025 financial guidance.
Following these disclosures, Upstart's stock price fell $4.49 per share, or 9.71%, to close at $41.75 per share on November 5, 2025.
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding Upstart's conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
To learn more about the Upstart class action, go to www.faruqilaw.com/UPST or call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310).
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SOURCE Faruqi & Faruqi, LLP
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