Upstart’s AI Model 22 Underperformed, Causing $70 Million Revenue Shortfall and Investor Losses

Upstart investors who purchased shares between May 14, 2025, and November 4, 2025, face potential losses after the company’s AI model—touted as a revenue driver—failed to deliver as promised. On November 4, 2025, Upstart reported Q3 revenue of $277 million, missing its guidance of $280 million and estimates by $2.62 million. It also cut its full-year revenue forecast from $1.055 billion to $1.035 billion and slashed expected fee revenue by $44 million, from $990 million to $946 million.

The company blamed Model 22, the AI system launched in May 2025, for overreacting to macroeconomic signals and becoming overly conservative in approving loans. This reduced conversion rates and hurt revenue. During an earnings call, executives admitted they had knowingly calibrated the model to be more cautious early in the quarter, and the negative effects would persist into Q4.

The revelation triggered a 9.71% drop in Upstart’s stock price, closing at $41.75 per share on November 5, 2025. A class action lawsuit has since been filed in the Southern District of New York, seeking to recover damages for investors who bought shares during the Class Period. The case alleges that executives made false statements about Model 22’s performance and failed to disclose its flaws until after the damage was done.