Upstart Holdings Inc., a consumer lending platform that uses artificial intelligence to assess borrowers’ creditworthiness, reported third-quarter earnings results that fell short of analyst expectations. The company’s revenue of $134.6 million missed the consensus estimate of $139.8 million by about 3.9%, and its adjusted loss of $0.05 per share was wider than the expected loss of $0.02 per share.
Upstart’s loan volume dropped 34% year over year, as the company’s lending partners originated 114,464 loans. The conversion rate from potential customers asking for more information fell from 9.7% to 9.5% year over year.
The company also provided downside guidance for the fourth quarter. Upstart guided revenue to $135 million, 14.4% lower than the consensus estimate of $157.6 million. Upstart expects a net loss of $48 million and an adjusted net loss of $14 million. The adjusted EBITDA outlook calls for a break-even quarter, compared to a positive $2.3 million in the third quarter.
As a result of the weak earnings report and outlook cut, Upstart stock is tanking in premarket trading. The stock is down about 28%, trading at $21.20.
Apple Inc. (NASDAQ: AAPL) also reported earnings results this week, but the market was not impressed. iPhone sales were modestly weak, compared with past torrid growth. There are also concerns about China, the largest smartphone market in the world.
Despite the concerns, Apple’s services business continued to grow rapidly. Revenue rose to $22.3 billion, up from $19.2 billion in the quarter a year ago. This includes the App Store, Apple Pay, Apple Card and subscriptions to Apple TV+, Apple Music and iCloud. Apple’s installed base of 2 billion worldwide drives that revenue.
Apple’s services businesses could eventually grow to match iPhone revenue. Cloud storage is now the norm for both people and companies. Apple TV+ may compete with Netflix, Amazon and others. However, Apple has well over $100 billion on its balance sheet. Its ability to compete in the business is based on the installed hardware base and its ability to create programming using huge budgets.
Overall, Apple’s earnings report was mixed. iPhone sales were weak, but the services business continued to grow rapidly. The market is concerned about the outlook for China, but Apple’s strong brand and balance sheet should help it weather the storm.
The earnings reports from Upstart and Apple highlight the challenges that technology companies are facing in the current economic environment. Rising interest rates and inflation are putting pressure on consumers and businesses alike. This is leading to slower growth and lower profitability for many tech companies.
Despite the challenges, there are still opportunities for tech companies to grow and succeed. Upstart is betting that the demand for its lending platform will rebound as interest rates stabilize and the economy improves. Apple is counting on its growing services business to offset any slowdown in iPhone sales.
Investors should carefully consider the risks and opportunities before investing in any tech company. It is important to monitor the economic environment and the company’s specific business outlook.