Upstart Holdings Inc. shares fell after the company 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. Since Upstart
UPST,
+9.02%
offered preliminary second-quarter results a month ago that fell shy of expectations, the key issue headed into the company’s official earnings report was its outlook.
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. Shares sank about 15% in after-hours trading Monday after rising roughly 9% in the regular session. In recent months, Upstart has experienced challenges with loan funding that executives discussed on the latest earnings call. While Upstart Chief Executive Dave Girouard said that the company’s bank partners “have seen consistently strong credit performance,” he noted that some “have paused or reduced originations due to fear about the future of the economy.” Executives at Upstart have determined that they need to “upgrade and improve the funding side of our marketplace, bringing a significant amount of committed capital on board from partners who invest consistently through cycles,” he continued. Additionally, the company acknowledged a changing approach to how it treats its own balance sheet during uncertain times. “While we continue to believe that it doesn’t make sense for Upstart to become a bank, we’ve decided it may make sense to, at times, leverage our own balance sheet as a transitional bridge to this committed funding,” Girouard said. “I acknowledge that this is a shift relative to what we planned and communicated earlier this year but a changing and volatile environment suggests we need to be flexible and responsive in our approach.” The shift reflects a belief among executives that they know “better than anybody how our model is performing today” and recognize that “the opportunity to generate outsized profi …