In a significant development for shareholders of Upstart Holdings, Inc. (NASDAQ: UPST), Robbins LLP has announced the initiation of a class action lawsuit on behalf of investors who purchased UPST securities between May 14, 2025, and November 4, 2025. The lawsuit arises from allegations that Upstart misled investors regarding its business prospects, particularly related to the performance of its AI lending model, Model 22.

2. Background: The Rise and Fall of Model 22

In early May 2025, Upstart launched Model 22, a new iteration of its artificial intelligence technology aimed at improving loan approval rates and driving revenue growth. Initially, the company projected promising financial results, guiding investors to expect approximately $1 billion in revenue for the fiscal year 2025. This guidance was later slightly increased to $1.01 billion and then significantly raised in August 2025 to $1.055 billion, bolstered by alleged improvements attributed to Model 22.

However, according to the class action complaint, several critical aspects regarding the model's performance were not disclosed to investors. Specifically, it claims that Model 22 frequently overreacted to negative macroeconomic signals during its risk assessment processes, leading to overstated accuracy and inflated loan approval rates. Moreover, the model's overly conservative evaluations were reportedly having a detrimental impact on the company’s revenue, making previous financial guidance unrealistic.

3. The Financial Fallout

The repercussions of these allegations became apparent when Upstart released its third-quarter financial results on November 4, 2025. The company reported a revenue of $277 million, falling short of its earlier guidance of approximately $280 million and missing consensus estimates by $2.62 million. The fourth quarter revenue forecast was equally disappointing, with expectations of only $288 million, significantly below the consensus estimate of $303.7 million.

Additionally, Upstart revised its full-year revenue guidance down to approximately $1.035 billion, below the previous forecast of $1.055 billion, and adjusted its expected revenue from fees down to approximately $946 million from $990 million. Following these announcements, Upstart’s stock plummeted by $4.49 per share, a drop of 9.71%, closing at $41.75 on November 5, 2025.

4. Legal Implications and Next Steps for Shareholders

The class action lawsuit opens the door for shareholders who believe they were misled to seek recovery for their losses. Those interested in participating as lead plaintiffs must file their papers with the court by June 8, 2026. Notably, shareholders are not required to actively participate in the case to be eligible for any potential recovery.

Robbins LLP emphasizes that all representation is on a contingency fee basis, meaning shareholders will incur no fees or expenses unless the case results in a recovery.

5. Conclusion

As the situation unfolds, Upstart Holdings, Inc. faces a challenging period ahead. The allegations of misleading investors regarding the performance of its AI model have triggered a class action lawsuit, highlighting the risks associated with emerging technologies in the financial sector. Shareholders are encouraged to stay informed and consider their options as the legal proceedings develop.

Original press release