Upstart Holdings Faces Class Action Lawsuits Over AI Lending Model Failures
New York, Tuesday, 28 April 2026.
Investors have until June 8, 2026, to join lawsuits against Upstart Holdings, alleging its AI lending model overreacted to economic signals, severely damaging the company’s 2025 revenue.
The Alleged Failures of Upstart’s AI Underwriting
Multiple prominent investor rights law firms, including Rosen Law Firm [1][3][4][6][7][8], Bronstein, Gewirtz & Grossman, LLC [2], and Faruqi & Faruqi, LLP [5], have announced class action lawsuits against Upstart Holdings, Inc. (NASDAQ: UPST). The core of the litigation centers on the company’s artificial intelligence underwriting tool, referred to as “Model 22” [1][2][5]. According to the complaints, Upstart and its corporate executives allegedly misled investors by overstating the model’s overall accuracy and its propensity to increase loan approval rates [1][2][5]. In reality, the plaintiffs argue that Model 22 frequently overreacted to negative macroeconomic signals in its risk-separation processes [1][2][5]. This overly conservative assessment of credit conditions purportedly depressed the lending platform’s revenue generation, rendering the company’s full-year 2025 revenue guidance fundamentally unrealistic [1][2][5].
Financial Fallout and Market Reaction
The financial disclosures on November 4, 2025, painted a stark picture of the revenue damage [5]. Upstart reported third-quarter revenue of $277 million, missing its prior guidance of approximately $280 million by a difference of 3 million [5]. Furthermore, the company drastically revised its future outlook [5]. Fourth-quarter revenue expectations were set at approximately $288 million, falling short of the market consensus of $303.7 million by 15.7 million [5]. For the full fiscal year 2025, Upstart lowered its revenue guidance from roughly $1.055 billion to approximately $1.035 billion, while expected revenue from fees was slashed from approximately $990 million to $946 million—a reduction of -4.444 percent [5].