Upstart Shareholders Allege AI Model Flaws Made 2025 Revenue Guidance Unrealistic

Upstart told investors its AI was getting smarter. Model 22 was supposed to approve more borrowers, lift conversion rates, and push revenue past $1 billion. For months, executives pointed to AI breakthroughs and raised guidance again and again.

But behind the scenes, the lawsuit says that same model was overreacting to macro signals, turning far too conservative and quietly choking off approvals. In May 2025, Upstart launched Model 22 and celebrated the rollout. By August, leadership raised full year revenue guidance again, crediting the model for stronger growth. Then on November 4, 2025, the story flipped. Upstart admitted the model had overreacted, cut fourth quarter expectations, and lowered full year guidance after conversion rates slid from about 24% to about 21%.

Investors were stunned. The stock fell about 10% in a day as confidence in the AI story cracked. Now, investors are learning more about the lawsuit.