Upstart Holdings UPST and Affirm Holdings AFRM are the two well-known names in the fintech industry. These fintech innovators are using artificial intelligence (AI) to upend traditional lending, offering faster, more efficient and often more inclusive credit solutions.
Upstart focuses on AI-driven personal loans, while Affirm is best known for its "buy now, pay later" (BNPL) model. Both target similar customer bases and banking partners, but their approaches, financials and future outlooks differ significantly. So, which AI-powered disruptor offers the better opportunity for investors today? Let’s find out.
Upstart: Building a Smarter Credit Engine
Upstart has developed an AI-based underwriting platform that goes far beyond conventional FICO scoring. Its proprietary model incorporates alternative variables like education and employment history to assess risk more accurately, enabling the company to automate 92% of loans in the first quarter of 2025. That level of automation isn’t just a technical feat, it’s a cost advantage and a user experience edge that legacy lenders struggle to match.
What’s driving Upstart’s growth is not just its core personal loan business, but also its expansion into auto loans, HELOCs and small-dollar loans. These verticals are scaling rapidly. In the first quarter of 2025 alone, auto loan originations climbed 42%, HELOCs surged 52%, and small-dollar loans grew 7% sequentially. The company is executing across multiple fronts, supported by enhancements to its AI engine, better conversion rates and tools like instant income verification.
Financially, Upstart’s first-quarter numbers were impressive. Revenues soared 67% year over year, and its non-GAAP EPS flipped from a loss of 31 cents in the last year to a profit of 30 cents in the first quarter. The outlook is even brighter. Upstart guided for 76% revenue growth in the second quarter and 59% for the full year.
On the funding side, Upstart continues to deepen relationships with institutional investors like Fortress Investment Group, which now help fund more than half of its originations. Importantly, the company is shifting toward super-prime borrowers, who now represent 32% of personal loan originations. This move reduces risk and increases funding reliability, even though it comes with thinner margins.
Of course, not everything is smooth sailing. Still-high interest rates and macro uncertainty remain potential roadblocks. Also, its contribution margin dipped from 61% to 55% due to the shift toward lower-risk, lower-yield borrowers. However, Upstart’s expanding product suite, improving credit performance and growing profitability position it as a differentiated and increasingly resilient fintech player.
Affirm: Strong Brand, Slower Path
Affirm has built an impressive BNPL empire, making it easier for consumers to split payments at checkout through major partners like Amazon and Shopify. Its AI-driven platform approves loans within seconds and emphasizes transparency — no hidden fees, no fine print — which has won it a loyal customer base, particularly among millennials and Gen Z.
Affirm’s ecosystem is growing, with 21.9 million active users and 358,000 active merchants at the end of the third quarter of fiscal 2025. Its services now cover more than just retail. The company is expanding into verticals like travel and home improvement, giving it exposure to big-ticket spending. Beyond BNPL, Affirm is slowly moving into debit and broader banking services, aiming to become a full-spectrum digital finance platform.
Geographically, Affirm is taking calculated steps toward international expansion. It recently launched Shop Pay Installments in Canada and plans to expand to the U.K., Australia and Western Europe. That global roadmap gives it a shot at scale, but competition looms large, with rivals like Klarna and PayPal already established in those regions.
However, while Affirm’s strategic direction is encouraging, its financial progress lags Upstart’s. In the third quarter of fiscal 2025, revenues grew 36% year over year, which is solid but far behind Upstart’s 67%. The company barely scraped a profit, posting non-GAAP earnings of one cent per share after losing 43 cents in the same period last year. Management expects fourth-quarter revenues to grow between 23% and 28%, signaling some deceleration.
EPS Estimate Trends: UPST Picks Up Steam, AFRM Stays Volatile
The Zacks Consensus Estimate for Affirm’s fiscal 2025 top and bottom lines implies year-over-year growth of 36.9% and 95.8%, respectively. However, the estimate revision trend for MU’s fiscal 2025 and 2026 EPS has remained highly volatile.
Affirm EPS Estimate Revision Trend
Zacks Investment Research
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The Zacks Consensus Estimate for Upstart’s 2025 top and bottom lines implies a year-over-year increase of 58.8% and 830%, respectively. However, unlike Affirm, estimates for Upstart’s 2025 and 2026 EPS have demonstrated a steady upward revision trend. This stability is a testament to the company’s predictable performance in a volatile sector.
Upstart EPS Estimate Revision Trend
Zacks Investment Research
Image Source: Zacks Investment Research
AFRM vs. UPST: Price Performance & Valuation Check
Both companies have seen share price fluctuations in 2025 amid geopolitical tensions and macroeconomic uncertainty. While AFRM shares have plunged 11.8% year to date, UPST dropped 14%.
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Affirm and Upstart both trade at almost similar forward sales multiples. At present, AFRM and UPST have a forward price-to-sales (P/S) ratio of 4.46 and 4.52, respectively.
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Conclusion: Upstart Holds the Edge
Affirm has built a compelling consumer brand and is making the right moves toward becoming a diversified financial platform. However, at its core, the company remains heavily dependent on the cyclical and increasingly crowded BNPL market. Its profitability trajectory is still murky, and growth, while steady, lacks the velocity seen in Upstart.
Meanwhile, Upstart is executing across multiple high-growth verticals, showing real signs of operating leverage, and appears closer to achieving consistent profitability. Its AI-driven model, expanding product suite and improving loan quality give it a stronger foundation for long-term success.
Considering these factors, Upstart seems to be the better fintech investment right now. UPST and AFRM each carry a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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