Blend Labs, Inc. (BLND) Earnings

Management highlights

### Autopilot Commercial Launch & Early Performance - Autopilot, Blend's agentic AI product for mortgage loan fulfillment, became commercially available on July 1, 2026 after a four-month beta period. As of the call, over 45,000 loans have been processed by Autopilot, and more than 65 lenders have activated the product for testing. Six lenders have already signed commercial contracts, including a large national mortgage servicer that is building custom experiences on top of Autopilot. - Early customer data shows 10-15% improvement in pull-through rates, 2-4 day reduction in loan cycle time, and an average of 4.5 hours of automated fulfillment work per loan. - Monetization launched with 1-year flat-fee contracts, with a long-term plan to shift to a per-funded-loan success-based pricing model aligned with Blend's existing mortgage business model. - Blend identifies four hard-to-replicate competitive advantages for Autopilot: early access to borrower applications at the point of intake, 15 years of proprietary mortgage loan data that improves model performance and reduces inference cost to ~1/3 of generic model setups, a custom-built compliance and orchestration infrastructure that keeps human lenders in control of high-stakes decisions, and long-standing customer relationships with top lenders. Autopilot's open infrastructure also allows third parties to build on top of Blend's platform. ### Blend 3.0: Internal Agentic AI Transformation - Blend 3.0 is the company's company-wide shift to an agentic-first operating model, following the market-building phase (Blend 1.0) and the profitable sustainability phase (Blend 2.0). - Agentic AI has increased engineering team throughput by 3.6x since January 2026 with roughly the same headcount, up from 1.5x throughput growth just three months prior. Management projects engineering throughput could reach 10x year-over-year growth by the end of 2026, accelerating product development and customer feature delivery. - The agentic-first operating model is now being rolled out to the go-to-market and customer support organization, where AI agents triage support tickets, draft responses, and even initiate pull requests for bug fixes. Blend aims to be in the top 1% of all companies in agentic AI adoption, and the transformation is a company-wide strategic priority, not a side project. ### Sales & Customer Growth - Q2 2026 saw 14 new deals and expansions, highlighted by a new credit union customer that purchased Autopilot as part of its initial contract, and a cross-sell of Blend's rapid refi and rapid home equity products to an existing top-five credit union customer. - Total company pipeline remains up more than 40% year-over-year, with late-stage pipeline (deals expected to close in the next quarter) growing nearly 40% between March and June 2026 after the addition of new sales leadership earlier in the year. The late-stage pipeline includes a top-20 large financial institution and multiple large deals for Blend's rapid products and Autopilot, with two additional large rapid deals expected to close in the near term. Large deals typically take time to move through internal governance, so revenue impact will appear in financials over the medium term. - Renewal management has improved, with the core customer base renewing for longer terms and higher average contract values, with pricing aligned to delivered value. ### Financial Performance - Non-GAAP gross profit was $26.5 million, with a non-GAAP gross margin of 78.3%, up 220 basis points year-over-year, in line with the 77-78% normalized margin framework. Autopilot model costs remain low and immaterial to the P&L in the near term. - Non-GAAP operating expenses were $19.5 million, flat year-over-year. Non-GAAP operating income was $7 million, above the high end of guidance, with a non-GAAP operating margin of 20.6%, up nearly 600 basis points year-over-year. Free cash flow was $6.9 million. - Blend ended the quarter with $44.9 million in cash, cash equivalents and marketable securities, and zero debt. The company repurchased 11 million shares in Q2 for an average price of $1.65 per share, with $13.2 million remaining in the current $50 million share repurchase authorization.

Guidance

- Third quarter 2026: Total revenue is expected to be between $31.5 million and $33.5 million, representing -4% to +2% year-over-year growth. Mortgage suite revenue is expected to change -4% to +3% year-over-year, with funded loan volume of 200,000 to 210,000 units (+2% at the midpoint) and economic value per funded loan of $80 to $81. Consumer banking suite revenue is expected to grow -5% to +1% year-over-year. Non-GAAP operating income is expected between $3.5 million and $4.5 million, with a 12% operating margin at the midpoint, as the quarter includes a $1.5 million step-up in sales and marketing expense for the annual Blend Forum customer event. - Fourth quarter 2026: Management's outlook is more conservative than Fannie Mae's current forecast, with expected total market mortgage volume of 1.105 million to 1.165 million units (-11% year-over-year at the midpoint). Blend expects funded loan volume of 180,000 to 190,000 units, representing a 10% to 15% year-over-year decline, factoring in the final tail of a previously announced large customer roll-off. - Management maintains a conservative outlook for 2026 full-year mortgage volumes, more cautious than Fannie Mae's revised 17% full-year market growth forecast, due to expectations that refinance volumes will remain muted in a higher-for-longer interest rate environment. Autopilot revenue impact remains too early to model, and management encourages investors to wait for more commercial traction before updating forecasts. - Management expects underlying strategic progress to position Blend to re-accelerate growth heading into 2027.

Segment performance

Total Q2 2026 revenue was $33.8 million, representing 7% year-over-year growth, accounting for 100% of total revenue. 1. Mortgage Suite: Revenue of $19.2 million, up 7% year-over-year, contributing 56.8% of total revenue. Funded mortgage loans processed on Blend's platform reached approximately $233,000, up 14% year-over-year, with economic value per funded loan at $79, in line with prior guidance. 2. Consumer Banking Suite: Revenue of $12.2 million, up 6% year-over-year, contributing 36.1% of total revenue, slightly above the high end of prior guidance. 3. Professional Services: Revenue of $2.4 million, consistent with management expectations, contributing 7.1% of total revenue.

Risks & headwinds

- Persistently high mortgage rates (rising from ~6.4% in May to ~6.8% in recent weeks due to geopolitical conflict) have muted overall mortgage market activity, including both purchase and refinance volumes, which may suppress near-term revenue performance. - Blend saw an uptick in customer churn notices in Q2 2026 relative to recent quarters, as customers move to lower-cost point solutions amid cost-cutting pressure from the weak mortgage market. The expected revenue impact is manageable, estimated at low single digits of annual revenue, but the trend is being monitored closely. - Large financial institution deals require extended internal governance and approval timelines, which can delay expected closing and revenue recognition relative to initial pipeline projections. - The macroeconomic backdrop for mortgage remains highly fluid and sensitive to interest rate movements, so volume projections may change as market conditions evolve.

Analyst Q&A

• Q: The analyst asks if management still maintains its prior outlook that Autopilot could deliver 10-15% incremental revenue growth in 2027, one month into commercial sales with six contracts signed. /

  A: Management confirms early signs remain encouraging, noting that interest from large financial institutions has been stronger than expected, with many of the largest banks in late-stage trials or internal approval processes. Early performance data from over 45,000 processed loans has been more positive than anticipated, and the product is positioned as a compounding long-term growth driver, though large deal approvals still take time. No updated incremental guidance was provided.

• Q: The analyst asks how management balances faster product innovation from internal agentic AI adoption versus operating expense leverage, and when the 3.6x engineering throughput growth will translate to financial results. /

  A: Management notes that Blend's current profitability allows the firm to prioritize medium-term 2027+ growth over immediate near-term operating leverage. The faster innovation from agentic transformation will build competitive advantage and drive revenue growth as new products like Autopilot scale, rather than delivering immediate cost savings.

• Q: The analyst asks what is driving the recent uptick in churn notices, and if customers are leaving for new AI-native point solutions or in-house tools. /

  A: Management confirms the uptick is driven by existing low-cost providers, not new AI-native entrants. Churn is a result of broad cost-cutting pressure on lenders from the weak, high-rate mortgage market, not a systematic shift away from Blend's value proposition. The overall revenue impact is expected to be small, in the low single digits of annual revenue.

• Q: The analyst asks how Blend differentiates Autopilot from competing tools, and how orchestrating the full end-to-end workflow drives customer ROI. /

  A: Management explains that most competing solutions add AI as a layer on top of existing manual processes, while Autopilot is built as an ambient background agent that drives the entire loan process from start to finish. The long-term vision is to combine Blend's real-time rapid pricing product with Autopilot to deliver a full clear-to-close decision in a single consumer session, even outside standard business hours, creating large compounding efficiency gains for lenders that competing point solutions cannot match.