Blend Labs (NYSE:BLND) reported modest third-quarter revenue growth and operating income above its guidance range, but forecast a revenue decline in the fourth quarter as higher mortgage rates weigh on lending activity.
The lending software company said it signed 26 new deals and expansions during the quarter, its strongest sales performance in more than three years by dollar value. Co-Founder and Head of Blend Nima Ghamsari said converting its pipeline for Autopilot, the company’s loan-processing automation product, will be central to generating growth in 2027.
“The market got harder, but we are moving faster than ever,” Ghamsari said. He added that Blend is not counting on an improving mortgage market next year.
Third-Quarter Results
Revenue from continuing operations rose 1% year over year to $32.9 million, in the upper half of Blend’s $31.5 million to $33.5 million guidance range. Mortgage Suite revenue fell 2% to $17.4 million, while Consumer Banking Suite revenue increased 5% to $13.2 million.
Approximately 194,000 funded mortgage loans were processed on Blend’s platform, down 4% from a year earlier and below the company’s expectation of 200,000 to 210,000. Head of Finance and Administration Jason Ream said the weakening market began affecting volumes in September.
Non-GAAP operating income was $4.9 million, exceeding the high end of Blend’s $3.5 million to $4.5 million guidance. The non-GAAP operating margin was 14.9%, an improvement of nearly two percentage points from a year earlier.
Non-GAAP gross margin declined to 77.2% from 78.3% in the preceding quarter. Ream attributed the sequential decline primarily to Autopilot model costs, which increase with the number of loans processed. He said the company does not expect the effect on margins to be significant for at least the next year.
Blend ended the quarter with $44.2 million in cash, cash equivalents and marketable securities and no debt. Free cash flow was essentially flat for the quarter and $14.3 million for the year to date.
Autopilot Pipeline and New Products
Five of the quarter’s 26 deals involved Autopilot. Ten customers were under contract for the product, up from six in early August, and it had worked on more than 90,000 loan applications since launch, Ghamsari said.
Ghamsari said the pipeline includes three of the 20 largest banks, two large credit unions and one of the 20 largest retail mortgage lenders. Deals Blend is working to close in the fourth quarter could contribute $5 million in incremental 2027 revenue, he said. Those deals are not yet signed, and the company’s fourth-quarter outlook includes only Autopilot contracts already in place.
For existing customers, Autopilot can be activated within their current Blend environment without an integration project, Ghamsari said. By contrast, new customers and Rapid product deals can take multiple quarters to integrate before contributing to results. He also cautioned that large lenders’ AI governance, compliance and procurement reviews can take months.
Blend has initially priced Autopilot through one-year, flat-fee agreements to encourage adoption. Ghamsari said pricing tiers range from $100,000 or less to $1 million, depending on customer size. The company did not disclose Autopilot’s specific revenue contribution.
Ghamsari also highlighted Navigator, an assistant for loan officers, and said Blend launched a mobile version for customers earlier in the week. He said two large lenders have built voice agents on Autopilot’s infrastructure, while other lenders are developing integrations for their own customer experiences.
Lower Volume Outlook
For the fourth quarter, Blend expects revenue of $27.7 million to $29.7 million, down approximately 8% to 15% year over year. It expects Mortgage Suite revenue to decline 23% to 28%, partly offset by Consumer Banking Suite growth of 2% to 10%.
The company forecasts fourth-quarter non-GAAP operating income of $2.3 million to $3.3 million. Ream said lower revenue would put pressure on operating income, although Blend would remain disciplined about costs.
Blend expects fourth-quarter industry mortgage volume of 850,000 to 910,000 units, down 28% to 33% year over year. Ream said its prior expectation was for an 8% to 13% decline. For 2027, the company’s current outlook calls for industry volume to fall by a high-single-digit to low-double-digit percentage, with most of the decline in the first half.
Blend expects economic value per funded loan to rise to approximately $86 to $87 in the fourth quarter from $81 in the third. Ream said about $3.50 of that increase reflects fixed fees being spread over lower loan volume. For full-year 2027, Blend expects the measure to rise by a mid-single-digit percentage, helped by signed Autopilot contracts, adoption of other products and pricing on renewals.
On capital allocation, Ream said Blend repurchased nearly $37 million of shares in the first half of the year but made no repurchases in the third quarter. The company has $13.2 million remaining under its authorization and will continue to evaluate buybacks after prioritizing operating liquidity.
About Blend Labs (NYSE:BLND)
Blend Labs, Inc develops cloud-based software that helps financial institutions digitize and streamline lending and banking processes. Its platform is designed to support customer applications, document collection, underwriting workflows, compliance requirements and other steps involved in delivering financial products.
The company’s solutions cover areas including mortgage lending, consumer loans, deposit accounts and other retail banking services. Blend provides configurable tools intended to help banks, credit unions, fintech companies and other lenders create digital customer experiences while connecting front-end applications with back-office systems.
Blend was founded in 2012 and is headquartered in San Francisco, California.
