BLND · Blend Labs, Inc.

Gross profit expanded to $23.4 million, a 23.2% increase from $19.0 million, achieving a robust 75.8% margin. This margin strength reflects strategic shifts including the verification services partnership, alongside a key trend of reduced software capitalization rates in 2026 compared to the prior year, stemming from the adoption of new accounting standards like ASU No. These changes influenced the composition of reported profitability by altering the timing of expense recognition for internal-use software development.

Operating income improved to a loss of -$5.1 million from -$7.7 million, representing a 34.2% reduction in the loss magnitude and a -16.4% operating margin. Management's restructuring actions have been instrumental here, focusing investments on initiatives critical to long-term strategy while implementing workforce reductions since 2022 to enhance cost efficiency and align the operating structure with current market dynamics. Research and development costs continue to be expensed as incurred unless qualifying for capitalization, and sales commissions are expensed when not incremental to contract acquisition, supporting disciplined expense management.

Net income narrowed to a loss of -$8.0 million from -$9.2 million, a 12.8% improvement, with diluted EPS at -$0.05. These results underscore the benefits of cost controls amid revenue momentum. Operating cash flow remained positive at $7.4 million, affirming the business model's cash generation potential even as expenses are expected to rise slightly in 2026 relative to 2025, influenced by lower software capitalization.

Looking forward, Blend Labs sees untapped opportunities to expand product offerings and drive transaction volume for financial institutions via its platform. However, historical results are not necessarily indicative of future performance, and international expansion carries additional costs and risks. These dynamics position the company to build on Q1 momentum through focused execution.