Place the basil, Parmesan, pine nuts, garlic, kosher salt, black pepper, and lemon juice in a blender or food processor. Pulse a few times to begin breaking down the basil and nuts.

With the machine running, drizzle in the olive oil and blend until the ingredients are combined.

Stop the machine, scrape down the sides with a spatula, then run it again and drizzle in the water until the pesto reaches a spreadable consistency. Set the pesto aside.

Preheat the oven to 350°F (175°C). Line a sheet pan with a silicone liner or parchment paper.

Place one loaf on a cutting board. Make cuts about 3/4 inch apart across the loaf, slicing down almost to the bottom crust but not cutting through the bottom. Repeat with the second loaf.

Using a small spoon or knife, spread pesto into each cut so the inside of the loaf is coated. Work the pesto into the openings for even distribution.

Push shredded mozzarella into the gaps between the slices so each pocket contains some cheese.

Spread any remaining pesto over the top of each loaf and press the remaining shredded mozzarella on top to cover the loaves.

Transfer the loaves to the prepared sheet pan and tent them loosely with foil (do not wrap tightly).

Bake for 15 minutes, then remove the foil and bake an additional 5 minutes, or until the interior cheese is melted and the top is lightly browned.

Remove from the oven and let the loaves rest 4–5 minutes before slicing and serving.