Release Date: August 04, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wix.com Ltd WIX launched Base 1, its proprietary LLM, which improves product quality, reduces costs, and creates a proprietary data asset that compounds over time.
- Base44 gross margin improved dramatically from near 0% at the start of 2026 to approximately 60% in the second half, driven by Base 1 and cost optimization.
- Self-creators revenue growth accelerated sequentially to 14% year-over-year, with strong Base44 performance and encouraging Wix Harmony results.
- Base44 demand remains elevated, with new cohorts outperforming previous ones and increasing adoption of annual plans, indicating growing user trust and durability.
- The company is strategically reinvesting gross margin savings into sales and marketing to capture market share in the AI-powered app creation space, reflecting confidence in long-term growth.
- Wix.com Ltd (WIX) is leveraging its data science expertise to rapidly develop and deploy in-house AI models, reducing reliance on external vendors and improving cost structure.
Negative Points
- Total non-GAAP gross margin declined 3 points year-over-year due to elevated investments in Base44 and AI compute costs.
- Non-GAAP operating income margin was only 12% of revenue, pressured by elevated sales and marketing expenses and AI inference costs for free Base44 users.
- Bookings growth (12%) lagged revenue growth (15%), and the company expects this trend to continue, indicating potential future revenue deceleration.
- The wind-down of subsidiary InkFrog negatively impacted GPV growth, which grew only 3% year-over-year.
- The company is extending its TROI target, meaning it will take longer to recoup marketing investments, which could pressure near-term profitability.
- Partners business growth was in line with lowered expectations, and the company is still testing new solutions to align with the evolving ecosystem, indicating uncertainty in this segment.
Q & A Highlights
Q: Can you expand on the Base 1 proprietary LLM, how it's built, any quality trade-offs, and the potential for further AI cost improvements?
A: Avishai Abrahami (CEO): Base 1 is a model we trained in-house. The core concept is continuous training based on what works best for our users. Since the model generates hundreds of thousands of lines of code per prompt, we use our proprietary data to identify the best results and feed that back into the model. We already see that Base 1's results are better than frontier providers for Base44-specific tasks, and it costs dramatically less. This is a long-term strategy to continuously improve a critical part of Base44.
Q: How much of the expected Base44 gross margin improvement to ~60% in the back half has been realized, and what percentage of inference traffic is running through Base 1?
A: Lior Shemesh (CFO): We are already seeing the range we provided for gross margin. It happened gradually over the last few weeks, but we have already started to see the increase within the guidance range. This gives us high confidence in the trajectory.
Q: What are the biggest drivers of Base44 demand right now, and can you talk about user types or channels?
A: Avishai Abrahami (CEO): The biggest driver is user satisfaction with the applications they build. When a user successfully builds an app, they share it, which is our biggest source of new users. We see about 40% of users building personal projects and 60% building business-oriented applications. Notably, we have more large enterprises on Base44 than we do on Wix, showing the product's versatility.
Q: To what extent is partner activity migrating towards Base44, and how do you ensure this increases total lifetime value rather than shifting revenue between buckets?
A: Avishai Abrahami (CEO): We see this as a beginning of a potentially big trend, but it's very early. We do see some partners reducing Wix activity while increasing Base44 activity, and we also see partners from competitors moving to Base44. It's too early to predict how it evolves. Lior Shemesh (CFO) added that Base44's profitability is now more or less the same as many other software companies, with more room for improvement.
Q: Can you talk about the TROI framework? Is there a maximum point you're willing to extend it to, or could it flex higher based on market conditions?
A: Nir Zohar (President): The TROI framework allows us to invest in marketing with high discipline. We don't expect to increase it necessarily anytime soon. However, improvements in gross margin or more annual subscriptions on Base44 could drive the TROI forward, allowing us to collect faster. It's always calculated through a clear formula based on how quickly we can get the investment back.
Q: How should we think about the bookings trajectory in the second half? Is it a dip and reacceleration, and is the spread between revenue and bookings consistent in Q3 and Q4?
A: Lior Shemesh (CFO): The bookings lag is mostly due to the partners business. The entire company is focused on generating more profitable growth through Base44 and new products like Harmony. I hope the bookings situation will change in 2027, but it's too early to say. For Q4, I don't see acceleration compared to Q3; revenue growth on a year-over-year basis will be more or less the same, with benefits coming mostly from Base44.
Q: As partners use Base44 in place of Wix Studio, can you talk about the attach rate of Wix Business Solutions on a headless basis and early learnings from headless initiatives?
A: Nir Zohar (President): It's too early to comment on whether partners are supplementing or replacing Studio usage. We see some using both for different use cases. For headless, we want people to benefit from the Wix business stack in an easy manner. We're seeing traffic from various agentic solutions, including OpenAI and our own stack, and it's an early cycle. We expect clarity in the coming quarters.
Q: Is the Base44 ARR trajectory similar to previous updates, and are you still ahead of Lovable in the US? Can you also discuss the mix of monthly versus annual plans?
A: Nir Zohar (President): ARR is trending in similar manners as before, and we're seeing more adoption of annual plans, though we won't break out exact numbers. Avishai Abrahami (CEO) added: We are not taking share from Lovable; we are inventing a new market together. We support each other by educating the market. In the US, our estimation is that we are ahead of them, but it's hard to measure precisely.
Q: Can you talk about the improvements of Base 1? Should we think about a parallel path with open-source models, and how does that impact conversion and retention?
A: Avishai Abrahami (CEO): Base 1 will improve in parallel with open-source models, but that's not the most significant part. For most applications, current models are already intelligent enough. Our focus is on making Base 1 better at solving specific problems for non-professional developers who don't prompt in a professional way. Improving Base 1 directly improves conversion and retention because users get better applications. Regarding the competitive moat, everyone uses the same algorithm, but we have proprietary data that compounds into a better product.
Q: Can you talk about the difference in economics for partners shifting to Base44, in terms of revenue or margin contribution?
A: Avishai Abrahami (CEO): There's no clear answer; it depends on what they're doing. Partners are happy because they can now build applications and charge $15,000 or $30,000 instead of $1,000 for a website. They might build fewer projects but more expensive ones, resulting in a bigger ARR contribution. However, this is yet to be proven, and we need a few more months to provide clear numbers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
