Wix.com Ltd. (WIX) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals solid financial performance with a strong free cash flow and strategic investments in Base44, despite one-time marketing expenses. The Q&A highlights optimism around Base44's growth and synergies with Wix, along with manageable costs for AI development. Although management avoided specifics in some areas, the overall sentiment is positive, with improving gross margins and a focus on innovation. The anticipated revenue growth and cash position further support a positive outlook for the stock price over the next two weeks.
Key Financial Performance
New Q1 2026 User Cohort Bookings Nearly $52 million in bookings in its first 3 months, a 46% increase compared to the bookings generated by the Q1 2025 cohort over its first 3 months. This growth was driven by improved conversion of new users into paid subscriptions, higher-priced subscriptions, and increased attach of business solutions.
Base44 ARR Achieved $150 million in ARR in mid-May 2026, up from $100 million in early March 2026. This growth was driven by strong demand, improved retention, and increased monetization.
Acquisition Marketing Spend Approximately $90 million in Q1 2026, with a projected time to return on investment of 7 to 9 months. This includes marketing for Base44 and Core Wix, excluding Super Bowl expenses and AI costs attributed to free users.
Total Bookings $585 million in Q1 2026, up 15% year-over-year. Growth was driven by strong new cohort behavior, retention of the existing user base, and Base44 outperformance.
Total Revenue $541 million in Q1 2026, up 14% year-over-year. Growth was attributed to strong new cohort behavior and Base44 outperformance.
GPV (Gross Payment Volume) $3.8 billion in Q1 2026, up 12% year-over-year. Growth was slower due to macroeconomic pressures on SMBs.
Non-GAAP Gross Margin 66% in Q1 2026, declining year-over-year and sequentially. Stable gross margins in Core Wix were offset by elevated investments in Base44 and AI compute costs.
Non-GAAP Operating Income 5% of revenue in Q1 2026, impacted by higher sales and marketing expenses, including $24 million for Super Bowl ads.
Free Cash Flow $112 million in Q1 2026, representing 21% of revenue. This was driven by a large onetime step-up in working capital benefits.
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Operating Highlights
Proprietary LLM Development: Wix has built and deployed its first proprietary LLM to power the design engine of Wix Harmony. This model is faster, produces fewer errors, and delivers better outcomes for users. It also reduces inference costs and provides greater control over product development.
AI-Powered Tools: Wix continues to integrate AI into its offerings, including the rollout of Wix Harmony and the acquisition of Base44, the largest AI-powered app creation platform in North America.
Market Expansion with Base44: Base44 achieved $150 million in ARR by mid-May 2026, demonstrating strong growth momentum. Marketing efforts have been ramped up to capture demand, and Base44 is positioned as a leading AI-powered application creation platform in North America.
AI Cost Optimization: Wix has been lowering AI inference costs by optimizing third-party model usage, leveraging open-source models, and developing its own LLM. This strategy is expected to reduce costs further as AI adoption scales.
Operational Efficiency via AI: AI integration in customer care has reduced headcount by over 40% since 2022 while maintaining service quality. Similar efficiency improvements are being implemented in R&D.
Strategic Focus on AI: Wix is leveraging its proprietary AI models and infrastructure to differentiate itself in the market. The company is focusing on AI-powered online creation for SMBs and enhancing its product roadmap to maintain its competitive edge.
Share Repurchase Program: Wix completed a $1.6 billion share repurchase program, reducing its equity base by nearly 30%, which is expected to be accretive to shareholders in the long term.
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Risk or Challenges
Productivity Impact from Middle East Conflict: The ongoing war in the Middle East has impacted the productivity of Wix employees, with over 60% of the workforce located in Israel. This has led to delays in product timelines for the partners' audience, potentially affecting the company's ability to meet its high product standards and ambitious road map.
Slower Growth in Partners' Business: The partners' business experienced slower-than-expected growth due to a deliberate pullback in studio marketing efforts and a smaller top-of-funnel user base. This dynamic is expected to continue to drag on bookings and revenue growth in the partners' segment.
Elevated AI Compute Costs: The company is incurring elevated AI compute costs, particularly for Base44, as new users consume more AI inference bandwidth during their initial build phase. These costs are front-loaded and could pressure margins in the short term.
Macroeconomic Pressure on SMBs: Gross Payment Volume (GPV) growth remains soft as small and medium-sized businesses (SMBs) on the platform face macroeconomic challenges, potentially impacting revenue growth.
Currency Exchange Rate Headwinds: The strengthening of the Israeli shekel against the U.S. dollar has created a $64 million headwind on the company's full-year expense base, primarily affecting the second half of 2026.
Marketing Spend and Return on Investment: Significant marketing investments, including Super Bowl ads and Base44 branding, have increased expenses. While these efforts have driven traffic and brand awareness, the longer time to return on investment for Base44 marketing spend could impact short-term financial performance.
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Guidance & Outlook
Revenue Growth: Wix expects both bookings and revenue to grow at a mid-teens percentage on a year-over-year basis for the full year 2026. For Q2 2026, revenue is also expected to grow at a mid-teens percentage year-over-year.
Free Cash Flow Margin: For the full year 2026, free cash flow margin, excluding acquisition-related expenses, is expected to be in the high teens. Assuming pre-tender completion capital structure, the margin would be in the low to mid-20% range.
Base44 Growth: Base44 achieved $150 million in ARR in mid-May 2026 and is expected to continue its growth trajectory. Marketing spend for Base44 is projected to have a time to return on investment (TROI) of 7 to 9 months.
AI Cost Management: AI costs are expected to remain minimal for Core Wix, with gross margins relatively unchanged through 2026. Elevated AI compute costs for Base44 are expected to be front-loaded, with costs stabilizing as new users consume less AI inference bandwidth over time.
Currency Impact: A $64 million FX headwind on the full-year expense base is expected, primarily in the second half of 2026, due to the strengthening of the Israeli shekel against the U.S. dollar.
Partners Business: Growth in the partners business is expected to remain slower due to a deliberate pullback in marketing efforts and smaller top-of-funnel cohorts. This is expected to be a drag on bookings and revenue growth going forward.
AI Product Roadmap: Wix plans to continue investing in AI-powered products, including its proprietary LLM for Harmony, and expects these initiatives to drive long-term growth and market share gains.
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Shareholder Return Plan
Share Repurchase Program: In April, Wix completed a modified Dutch auction tender offer of approximately 18 million shares for $1.6 billion. This repurchase accounted for nearly 30% of Wix's equity base. The company believes this action will provide meaningful value to shareholders and prove to be accretive to the existing shareholder base in the long run as Wix executes its strategic plan.
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Key Q&A
Q:What are the standout use cases for Base44, and how does it add to the core business?
A:Base44 is seeing a wide variety of use cases, including personal uses, solopreneurs, and small businesses. It serves as an expansion for the top of the funnel and aligns closely with Wix's core business. Additionally, some small business-oriented use cases on Base44 are relevant to applications needed by business owners on Wix, presenting further opportunities.
Q:How is the partner channel expected to rebound, and is it tied to the product cycle?
A:The rebound in the partner channel is tied to the product cycle. Delays in product offerings due to changes in the environment and AI workflows have impacted the cadence, but efforts are underway to introduce more innovation and catch up throughout the year.
Q:What is the company doing to build its own LLM, and how does it compare to Frontier models in terms of cost and deployment?
A:The company has developed its own LLM for Harmony, which significantly reduces inference costs compared to Frontier models. It also offers better quality and adaptability. Deployment for Base44 is more complex and lacks a specific timeline, but top engineers are working on it under close management.
Q:Are developers increasingly using other AI platforms, and how is their behavior changing?
A:Some developers are using other AI platforms, including Harmony, and are providing feedback on missing capabilities. This feedback helps identify areas for innovation to better serve partners. There is also some overlap between partners and Base44, which presents additional opportunities.
Q:How widespread is partner adoption of Base44, and are there synergies between Base44 and Wix?
A:Partner adoption of Base44 is not marginal and could become a deeper trend. Synergies between Base44 and Wix are being explored to make both platforms more effective for partners and businesses.
Q:What was the cost to develop the LLM for Harmony, and what are the ongoing costs for improvement?
A:The cost to develop the LLM for Harmony was small and manageable. Ongoing costs for training and improvement are not expected to significantly impact expenses.
Q:What is the company's cash position and free cash flow outlook?
A:The company has approximately $900 million in cash and cash equivalents as of Q2, excluding near-term cash generation. Free cash flow guidance remains unchanged, with differences attributed to interest expenses and buyback-related costs.
Q:How is the company addressing competitive risks from low-code platforms, and what should investors focus on?
A:The company is monitoring competition from low-code platforms but has not seen significant pressure from larger platforms. Efforts are focused on maintaining leadership in key markets and improving product offerings to capture market share.
Q:What was the impact of the Super Bowl on sales and marketing expenses, and what is the expected run rate?
A:The Super Bowl campaigns for Wix and Base44 cost over $20 million, which is a one-time expense. Sales and marketing expenses are expected to decrease in subsequent quarters, with ongoing investments in Base44 based on ROI.
Q:What are the expectations for acquisition earn-outs related to Base44?
A:Acquisition earn-outs will increase quarterly based on milestones set in the M&A agreement, with a cap in place.
Q:Is the usage mix for Base44 shifting, and what is the gross margin outlook?
A:The usage mix for Base44 is still evolving, with potential for more meaningful partner adoption over time. Base44's gross margin is improving significantly quarter-over-quarter, with ongoing optimization and scaling expected to drive further improvements.
Q:What is driving new cohort bookings growth, and how are newer cohorts performing?
A:New cohort bookings growth is driven by both Base44 and Wix, with Base44 becoming a larger contributor. Newer cohorts are performing well, with ongoing good trends in core growth and performance.
Q:How do Base44's older cohorts compare to core Wix in terms of retention, and does AI impact pricing strategy?
A:Base44's older cohorts show incremental improvement in retention compared to Wix. AI does not currently impact the pricing strategy for Wix, but future changes may occur if token consumption becomes significant.
Q:Review of Unclear Management Responses
A:Management avoided providing specific timelines for deploying the LLM in Base44, exact numbers for inference cost savings, and detailed retention metrics for Base44 cohorts. Additionally, they did not break out the contribution of Base44 versus Wix to new cohort bookings or provide specific gross margin figures for Base44.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ADI rollout
AI ability
AI model
AI simple
ARR Acquisition
ARR mid
Acquisition marketing
America market
Artificial Design
Base Retention
Base Super
Harmony
Monetization
booking cohort
cohort user
conference
control
creation platform
day
depth
engine
feedback
industry
inference
infrastructure
market share
market user
marketing spend
outcome
product road
quarter
return
road map
spend Base
standard
use case
user base
user market
user subscription
web creation
WIX Transcript
Wix.com Ltd. (WIX) Q1 2026 Earnings Call Transcript
Positive5-13
The earnings call reveals solid financial performance with a strong free cash flow and strategic investments in Base44, despite one-time marketing expenses. The Q&A highlights optimism around Base44's growth and synergies with Wix, along with manageable costs for AI development. Although management avoided specifics in some areas, the overall sentiment is positive, with improving gross margins and a focus on innovation. The anticipated revenue growth and cash position further support a positive outlook for the stock price over the next two weeks.
Wix.com Ltd. (WIX) Q4 2025 Earnings Call Transcript
Positive3-4
The earnings call summary and Q&A indicate positive sentiment. The company raised its full-year outlook for revenue and bookings, signaling confidence in its growth trajectory. Base44's rapid ARR growth and the strategic partnership with OpenAI are additional positives. While there are some concerns about premium subscription declines, the focus on higher-value cohorts mitigates this. The Q&A section reveals a generally optimistic outlook, with increasing conversion rates and efficient cost management. Overall, the positive factors outweigh any negatives, suggesting a likely positive stock price movement.
Wix.com Ltd. (WIX) Presents at UBS Global Technology and AI Conference 2025 Transcript
Neutral12-2
Wix.com Ltd. (WIX) Q3 2025 Earnings Call Transcript
Positive11-19
The earnings call reflects a positive sentiment with strong financial metrics, optimistic guidance, and strategic growth initiatives. Revenue and bookings growth projections are promising, and the BASE44 acquisition is expected to drive long-term synergy. Despite some uncertainties around churn and margin pressures, management's optimism about reducing costs and improving profitability is reassuring. The AI-driven advancements and market expansion plans further enhance the positive outlook. While some concerns were raised in the Q&A, they were addressed with confidence, supporting a positive sentiment for stock price movement.
WIX Report
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