Wix.com’s Earnings Call: Gross Margin Progress and Partner Migration Claims Clash

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Date of Call: Aug 4, 2026

Financials Results

• Revenue: Up 15% year-over-year
• Gross Margin: 67% non-GAAP, a slight increase sequentially, down 3 points year-over-year
• Operating Margin: 12% of revenue (non-GAAP)

Guidance:

• Revenue for Q3 2026 expected to grow at a low double-digit percentage year-over-year.
• Full-year 2026 revenue expected to grow at a low to mid-teens percentage year-over-year.
• Full-year 2026 free cash flow margin (excluding acquisition and restructuring costs) expected to be in the high teens.
• Non-GAAP operating margin for the consolidated company expected to step up in the second half of the year.
• Bookings growth expected to lag revenue growth by a few points, at a low teens percentage year-over-year for the full year.

Business Commentary:

Revenue and Bookings Growth:

• Wix reported revenue growth of 15% year-over-year and bookings growth of 12% year-over-year in Q2.
• The growth was driven by strong performance in the Base44 segment and continued growth in the core Wix business.

Base44 Gross Margin Improvement:

• Base44's gross margin improved significantly to approximately 60% in the second half of the year from near 0% at the start.
• This improvement is attributed to the introduction of Base1, a proprietary LLM, which reduces AI-related costs and enhances control over the technology stack.

AI Product Development:

• Wix achieved a significant milestone with the introduction of Base1, its proprietary LLM, which outperforms models from frontier providers while costing less.
• The development was driven by a strategic focus on deepening ownership of the technology stack and expanding Wix's role in the AI ecosystem.

Partner and Ecosystem Dynamics:

• Partners' revenue grew 17% year-over-year, with a step-up in Base44 contribution as professionals increasingly leverage AI in their workflows.
• The shift is driven by the adoption of AI and AI agents in partner workflows and the expansion of software creation pipelines.

Sales and Marketing Investment:

• Wix plans to reinvest the gross margin savings from Base44 into sales and marketing activities, aiming to capture elevated demand trends.
• This decision is based on the improved margin profile of Base44 and the expectation of continued strong demand.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence in strategic priorities and product milestones: 'our conviction in our near-term strategy...remains unchanged,' 'we achieved a significant product milestone,' 'we are doubling down on a strategy that has already proven successful,' and 'we are raising our TROI target moderately, underscoring our confidence.'

Q&A:

• Question from Ugal Aronian (Wedbush): Could you expand on base one and the proprietary LLM, including any quality trade-offs and potential for further AI cost improvements?
  Response: Base one is a proprietary LLM trained in-house that is already outperforming frontier models for Base44 tasks and costs dramatically less, enabling continuous improvement.

• Question from Ugal Aronian (Wedbush): Can you give an update on the partner ecosystem and competitive environment regarding vibe coding and AI builds?
  Response: Partners show increased appetite for AI solutions across Wix Harmony and Base44, with ongoing testing of new products to align with the evolving ecosystem.

• Question from Elizabeth Porter: How much of the expected Base44 gross margin improvement has already begun, and what percentage of traffic is running through base one?
  Response: The margin improvement range is already being seen, with base one traffic gradually increasing over recent weeks.

• Question from Elizabeth Porter: What is the renewal behavior for early Base44 cohorts and indicators of durable ARR?
  Response: The company is nearing the first annual renewals but not yet ready to comment; monthly behavior shows improvement, and the company feels comfortable with its growth trajectory.

• Question from Alexey Gogolev (J.P. Morgan): What are the biggest drivers of Base44 demand and user types?
  Response: Demand is driven by user satisfaction and sharing, with about 40% of users on personal projects and 60% on business-oriented applications, including more enterprises than Wix.

• Question from Alexey Gogolev (J.P. Morgan): To what extent is partner activity migrating to Base44, and how does that affect lifetime value?
  Response: Some partners are shifting from Wix or competitors to Base44, but it's too early to predict the trend; partners report building more valuable, higher-priced applications.

• Question from Josh Beck (Raymond James): What are the metrics for extending the TROI framework, and is there a ceiling?
  Response: The TROI framework allows disciplined investment; there is no strict ceiling, but adaptations will be made based on factors like gross margin improvements and subscription mix.

• Question from Josh Beck (Raymond James): How should we think about bookings trajectory and modeling partners?
  Response: Bookings growth may change in 2027 as new products and Base44 acceleration generate more growth; the current dip relative to revenue is partly due to partner focus.

• Question from Ken Wong (Oppenheimer): What underpins confidence in the Q4 revenue guide given the implied acceleration?
  Response: Q4 revenue growth is not expected to accelerate significantly over Q3; the benefit comes mostly from Base44, with consistent year-over-year growth expected.

• Question from Robert Kulberth (Evercore): What is the attach rate of Wix business solutions on a headless basis, and can you detail the gross margin improvement in H2?
  Response: Partner usage dynamics with Base44 are early and evolving; gross margin improvement of two points in H2 is driven by Base44 savings from Base one adoption.

• Question from Naveed Khan (B. Reilly Securities): Is Base44's ARR trajectory similar to prior updates, and what is the mix of monthly vs. annual plans?
  Response: ARR is trending similarly to before, with more annual plan adoption but no exact mix breakdown provided.

• Question from Andrew Boone (Citizens): How does Base one's improvement trajectory compare to open-source models, and what is the competitive mode versus frontier models?
  Response: Base one benefits from open-source progress but its primary value comes from Wix-specific improvements for application building, enhancing conversion and retention. The competitive landscape with frontier models is complex but remains important for Western innovation.

Contradiction Point 1

Gross Margin Improvement and Traffic Adoption

Disagreement on the pace and visibility of margin improvement and model traffic shift.

What did Elizabeth Porter discuss in the earnings call? - Elizabeth Porter

2026Q2: The gross margin improvement range is already being seen, having increased gradually over recent weeks. Significant traffic is already running on non-frontier models, including Base One. - Lior Shemesh(CFO)

How much of the expected Base44 gross margin improvement to ~60% has already begun, what percentage of traffic is running through Base One, and are there any deployment constraints? - Elizabeth Porter

2026Q2: The expected gross margin improvement has already begun to materialize, as the company is seeing the projected increase within the stated range. Traffic is being gradually shifted to Base1, with the model's usage improving over the last several weeks. - Lior Shemesh(CFO)

Contradiction Point 2

Partner Migration and Economic Impact

Inconsistency on the quantifiable impact of partner migration on Wix's economics.

What are your thoughts on the company's earnings performance this quarter? - Alexey Gogolev (J.P. Morgan)

2026Q2: Some partners are beginning to shift from Wix to Base44, and others are moving from competitors to Base44... The impact on total lifetime value is still too early to quantify. - Avishai Abrahami(CEO)

What are the biggest drivers of Base44 demand, user types, and channels, and to what extent are partners migrating to Base44, impacting total lifetime value? - Stefano Osbergo (Needham & Company)

2026Q2: Partners building complex applications see higher project value and potentially increased Wix take rate. It is still too early for definitive metrics. - Avishai Abrahami(CEO) & Lior Shemesh(CFO)

Contradiction Point 3

Base44 ARR Trajectory and Renewal Behavior

Contradiction on commenting on early renewal behavior and ARR durability.

Elizabeth Porter - Elizabeth Porter

2026Q2: The company is nearing the first annual renewals for Base44 but is not yet ready to comment. - Nir Zohar(President)

Okay, let's see. The user wants me to rewrite the input into one concise earnings-call question. The input is: "What is the renewal behavior for Base44's earliest annual cohorts, and what indicators give confidence in durable Base44 ARR?" First, I need to understand the original question. It's asking about two things: the renewal behavior of the earliest cohorts of Base44 and the indicators that show confidence in the durability of Base44's ARR (Annual Recurring Revenue). Now, the challenge is to combine these two parts into a single, concise question. The user specified that the output must be exactly one line, end with a question mark if a rewrite is possible, and avoid any additional text.The original question has two parts connected by "and". To make it one question, maybe I can rephrase it to ask about both aspects in a way that's still one question. For example, "What is the renewal behavior of Base44's earliest annual cohorts and what indicators support confidence in its durable ARR?" But I need to check if that's concise enough and still clear. The key elements are "renewal behavior", "earliest annual cohorts", "indicators", and "durable ARR". Combining them into a single question without making it too long. Maybe using "and" is acceptable here as it's part of the question structure. Also, the output must end with a question mark. Since the original input is a valid question and can be rewritten, the output should end with "?". I don't see any ambiguity in the original question. It's specific to Base44's cohorts and ARR indicators. So the rewrite should capture both aspects. Let me try to make it more concise. Perhaps "How does Base44's earliest annual cohorts' renewal behavior and key indicators reflect durable ARR?" But that might be too compressed. Wait, the original question is two separate parts. Maybe the best way is to keep both parts with "and" but make sure it's a single question. The user's example shows combining two parts with "and" as long as it's one question. So the correct output would be: "What is the renewal behavior for Base44's earliest annual cohorts and what indicators give confidence in durable Base44 ARR?" Yes, that's exactly the original input. Wait, but the user wants it rewritten into one concise question. However, the original input is already two parts connected by "and". Maybe the user wants it phrased more concisely but still as two parts in one question. Since the original is already a valid question and meets the criteria, perhaps the output is the same as the input. Wait, but the instruction says if the input is already a clear question, and can be rewritten, then output the rewritten version. But in this case, the input is already a question. The user might want it to be more concise. Let me check the original input again. The input is two questions joined by "and". The task is to make it into one concise earnings-call question. Maybe combining them into a single question that asks both aspects. For example: "What insights does Base44's earliest annual cohorts' renewal behavior and key indicators provide about the durability of its ARR?" But that might change the original meaning. The original is asking for two specific things: the renewal behavior and the indicators. So perhaps the best approach is to keep both parts as they are but ensure it's one line. The original input is already one line with two parts. Since the user allows using "and" in the question, maybe the correct output is the same as the input. Wait, but the user says "rewrite the input into ONE concise earnings-call question". So maybe the input is already acceptable, but perhaps the user wants it to be more concise. However, the input is already concise. The original input is two questions in one. Maybe the user wants it to be phrased as a single question that asks both aspects. Alternatively, maybe the answer is to leave it as is because it's already a valid question. The instruction says if the input is not a question, too vague, or lacks info, output as-is. But here, the input is a valid question. However, the user wants it rewritten into one concise question. So perhaps the input is already correct and the output is the same. Wait, but the user says "must follow: Output EXACTLY ONE line. Output ONLY the final question text." The input is already a question. So maybe the answer is the input as-is. But the user says "rewrite the input into ONE concise earnings-call question". So maybe the input is already a valid question, but perhaps the user wants it to be more concise. But the input is already concise. Wait, the input is two parts. Let me count the words. The input is: "What is the renewal behavior for Base44's earliest annual cohorts, and what - Elizabeth Porter

2026Q2: **First annual renewals are approaching**, but specific commentary is premature. - Nir Zohar(President)

Contradiction Point 4

Base44 Gross Margin Trajectory

Conflicting statements on the timeline and scale of gross margin improvement.

Elizabeth Porter - Elizabeth Porter

2026Q2: The gross margin improvement range is already being seen, having increased gradually over recent weeks. - Lior Shemesh(CFO)

What percentage of the expected Base44 gross margin improvement to ~60% has been realized, and what percentage of traffic is currently running through Base One? - Naved Khan (B. Riley Securities)

2026Q1: Base44’s standalone gross margin is improving significantly quarter-over-quarter... The company expects a 'big change' in Base44 gross margin from Q1 to Q4. - Lior Shemesh(CFO)

Contradiction Point 5

Base44 User Retention Trends

Contradictory characterization of monthly retention strength for Base44.

Elizabeth Porter - Elizabeth Porter

2026Q2: Monthly retention for Base44 is improving each month, though not at the higher annual rate seen with the core Wix product. - Nir Zohar(President)

What is the renewal behavior of Base44's earliest annual cohorts and the key indicators supporting durable Base44 ARR? - Andrew Boone (Citizens JMP Securities)

2026Q1: Base44 monthly subscription cohorts show incremental, ongoing improvement. - Nir Zohar(President)

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