Base44 Margin Gains Signal Progress in Wix’s AI Strategy

Wix’s Proprietary AI Model Improves Base44 Economics

Wix.com delivered second-quarter revenue of $563.1 million, up 15% year over year and above Wall Street expectations. Bookings increased 12%, supported by continued growth in the company’s core website-building business and demand for Base44, its AI-powered application creation platform.

The market reaction centered on Base44’s improving economics. Wix expects the platform’s non-GAAP gross margin to reach approximately 60% during the second half of 2026, up from near zero at the beginning of the year, following the launch of its internally developed Base1 AI model.

Key Points

• Wix reported second-quarter revenue of $563.1 million, up 15% year over year, while bookings increased 12%.
• Wix expects Base44’s non-GAAP gross margin to reach approximately 60% in the second half of 2026 after starting the year near zero.
• The company maintained its full-year outlook for low-teens bookings growth, low-to-mid-teens revenue growth and a high-teens free-cash-flow margin.

Base44 Demand Supports Wix’s Revenue Growth

Wix’s second-quarter performance reflected contributions from both its established website-building platform and its newer AI application tools.

Revenue increased 14.9% year over year to $563.1 million, exceeding analyst expectations of approximately $552 million to $556 million. Bookings rose 12% to $569.1 million, while annual recurring revenue reached $1.96 billion.

Self-Creators revenue growth accelerated sequentially to 14%. Management attributed the improvement to stronger conversion from free to paid accounts, stable customer retention and continued activity at the top of the customer-acquisition funnel.

Partners revenue increased 17%, with Base44 making a larger contribution as professional users incorporated AI and AI agents into their workflows. Some partners are using Wix and Base44 for different projects, while others have shifted portions of their activity toward software application development on Base44.

Demand for Base44 remained elevated during the quarter. Management said newer user groups performed better than earlier groups, while more customers selected annual plans as confidence in the platform increased.

Approximately 40% of Base44 users are creating personal projects, while about 60% are building business-oriented applications. Wix also said Base44 has attracted more large-business users than its traditional platform.

How Is Base1 Improving Base44’s Margins?

The June launch of Base1 marked an important development for Base44’s cost structure.

Base1 is a proprietary large language model developed specifically for application-creation tasks on the Base44 platform. Wix said developing the model internally gives the company more control over product quality, allows it to update the technology more quickly and reduces its dependence on outside AI model providers.

Chief Executive Officer Avishai Abrahami said Base1 is producing stronger results for Base44-specific tasks than broader frontier models, although the company is not positioning it as a superior model across every type of AI workload.

The financial effect is expected to be substantial. Base44’s non-GAAP gross margin began the year near zero as Wix absorbed high AI inference and computing costs while expanding the platform.

Management now expects Base44’s non-GAAP gross margin to approach 60% during the second half of 2026. The improvement is projected to add approximately two percentage points to Wix’s consolidated non-GAAP gross margin compared with the first half.

Wix said the margin gains had already begun emerging gradually during the weeks following Base1’s launch.

Total company non-GAAP gross margin was 67% in the second quarter. That was slightly higher sequentially but three percentage points below the prior-year period, reflecting investments in Base44 and higher AI computing expenses.

Non-GAAP operating margin was 12% as Wix increased marketing investment and covered the AI processing costs associated with free Base44 users. The company expects operating margin to improve during the second half as AI costs decline and seasonal marketing expenses in the core Wix business decrease.

What Matters Next for Wix and Base44?

Wix is pursuing two separate AI product strategies.

Wix Harmony combines AI tools with the company’s visual website-building platform and primarily targets self-creators. Base44 allows customers to build applications and software through natural-language instructions.

Management said operating both products allows Wix to address demand regardless of whether customers prefer visually controlled website creation or prompt-based software development.

The company plans to reinvest part of Base44’s improved gross profit into sales and marketing rather than allowing all the savings to flow directly into operating income. Wix believes the additional spending can help capture demand in the expanding AI application-creation market.

Marketing efficiency will therefore remain important. Wix plans to moderately extend the period over which it expects to recover Base44 customer-acquisition spending. Management said that target could change again if gross margins continue improving or more customers move to annual subscriptions.

Retention is another area to monitor. Wix said Base44’s monthly retention has not yet reached the level of the established Wix platform, although customer behavior has improved in nearly every month. The company is also approaching the first annual renewal period for Base44 customers but has not yet provided renewal data.

Wix maintained its full-year outlook. The company continues to expect bookings growth in the low teens, revenue growth in the low-to-mid teens and a high-teens free-cash-flow margin excluding acquisition and restructuring costs.

Third-quarter revenue is expected to grow at a low-double-digit rate.

What It Means for Investors

Wix’s second-quarter results showed that Base44 is contributing to growth while its financial profile begins to improve.

Revenue and adjusted operating income exceeded expectations, annual recurring revenue reached $1.96 billion and Base44 continued attracting both individual and business users. The platform’s expected movement from near-zero gross margin to approximately 60% represents an important change in the economics of Wix’s AI expansion.

The company is not planning to retain all of those savings. Management intends to use part of the improved margin to fund additional Base44 marketing and customer acquisition, balancing near-term operating profitability with efforts to increase adoption.

That approach places greater importance on retention, annual subscription growth and the return generated by marketing spending. Base44’s customer base is expanding, but the product remains earlier in its development than Wix’s core platform.

The broader Wix business continues to provide support. Self-Creators revenue accelerated, Partners revenue rose 17%, free cash flow remained positive and management maintained its full-year guidance.

The stock’s reaction reflected improving confidence that Wix can expand its AI offerings without allowing computing expenses to permanently weaken consolidated profitability.

Conclusion

Wix’s second-quarter results provided evidence that its AI investments are beginning to support both revenue growth and better unit economics.

Revenue increased 15% to $563.1 million, bookings rose 12% and demand for Base44 remained strong. The company’s internally developed Base1 model is expected to reduce AI costs and lift Base44’s non-GAAP gross margin to approximately 60% in the second half of 2026.

Wix plans to reinvest part of those efficiency gains into marketing, keeping the focus on customer acquisition and long-term platform expansion. Operating margins are still expected to improve during the second half as lower AI costs and reduced seasonal marketing expenses offset that investment.

The next phase of Wix’s AI strategy will depend on whether Base44 can maintain demand, improve retention and convert its expanding user base into recurring revenue while preserving the margin gains produced by Base1.

FAQs

Why did Wix stock rise after its second-quarter results?

Wix stock rose after revenue and adjusted earnings exceeded expectations, Base44 demand remained strong and management projected a significant improvement in the AI platform’s gross margin.

How much did Wix’s revenue grow in the second quarter?

Wix’s revenue increased 15% year over year to $563.1 million, exceeding Wall Street expectations.

What is Base44?

Base44 is Wix’s AI-powered application creation platform that allows users to build software and applications through natural-language prompts.

How will Base1 affect Base44’s profitability?

Wix expects its proprietary Base1 model to lower AI processing costs and help Base44 reach a non-GAAP gross margin of approximately 60% in the second half of 2026.

Did Wix change its full-year 2026 outlook?

No. Wix maintained its outlook for low-teens bookings growth, low-to-mid-teens revenue growth and a high-teens free-cash-flow margin excluding acquisition and restructuring costs.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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