Wix.com Ltd. Q1 FY2026 earnings call

AI Product and Infrastructure Strategy

• Wix has built and deployed its first proprietary large language model (LLM) specifically for the Wix Harmony design engine. Internal testing shows the custom LLM is meaningfully faster than third-party alternatives, produces fewer errors, delivers better user outcomes, and allows for daily iteration guided by Wix's large user base that general-purpose models cannot support. The proprietary model also drastically reduces inference costs, and Wix plans to build a broader portfolio of custom AI models for additional use cases.
• Wix retains flexibility to use best-in-class third-party models when appropriate, so it is never constrained by its in-house AI roadmap. Wix's 20 years of focus on web creation, deep product infrastructure, and integrated product ecosystem creates a competitive moat that new AI-native entrants cannot easily replicate.

Cohort and User Growth

• The Q1 2026 new user cohort (including Base44) totaled 6.4 million users, generating nearly $52 million in bookings in its first three months, a 46% increase over the Q1 2025 cohort. Strong growth was driven by improved conversion to paid subscriptions from Wix Harmony (rolled out in late January across major markets), and new users are purchasing higher-priced subscriptions with higher business solution attach rates, indicating a growing mix of high-intent users.
• Base44, now the leading AI-powered app creation platform by market share in North America, continues to see strong upward momentum in top-of-funnel demand, with stable TROI even as marketing spend increased in Q1. Marketing acquisition spend (excluding Super Bowl expenses and AI costs for free users) for Core Wix and Base44 totaled $90 million in Q1, with a projected 7-9 month payback period, consistent with historical returns for core Wix.

Operational Updates

• Over 60% of Wix employees are based in Israel; the ongoing Middle East war has created a Q1 productivity headwind, pushing back some partner product timelines. Management prioritizes product quality over speed and is working to catch up on delays while keeping its full 2026 product roadmap intact. All Wix employees and their families are currently safe, which is the company's top priority.
• Wix completed a modified Dutch auction tender offer in April, repurchasing ~18 million shares for $1.6 billion, reducing outstanding shares by nearly 30% and returning significant value to shareholders, which management expects to be long-term accretive.
• Internal AI adoption is driving productivity gains: customer support headcount has dropped over 40% since 2022 while service levels have held or improved. Wix is aligning its core R&D structure with Base44's AI-first operating model to accelerate R&D output, which management expects will offset broader AI costs across the business.

1. Core Wix Segment: Total Q1 2026 revenue from core Wix was $408 million, representing 75.4% of total company revenue, with stable non-GAAP gross margins year-over-year. Excluding Base44, new core Wix users generated healthy bookings growth on par with Q1 2025 levels despite a slightly smaller user base, driven by improved conversion to paid subscriptions from the Wix Harmony rollout. Existing core cohorts grew bookings via strong retention and solid monetization. 2. Base44 Segment: Acquired by Wix, Base44 generated $133 million in Q1 2026 revenue, accounting for 24.6% of total company revenue. Elevated AI compute investments to support rapid scaling pulled down the segment's gross margin in the quarter, but significant cost optimization has already delivered meaningful margin improvement over the past three months. Base44 hit $150 million in ARR by mid-Q2, up from $100 million ARR in early Q1, with improving retention driven by growing annual subscription adoption and steady increasing monetization. 3. Partners Segment: The partners segment grew 19% year-over-year in Q1 2026, but growth was slower than expected, due to deliberate pullback in partner-focused marketing spend over the last several quarters. Smaller top-of-funnel partner cohorts have shifted the user mix away from partners, which will continue to act as a drag on bookings and revenue growth until product alignment is completed. Overall company Q1 2026 results: Total bookings of $585 million (up 15% YoY), total revenue of $541 million (up 14% YoY), total non-GAAP gross margin of 66%, non-GAAP operating income of 5% of revenue, and free cash flow of $112 million (21% of revenue).

• Management is maintaining full year 2026 guidance for both total bookings and total revenue, which are still projected to grow at a mid-teens percentage year-over-year. The guidance incorporates slower-than-expected Q1 partners segment growth, which will be offset by accelerated growth initiatives in core Wix, including top-of-funnel optimization and stronger existing user performance, alongside continued accelerating growth from Base44.
• Q2 2026 revenue is projected to grow at a mid-teens percentage year-over-year, matching Q1's growth rate.
• Full year 2026 free cash flow margin (excluding acquisition-related expenses) is expected to be in the high teens. This incorporates the impact of foregone interest income from cash used for the share repurchase and interest expense on the new $500 million credit facility; the projected margin would be low-to-mid 20% if the pre-tender capital structure was still in place.
• A $64 million full year FX headwind on the expense base is incorporated into guidance, driven by meaningful strengthening of the Israeli shekel against the US dollar over the past year; the majority of this headwind will hit in the second half of 2026.

• Slower-than-expected growth in the partners segment driven by deliberate marketing spend pullback and product realignment will continue to act as a drag on overall bookings and revenue growth for the foreseeable future, and product launch delays from the Middle East conflict have pushed partner innovation later into 2026.
• Elevated AI compute costs for scaling Base44 have reduced near-term consolidated gross margins, and custom LLM development for Base44 is a more complex undertaking than the Harmony LLM, with no confirmed deployment timeline currently available.
• Growing competition from both new AI-native AI coding/web creation platforms and large technology platforms entering the space creates ongoing market pressure, though management notes it has not impacted Wix or Base44 performance to date.
• After the $1.6 billion share repurchase, Wix is currently in a net debt position, and the company targets a return to a net cash position, with near-term cash flow directed toward that goal.
• FX volatility, specifically appreciation of the Israeli shekel (where a large share of operating expenses are denominated), creates a material $64 million full year 2026 expense headwind.

Q: What are Base44's key use cases, how is it additive to core Wix, and is a partners segment rebound tied to product cycle timelines? / A: Base44 currently serves a broad mix of use cases including personal use, solopreneurs, and small businesses, with more specialization planned over time. It expands Wix's top of funnel, and Wix sees a growing opportunity for Base44's app building capabilities to serve existing core Wix business owners. The partners segment rebound is definitively tied to product cycle timelines: product innovation was delayed by Q1 productivity impacts from the Middle East conflict, but management expects to introduce new partner-focused innovations throughout the rest of 2026 to get back on track.

Q: Is Wix's proprietary LLM built on fine-tuned open-source models, how much lower are inference costs vs frontier models, when will it deploy to Base44, and how are partners' AI workflows changing? / A: Management did not confirm model base details, but confirmed inference costs for the custom LLM are marginal compared to frontier models, in addition to delivering better quality output that Wix can iterate on directly. Building a custom LLM for Base44 is a more complex, generalized undertaking with no set timeline, but Wix has assigned its top engineering team to the project, led personally by Avishai. Partners already use a mix of external AI platforms and Wix Harmony, and their feedback on missing capabilities for partner use cases is guiding Wix's product roadmap. There is already early overlap between partners and Base44 usage that Wix plans to cultivate.

Q: How much did the custom LLM cost to build, and what can we expect for ongoing development costs? What is Wix's pro forma cash balance after the share repurchase and new credit facility? / A: Management declined to share exact figures, but confirmed the total spend to build the Harmony LLM was quite small, not comparable to the massive R&D and GPU investments required for large frontier models. Ongoing costs to improve and retrain the model will also remain very modest and will not meaningfully impact overall expenses. Pro forma cash and cash equivalents for Q2 2026 are approximately $900 million, excluding free cash flow generated in the period.

Q: How should investors think about competitive risk from new AI coding platforms, given slowing visible customer growth? What is the interest impact baked into 2026 guidance? / A: Management notes healthy competition from direct Base44 peers like lovable, which makes Wix a better product, and large generalist platforms have not put meaningful pressure on Wix or Base44 to date. Base44 has already taken the leading market share position in North America's AI app creation market, and Wix is focused on continuing to innovate and capture additional market share. The total non-operational impact from lost interest income (for share repurchase cash) and new interest expense on the credit facility is approximately $100 million for 2026, with no change to the overall free cash flow guidance framework.