Wix.com (NASDAQ:WIX) said its Base44 application-building business has reached nearly $250 million in annual recurring revenue, prompting the company to increase marketing investment even as it lowered its full-year free cash flow margin outlook.
On its third-quarter 2026 earnings call, Wix maintained its full-year bookings and revenue growth forecasts but said it now expects free cash flow margin, excluding acquisition and restructuring costs, of approximately 16%, down from its previous target in the high teens. CFO Lior Shemesh attributed the reduction primarily to accelerating investment in Base44.
The company also announced that Nir Zohar, its longtime president, has become co-CEO alongside co-founder Avishai Abrahami. Zohar will oversee business operations, go-to-market strategy and scaling, while Abrahami will focus on products and technology.
Base44 Growth Drives Spending Plans
Management said demand for Base44, which lets users create applications using AI, exceeded expectations in the second half of the year. Zohar said conversion of new free users into paying customers has improved significantly in recent months, while retention of the first quarterly cohort surpassed the company’s expectations at the 12-month mark.
Bookings dollar retention for that cohort was stronger than purchase retention, in part because users upgraded to higher-priced subscriptions, Zohar said. He added that annual plans represented more than 20% of subscriptions purchased by the September 2026 cohort, compared with approximately 5% for the September 2025 cohort.
Wix expects fourth-quarter sales and marketing spending to rise from the third quarter as it pursues demand for Base44. Shemesh said the company remains within its previously stated marketing investment guardrails, including a 13-month target return on investment.
“As long as we see that we manage to maintain the same TROI, obviously we are going to continue to invest in marketing,” Shemesh said.
Wix is also building its first enterprise sales team for Base44. Zohar said the pace of further investment would depend on demand and sales results. The business already serves several Fortune 500 companies that came to the platform organically, he said.
Margins Improve, but Cash Flow Outlook Falls
Base44’s non-GAAP gross margin rose to 58% in the third quarter, helped by a full quarter of efficiencies from Wix’s Base 1 AI model. Shemesh said he expects a higher margin in the fourth quarter and approximately 60% for the second half of the year. He added that Base44’s gross margin could approach that of the core Wix business in 2027.
Total non-GAAP gross margin was 69%, unchanged from a year earlier and up two percentage points from the second quarter. AI costs for free users fell more than 50% sequentially as Wix routed more traffic to Base 1 and made other optimizations. The company expects AI costs for all free and paid users to be less than 30% of total bookings in the second half.
Non-GAAP operating income was 12% of revenue, which Shemesh said primarily reflected higher sales and marketing spending. Wix ended the quarter with approximately $1.05 billion in cash and cash equivalents and $1.63 billion in short- and long-term debt.
The revised free cash flow outlook also includes an approximately $10 million fourth-quarter working capital headwind from prepaying for graphics processing units needed to run its models over the next couple of years.
For 2027, Shemesh said he believes free cash flow in absolute dollars will be higher than in 2026, although the outcome will depend partly on marketing investment and demand. Wix plans to provide more information in February.
New Products Target Business Operations and Agencies
Wix maintained its 2026 outlook for bookings growth in the low teens and revenue growth in the low to mid-teens. For the fourth quarter, it expects low-double-digit revenue growth, with bookings growth continuing to lag revenue growth.
Abrahami said Symphony, a standalone AI agent system launched in August to handle tasks for small and midsize businesses, has already generated annual recurring revenue in the millions of dollars.
Wix also recently launched Studio Two for partners, though Abrahami described it as a pre-release rather than a full product release. The editor is designed to let professionals use AI tools, visual design and React code in the same project. Abrahami said opening the platform to outside tools better reflects modern workflows and supports an enterprise offering, including for customers that want to host projects themselves.
Asked about slowing partner activity, Zohar said reduced investment had played a limited role, while changes in customer behavior and demand were also factors. Some demand is moving to Base44 or other AI tools, he said. Management hopes Studio Two will help address those changes, but Zohar said it was too early to quantify results.
About Wix.com (NASDAQ:WIX)
Wix.com Ltd. is a cloud-based platform that enables individuals, businesses and organizations to create and manage websites. Its tools include customizable templates, a visual website editor and hosting, allowing users to build sites without advanced coding skills or develop more customized experiences. The company also offers services for online businesses, including e-commerce features, appointment booking, payments, marketing tools and website analytics. Its products are designed to help customers manage multiple aspects of their online presence through one platform.
