Wix Earnings: Growing Pains With Base44

Key Morningstar Metrics for Wix

• Fair Value Estimate: $143.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of Wix’s Earnings

Wix’s WIX third-quarter results were ahead of FactSet consensus, but this was overshadowed by guidance for sharply rising costs to support the Base44 acquisition. Shares fell 20% on Nov. 19.

Why it matters: Base44 growth is accelerating. Wix now expects at least $50 million in annual recurring revenue by year-end, versus $40 million-$50 million previously. However, costs appear to be rising faster.

• 2025 gross margin guidance was lowered to 68%-69% (69% previously), and operating expenses are now expected to be 50% of revenue (previously 49%) due to increased Base44 costs.
• Cost of revenue is rising due to artificial intelligence processing and compute costs for Base44, which tend to be front-loaded as users consume more AI tokens during their initial build. Sales and marketing costs are up as Wix has built and deployed a marketing strategy for Base44.

The bottom line: We cut our fair value estimate to $143 per share from $166 for narrow-moat Wix due to lower margins from investments to support Base44. Shares continue to look undervalued.

• Base44 looks poised to deliver strong growth. However, this brings more uncertainty, particularly considering additional costs related to AI compute. As a result, we’re taking a more cautious view on margin progression.
• The market is reacting negatively to companies with nascent AI-driven businesses showing sharp cost increases.

Coming up: 2025 guidance is for bookings of $2.060 billion-$2.078 billion (13%-14% reported growth). Revenue is forecast to be $1.990 billion-$2.0 billion (13%-14% reported growth), with free cash flow of around $600 million (30% reported margin).

• Fourth-quarter guidance is for revenue of $521 million-$531 million (13%-15% reported growth).