Conference Transcript - WIX 2026-09-08

Michael Sherman-Lewis, Analyst — Citi

Let's get started here. I'm James Michael Sherman-Lewis. I'm on the internet team here at Citi. Joining us is Lior Shemesh, Chief Financial Officer, Anir Zohar, President and COO. Thank you both for joining us here. Before we get into, obviously, you know, Base 44 and Wix's product roadmap, I wanted to zoom out for a second. There's a broader kind of debate here around the evolving role of a website in the agentic web.

Nir Zohar, COO

As AI agents have recently browsed transact online uh gentic traffic beginning to exceed human traffic um how does wix think about the long-term value of a website and how does it inform your product roadmap so i think it's about a year ago that same argument or the same question was about you know is the uh you know is the rise of ai means that websites are completely going away I don't think that is the it's me turn it off it's not the first time that this happened to him technical there we go so first here the question was more about will websites even exist because AI will come and basically make them redundant I don't think that's the I don't think that's concern anymore if anything I think that with vibe coding either on the high end professional level or the more less sophisticated simple level of base 44 there are more and more things being created and with more and more things being created some of them are websites some of them are applications but I think we're going to see more rather than unless I do believe, and we're seeing it and we're playing a part in it, is that how AI interacts with websites will keep on evolving and changing. So I would say one aspect of it is, you know, we've just integrated Harmony into Gemini. So it's going to be super easy for you to go through Gemini and immediately go into the creation path, which makes a lot of sense. You understand your intent, you understand what you're looking for, and the AI immediately puts you into the right flow that will make you happier by getting the experience you were looking for. A different part of it, which is more the transactional level with websites, is what's going to happen with a catalog when you want to buy something and you want to get an offer. Now, I think that the idea that everything is going to turn textual is, I actually think it's ridiculous, okay? I'll give you a beautiful, beautiful text about the hotel room I want you to book or a few good images of the room and the beach next to it. I'm pretty sure which one will resonate better with you, right? So text is not enough for us as humans. So I think, and you can say the exact same thing about the shoes you want to buy and if it's not exactly what you wanted, I'll show you the alternatives. I'll give you different selections. So I think there's definitely a change there in the sense that the AI would like to pull in the right thing that matches your search, matches your inquiry, matches the thing you're looking for. I think that's a better experience. But whether the full transaction happens within the agent or ends up pulling you back to a full-blown website, you need that place where everything exists in a seamless manner, has the right text for the catalog, the right images, videos, measurements, colors, prices, different prices for different places if it's cross-border, different taxes in different places. There's a lot of complexity. And even if you transact on the agent, at the end of the day, something needs to synchronize and make sure that something was, you know, transaction happened, fulfillment will happen And next, something was removed, reducted from the inventory. If there are a few agents that are working with my websites, it needs to be synchronized between them. And I think that this is definitely a change that's happening. It's actually happening slower than anyone anticipated. The fact that it's happening slower, in my mind, doesn't mean that it's not happening, just that it takes a lot more time to adapt. But I think that definitely we're going to see a change in how people interact with websites and what websites do for them. It's going to increase the level of complexity, not decrease it, which I think is where we intend to be very much kind of ahead of the game to try and solve that complexity for the, you know, for the small businesses, our clients, the ones who cannot afford to pay huge tickets in development costs in order to solve those kind of issues.

Michael Sherman-Lewis, Analyst — Citi

So increasing complexity, AI accelerating content creation. Wix's strategy here, as I see it, seems to be enabling user choice and how they do that creation. You know, Wix Harmony, you know, maybe having some more of the conventional like drag and drop. You've got Base44, natural language, but also headless integrations with major LLMs. Based on kind of what you're seeing this year, what channels and solutions are customers really gravitating towards?

Nir Zohar, COO

Well, it really depends about who they are. I think we're seeing, obviously we're seeing the regular behavior of most of the self-creators who are still going to Harmony because this still embodies the most simple and fully curated solution that has all the guardrails. And I think for people who are not tech savvy, this is very important. But we're also seeing some self-creators are starting to gravitate towards trying to do it fully blown on vibe coding. and we're seeing more of those on base 44 so there are sites being created on base 44 even though the majority is still applications there's still quite a few there are now quite a few websites being created on base 44 so you know that's that's one side of it if you look at partners and you know obviously their their business has been much more under the gun than than than the self-creators and they're seeing a lot of pressure, but they are also trying many, many different things. So some of them are trying to build websites on Base44. Some of them are trying to build applications and offer applications to their customers through Base44, whether with a Base44 website or a Wix website or someone else's website. And then headless is also picking up, still relatively small. Again, it's mostly more of a professional play. So it can be partners or actual engineers or people who want to build front in one place and then they want to take advantage of the very elaborate and deep business stack that we built on Mix over the years. And with Headless, it becomes super easy for them to adopt and enjoy that. I would just say, I don't think my job at this time is to try to foresee the future. First of all, I'm happy that's not my job because I'm going to miserably fail. I think it's impossible. Things are changing extremely fast right now. I think my job and our job as a management is to try to understand what are the most relative outcomes that we can consider in our space and then try to gear up and have a good solution out there. So whichever way the pendulum swings, we can capture opportunity.

Lior Shemesh, CFO

By the way, this is exactly one of the reasons that we bought base. When we thought about it earlier in those days, we thought, okay, what is going to be, you know, just vibe coding, combination, and so on. And that was, you know, one of the reasons why we decided to buy base. Providing optionality.

Michael Sherman-Lewis, Analyst — Citi

Exactly, exactly. Let's stay on base 44 for a minute. ARR went from 100 million early March to 150 million by mid-May.

Nir Zohar, COO

I think that growth trajectory continued through 2Q as you know i think we've discussed um what key parts of the product roadmap kind of going forward from here are you really excited about oh yes it's 44 you know there's so much try to track uh the the release notes on on on uh on x from coming from either the base team or from all at least something new that's coming every couple of days so it's really hard i'm it's hard for me to get attached to one specific thing and say, oh, that's the thing. But I think, you know, the fact of the matter is that the glass ceiling, so to speak, and it's not really a glass ceiling, but I think what's above our heads still on base 44 more than anything else, is the fact that most people that are not in tech and are in this room have never heard about vibe coding. They have no idea what it means. So go out to Sixth Avenue and ask around a little bit. You'll see that the vast majority never heard the term. A few heard the term but don't know what it means. And maybe one or two or zero understand that vibe coding is something that can benefit their own lives by going in and using natural language to create a piece of software that can do something for them. And I think that's, to me, the most interesting thing. I think that's going to be the biggest thing that is going to affect the growth trajectory is that as this becomes more widely distributed and populated and everyone knows about it, then that's where things expand dramatically. It's not that I'm not excited about the product. It's evolving tremendously well, but it's already a healthy product, right? So I think that it will continue expanding. There are more opportunities. There are business opportunities. We're going to, you know, we told the street that we said that we hired a VP for sales. We're going to start building an enterprise muscle for Base44. But I still think that just the expansion of the category, which is just getting, you know, just being born, is the most exciting part there. Because that's where the breadth of the town comes to play.

Michael Sherman-Lewis, Analyst — Citi

Widening the customer funnel, the aperture. That makes a lot of sense. For the customers that are using Base44 already, I think you've said cohort trends are improving almost every month, but it's not maybe yet at Wix's level of retention. Correct me if I'm wrong. With the first kind of cohort of annual subscribers, you know, coming up for renewal, what leading indicators are you seeing on that front?

Nir Zohar, COO

So for the annual, first of all, I have to remember we started selling annual subscriptions in August last year. Numbers were very, very small. I think statistically we'll have more validity throughout Q4. That being said, I would say we're seeing good indications, meaning that it's as we expected and definitely we have no concern looking at the numbers we're looking at right now. I think that the retention is, first of all, the retention is different and probably will remain different because some of the nature of what is being done is very different. There is much more call for personal use of applications on Base44 than there are for personal websites on Wix. And even there, if somebody builds a personal website, they usually will hold on to it for a long time. With applications, you might actually build something which is a one-time thing for you. But it doesn't mean that the next time you want to build or create something or a piece of software, you're not going to come back again to Base44. So I think the longer-term understanding of how the cohorts behave, we still don't have enough in order to fully understand it, and it's also expanding very, very fast, so we're seeing new things all of the time. but I'm actually encouraged by it because I think if we can get to a point or we can get to a place where people really expand their use in Facebook personally all the time. So I start by building an app for my business and then I understand that it's super simple that I might actually build two or three more apps for my business for different functions because a business will usually have one website but they may have an application for running the staff an application to do loyalty and a different application to deal with inventory and something that can replace my CFO and do the finance for me, then a person that is covering that as the business owner at some point may say, oh, I can actually use it to do something for my kids' soccer team or something for the PTA or et cetera. And I think as this expands, we can actually get Base44 be even more popular than Wix's. And that's obviously very exciting.

Lior Shemesh, CFO

Lira, let's... By the way, replacing CFO is really, really hard. I can tell you that.

Michael Sherman-Lewis, Analyst — Citi

Lira, let's bring you back in the conversation so we can keep your job.

Lior Shemesh, CFO

But I think that, you know, just going back to this, like, for a minute, I think that the first indication that we get, it is within our expectations, which is really, really good. I mean, the fear that, you know, something, wow, it's going to be like a complete failure, it's not the case. I think that within our expectations even a bit better, let me say that. But it's really good. And I think that it can only improve. You know, Niamh, for example, mentioned the fact that we're trying to build the enterprise business.

Michael Sherman-Lewis, Analyst — Citi

So we do see indication that actually on a dollar value, even it's better because it means that we see more and more businesses when they build application on base obviously the retention there is super high great can we can we talk briefly about the economics of of base 44 and some of these uh the newer models that you've implemented so two new in-house models uh the wix harmony lm and base one for base 44 each cutting inference costs by you know uh to about five percent of the frontier model with alternatives uh can you talk broadly about the decision to open source um the advantages in specializing on your own data um and then potentially a third one squeezed in um how you expect to adapt uh your proprietary models as

Nir Zohar, COO

frontier models continue to evolve yeah so i think the the the easy the easy value that everyone sees immediately is is the is the inference cost savings i would actually argue that it's the least interesting one because i think it would have happened anyway it might it probably would have happened took a longer time but eventually just on the nature of the kind of competition there is around it it should have come down the other thing i think that's driving costs on on ai compute obviously is energy and data centers the lack of both but we all know that there's so much investment into expanding that so you know over time i i would expect the cost to come down anyway naturally because we don't want to wait the fact that we can we can we can save a ton and improve the margin profile quickly by by doing it now is a huge benefit that being said i think that there are two other things that are actually even more important they're not immediate but they're more more important one is if the core or one of the core things that base 44 does is understanding what's the best flow in order to create and code web applications for a certain kind of customers. Then obviously sharing that know-how with a third party that might at some point either deliver the train their own models and then let competitors use it or become a competitor themselves is a huge, huge disadvantage. this advantage. So I think for us, you know, using this is an important way to protect our IP. And I would say that once you encapsulate the problem you have and the issue you're trying to solve with your own model, you also have a better chance to improve on that specific undertaking. Whereas when you're only reliant on the improvements of a third party that does something much wider, you may get some benefit, but not necessarily the exact benefit that fits the problem you're trying to solve. So if Fable is much better at deep research, I'm not sure that helps me with building applications, right? It doesn't mean that it's not amazing for deep research. So I think that's another thing that over time we'll be able to create and curate a better solution by focusing on our own efforts on our own trained model now to your question what happens when the new big innovation comes out um it's a great question i think that uh first of all we are tracking it all the time this is why we keep on using frontier models it's all the time um we're never going to be completely disconnected we're actually we're actually using a bunch of the of the top-notch new ones all the time and testing them. And I think, you know, at least so far, we've seen a lot of those kind of outsourced solutions manage to catch up rather quickly. You're asking, what if comes a new one that nobody catches up with and it is so good, it does something so different that you have to go and replace and go back to it? I don't know. It's a great question.

Michael Sherman-Lewis, Analyst — Citi

And if ever I have to deal with it then maybe we'll come back and say guys we're going to increase costs right now because you're going to use it but here's the benefit and we're here to why it makes sense so it can happen but it needs to be a smart business decision that i can articulate and explain to you why it makes sense right um if it comes to it we'll we'll have to uh engage with it understood um on the cost side uh and leo you know maybe you have some input here as well but base 44's profitability is uh it's continuing to improve we have a few metrics that we're anchoring on now you know troi uh modestly longer than 12 months uh 60 gross margins in the second half um the question really is um how do you think about the structural profitability today

Lior Shemesh, CFO

inclusive of free users um versus you know potential leverage ahead um and then parallel to that um how do you think about troi as you lean into marketing again in the second half so I think that when you talk about TRI and gross margin in the end of the day we manage risks so it means that if I see that I have a higher gross margin I can take more risks in terms of the TRI I think that let's start with the gross margin what we see right now and we did mention what we expect from the second half of the year so definitely within what we provided and let me say even a bit better, which is a really, really good indication because it means that when we go to next year, we're definitely going to improve the overall growth margin for next year. Again, assuming there is no new model that we will implement. I can tell you even more than that. I think that technically we can even increase the growth margin, but we want to use more of the frontier model in order to compare. So I think that we are in a very good place And we are going to see that next year Definitely the gross margin is going to improve Okay, based on what we know right now Now, with regard to the overall profitability I think that then the only question that remains Is how much we are going to invest in marketing And this is something that we'll have to decide You know, as we progress Because there's a lot of opportunities They can be like new products coming from base that would like to invest. I don't want to be in a position where we had the growth because of the free cash flow. Okay, we need to deliver and we need to make sure that we will continue with the growth. So I think that, you know, definitely when we provide the guidance, we are going to provide much more explanation about what we see, why, and what we decided to do. But in terms of the margins itself, it's getting better. um by the way the same also for weeks i'm going to see uh for the core weeks i'm going to the growth margin next year the consolidated it's uh it's a question about the mix between basin and weeks uh makes a lot of sense if we could switch gears quickly uh partners just uh wanted to hit on that quickly uh some volatility this year uh 50 million bookings headwind um Could you elaborate a little bit on the pipeline pressure?

Michael Sherman-Lewis, Analyst — Citi

But really the question is more on, have the headwinds changed? Have you seen any change in the magnitude of the headwinds?

Nir Zohar, COO

So the simple answer is no, we haven't. We haven't seen improvement. We haven't seen deterioration. Obviously, we also already absorbed the surprise factor the last time when we announced it in June. And I think, again, I think the role of partners in this ecosystem is changing. Are they going to be completely gone in two or three years from now? I don't know. I don't think so, but I don't know. I think that if they do, because they lose all of their business to essentially AI machines that can do everything instead of them, then we intend to own at least one of those AI machines and be part of that change. In the meantime, I actually think that as much of the simplest stuff becomes very easy to do with AI, but a lot of the complex stuff as a business owner are still very complex for you, and business owners still have that tendency to try to steer away from technology, one, because it scares them, and two, because it defocuses them from their business, which is what they know how to do best, unless it's digital business, then I think the role of the agency can just evolve to be someone who is much of a partner to the business owner in helping them run it more effectively in a world where there are lots of other new technological opportunities that suddenly they can unlock with better website building on Harmony or on Base44 with adding applications around the business, maybe with running the business with that AI cluster of experts that is being built on Symfony. And I think what we want to understand while we are improving the product and trying to kind of slow the bleeding, hopefully stop the bleeding, but at least slow the bleeding And this is something we're going to do very, very soon. We also were talking to many, many tens of our top agencies to try to understand what is the experience, what is changing, how their jobs are changing, and then from that to curate solutions of how can we help them evolve into the next phase of what is a partner, what is an agency in the age of AI. And I don't think anyone has all of the answers yet, But we are, you know, we're working closely with them in order to get there.

Michael Sherman-Lewis, Analyst — Citi

Wanted to open it up to the audience for any questions before we keep going.

Speaker 1

Just out of curiosity, could you maybe just let us know the split between queries based on Frontier models versus, you know, base one, your own internal LLM? Just if you could quantify, that would be very helpful.

Lior Shemesh, CFO

We don't want to, you know, to provide because for a few reasons. I think that it's mostly about the fact that it's keeping changing, okay? It's not something that I want to commit to. It's not something that I can commit to. I think that the fact is that, you know, you want to test, you want to understand. In some of the cases, customers actually will prefer to use different models, you know, so it's something that we are not able to do.

Nir Zohar, COO

But I would definitely say that if you look at the first half of the year or early in the year towards what it is right now, the portion of the frontier model usage has changed dramatically. It's a big change. Again, we're not going to quantify it exactly, but it's very big.

Michael Sherman-Lewis, Analyst — Citi

On your prior subject of evolution, I think we're potentially in this transition period as well where bookings have kind of lagged revenue growth for a few quarters now. Lior, I think you mentioned specifically that you hope that dynamic changes next year. What would need to be true for that to occur? for the inflection to potentially happen.

Lior Shemesh, CFO

Look, I think that in the end of the day, what we do right now, I think that most of the time, trying to figure out, you know, about what would be the growth drivers. Because, you know, there's a lot of changes right now. Even within base, I mean, we spoke about base, about new product. There's so much opportunities with base. But definitely, you know, this is one of the growth drivers that we are investing a lot. Second, with, you know, with Wix. I mean, there are mostly, I mean, there are like three things and, you know, Anir mentioned that, but, you know, definitely Symfony. I believe that also within partners, we have more opportunities and also we talk about the headless. So we are also evolving into a place where no matter where you do the front end, you still be using Wix. And I think that this is super important to understand because even if you lose Entropic or use Chai GPT or whatever, I think at the end of the day, do you want to be in a position where you can present our solution and everything that we've worked so many years and establish a lot of understanding about what small business needs, what kind of vertical, what kind of connections, and so on. So I think that we are working very hard in order to make sure that we can generate more growth from those growth drivers. But let's see. I think that it's too soon. But we're really, really optimistic about it.

Nir Zohar, COO

You know, you said it's a transition. I think it's like an, it's an underestimation of what's going on. First of all, like 10 years ago when we were sitting here, you know, we had basically, you know, we were a few years after the IPO. We had one editor and we're talking about how we're adding all of those business solutions and verticals in order to help people unlock more value as they want to build websites. And it wasn't that we were not invested in other things so much as the world was just a much simpler world back then. I think the shift that we're seeing now is really dramatic. I think it's less dramatic sometimes because people are trying to, you know, describe it as if the sky are falling and everything is going to go away tomorrow. I don't think that's the case. But I do definitely think that we are going through a massive shift of a new internet, which is the internet in the age of AI. And it definitely presents a huge amount of risks, but also massive opportunities. And I think everything we're talking about, think about all the things, the sheer number of different products and different things that we were talking about just now in in 20 minutes okay again i couldn't cover so many things last time because we didn't have like or 10 years ago because i didn't have so many things going for me i think all of that is geared up toward making sure that we can not only survive this shift we actually want to come as winners in this shift and i think we have we have a good good chance but we'll have to work very hard in that shift in the the platform evolution um i think the new products are interesting right just you know obviously headless uh kind of changing the the access and entry point uh symphony though um you know usable by businesses that are not even on wix at all um how does symphony maybe change your tam and how you think about uh creating new products that are you know maybe very different from the products you used to have so i think obviously there's about if you look at kind of like the go-to market or the kind of the profile of the user you can say there's a lot of similarities, but I think the TAM is actually a new TAM or an independent TAM because it tries to answer a completely different need than something else. At the end of the day, so much AI innovation, so many great things you can do with AI. You can really leverage AI to make your business much, much, much better. The vast majority of the people have no idea how to approach it. And if Symfony is successful, and I don't know to say it is, it's a three-weeks-old product, way too soon to determine anything. But I think that on paper, in terms of the opportunity, it's a super interesting opportunity. It's interesting because if it works, then yes, then it's independent of Wix, can cross with Wix definitely, but it's not determined on me bringing a customer to Wix and then selling them Symfony. But a whole new and independent opportunity. And I think the great thing about this age of AI is that this is a product we developed in a matter of months with a very, very small team. I personally really believe in it and hope that it's going to be a big hit. But I also have the appetite to do more of these and try to go after new big opportunities. I think, again, to go back to what I said before, it's an era with a lot of opportunities. so this is I think this is very exciting for us era of opportunities I think is a perfect place to end so thank you both so much for coming I really appreciate having you here