Wix (WIX) Q3 2025: Base44 Users Surge 7x, Elevating AI App Builder Trajectory

2025-11-19 | By EarningsIQ Research

Base44, Wix’s AI-powered app builder, scaled to over 2 million users in Q3—up 7x since June—marking a decisive leap into the low-code application market. Wix’s core web business sustained robust new user cohorts and higher-value subscriptions, while Base44’s rapid growth drove both opportunity and near-term margin drag. Management raised full-year guidance as Base44’s momentum and AI-driven initiatives reshape Wix’s long-term strategic foundation.

Summary

• AI App Builder Expansion: Base44’s user base and ARR outpaced initial targets, validating Wix’s foray into low-code software creation.
• Core Platform Durability: New user cohorts and advanced subscriptions reinforced Wix’s brand and revenue resilience.
• Margin Dynamics in Focus: Short-term cost pressure from Base44’s hypergrowth phase is expected to yield to future profit leverage.

Performance Analysis

Wix delivered 14% year-over-year growth in both bookings and revenue, with Q3 bookings reaching $515 million and revenue $505 million. The core Wix platform continued to attract robust new user cohorts, who increasingly opted for longer-duration and higher-value subscriptions, signaling rising trust and platform stickiness. Notably, transaction revenue grew 20% year-over-year, supported by a 13% increase in Gross Payment Volume (GPV) to $3.7 billion, with partners contributing over half of total GPV. The partners segment itself expanded 24%, underlining Wix’s deepening traction among professionals and agencies.

Base44, Wix’s newly acquired AI-powered app builder, was a standout, with its user base exceeding 2 million—more than 7 times the number at acquisition in June—and daily new paying subscribers surpassing 1,000. Base44’s ARR is now expected to reach at least $50 million by year-end, a marked increase from prior expectations. However, the ramp in Base44’s monthly subscription model and heavy upfront AI compute and marketing costs created a near-term drag on margins, with non-GAAP gross margin dipping to 69% (from 70% in Q2) and operating expenses rising, particularly in sales and marketing.

• Partner Channel Acceleration: Professional designers and studios drove outsized growth, reinforcing Wix’s ecosystem leverage.
• Commerce Monetization: Elevated take rates and increased Wix Payments adoption improved transaction economics.
• Base44 Cost Headwind: Upfront AI compute and acquisition marketing costs compressed margins, but are expected to normalize as the user base matures.

Despite these pressures, free cash flow margin improved to 32% on working capital benefits, and management expects margin expansion as Base44’s subscription mix shifts and AI costs decline. The company also completed a $1.15 billion convertible note issuance and repurchased $175 million in shares, signaling capital allocation discipline.

Executive Commentary

Strategic Positioning

1. AI App Builder Market Entry

Base44, Wix’s AI-powered low-code app builder, is rapidly establishing category leadership. Its share of AI application builder traffic rose from near zero to over 10% in a matter of months, reflecting product-market fit and effective application of Wix’s established marketing and branding playbook. The opportunity is vast, as small businesses typically require multiple business applications—far exceeding the single-website need of the past.

2. Subscription Mix Evolution

Base44’s revenue model is currently dominated by monthly subscriptions, which results in a linear bookings build versus Wix’s front-loaded annual model. As user trust deepens and platform maturity grows, management expects a migration toward annual plans, improving both revenue visibility and margin leverage over time.

3. Margin and Cost Structure Transition

Short-term margin headwinds are driven by Base44’s hypergrowth phase, with high upfront AI compute and marketing investments. However, as the cohort mix shifts from new to recurring users and as AI token costs decline with improved models and scale, management anticipates Base44 will converge toward Wix’s established margin profile.

4. Core Platform Resilience

Wix’s core business remains healthy, with organic and paid traffic driving new user acquisition, and a trend toward higher-value, longer-duration subscriptions. This provides a stable foundation for continued investment in adjacent growth vectors like Base44 and upcoming AI-powered web creation tools.

5. Capital Allocation and Balance Sheet Strength

Wix issued $1.15 billion in convertible notes and repurchased $175 million in shares, maintaining flexibility for M&A, product investment, and shareholder returns. Management’s willingness to deploy capital for both growth and buybacks underscores confidence in long-term free cash flow generation.

Key Considerations

Wix’s Q3 marked a pivotal transition as Base44’s explosive user growth and ARR momentum began to reshape the company’s revenue mix and cost structure. The quarter’s results highlight the balancing act between capturing new market opportunities and managing near-term margin dilution.

Key Considerations:

• Base44 User Surge: Over 2 million users and 1,000+ new daily paying subscribers reflect strong product-market fit but introduce volatility in early-stage churn and cost absorption.
• Subscription Mix Shift: The path to higher annual plan adoption in Base44 will be critical for stabilizing bookings recognition and improving margin leverage.
• AI Cost Decline Trajectory: Management expects rapid declines in AI compute costs, but the timing and magnitude remain dependent on both internal optimization and broader LLM market evolution.
• Core Cohort Strength: New user cohorts in the legacy Wix business continue to demonstrate robust retention and upsell behavior, supporting ongoing cash flow generation.
• Delayed Flagship Launch: The next-generation self-creator tool has been pushed to early 2026, with management emphasizing technical refinement over speed to market.

Risks

Margin compression risk remains elevated in the near term due to Base44’s hypergrowth dynamic, with a heavy skew toward monthly subscribers and high initial AI compute and marketing costs. Churn rates for Base44 are higher than legacy Wix, and while improving, could remain volatile as the product matures. Any delays in shifting the subscription mix or in reducing AI costs could prolong margin headwinds. Additionally, execution risk around the delayed flagship product launch and evolving web standards for AI agent compatibility could challenge Wix’s competitive positioning.

Forward Outlook

For Q4 2025, Wix guided to:

• Continued acceleration in Base44 bookings and ARR, with at least $50 million ARR expected by year-end
• Core Wix business maintaining robust new user and cohort growth

For full-year 2025, management raised guidance:

• Bookings of $2,060 to $2,078 million, up 13% to 14% year-over-year
• Revenue of $1,990 to $2,000 million, up 13% to 14% year-over-year
• Non-GAAP gross margin of 68% to 69% and operating expenses at approximately 50% of revenue
• Free cash flow of approximately $600 million, or 30% of revenue

Management highlighted several factors that will shape the outlook:

• Base44’s ongoing transition to annual subscriptions as user trust grows
• Normalization of AI compute and marketing costs as product and user base mature

Takeaways

Wix’s Q3 signals a strategic inflection point as Base44’s AI-driven growth repositions the company in the broader software creation market. Investors should closely monitor the pace of subscription mix evolution, cost normalization, and the execution of delayed flagship initiatives.

• AI App Builder Momentum: Base44’s hypergrowth validates Wix’s expansion thesis, but introduces new cost and retention dynamics that will shape profitability in 2026 and beyond.
• Core Business Stability: Wix’s web creation platform continues to deliver high-quality new cohorts and upsell, sustaining cash flow and funding new bets.
• Margin Recovery Path: The timing of Base44’s margin convergence and the success of AI cost reduction will be critical for long-term earnings power.

Conclusion

Wix is executing a dual-track strategy—defending its core web platform while aggressively scaling Base44 in the AI app builder space. The near-term margin tradeoff is a calculated bet on long-term market share and profit leverage as new business models mature and cost structures normalize.

Industry Read-Through

Wix’s results offer a clear signal for the broader SaaS and web infrastructure sector: AI-powered low-code and no-code tools are moving from niche to mainstream, with rapid user adoption and growing demand for business-specific applications. The shift toward monthly subscription models in new AI-driven products creates short-term margin volatility but can unlock significant ARR and cohort value over time. Competitors in web creation, commerce enablement, and digital productivity should expect rising customer expectations for AI-powered customization and automation, as well as a need to balance go-to-market speed with cost discipline and retention-focused product design. The delayed flagship launch at Wix also underscores the complexity of integrating advanced AI into consumer-facing platforms—a cautionary note for peers touting rapid AI product cycles.

WIX Technology SaaS AI Low-code Web Creation Subscription Margin