Wix.com Ltd. saw its stock price plummet 27.1% on Wednesday, closing at $55.32, after the company's first-quarter earnings report fell short of analyst expectations, with heavy spending on artificial intelligence initiatives raising red flags among investors.
The website-building platform reported first-quarter revenue of $541.2 million, representing a 14% year-over-year increase. However, adjusted diluted earnings came in at just $0.68 per share, significantly below the $1.22 consensus estimate. The company also posted a GAAP net loss of $57.5 million, a sharp reversal from the $33.8 million profit recorded in the same period last year.
Investor concerns centered on the company's aggressive investment in AI technologies, including its proprietary large language model (LLM) for the Wix Harmony AI website tool and the Base44 AI-driven app builder. Research and development costs surged to $178.2 million, up from $127.5 million a year earlier, while selling and marketing expenses nearly doubled to $199.6 million from $111.6 million. The non-GAAP operating margin contracted dramatically to just 5%, compared to 21% in the prior-year quarter.
JPMorgan analyst Alexei Gogolev lowered the price target on Wix shares to $86 from $91, maintaining an Underweight rating. Gogolev cited revenue and EBIT misses and noted that the company's investment phase is "far from over." Meanwhile, Bank of America's Mike McGovern reduced his price target to $95 from $109 but retained a Buy rating, describing the quarter as "mixed."
Despite the earnings miss, Wix management highlighted positive trends in customer acquisition. CFO Lior Shemesh reported that bookings from the first-quarter user cohort jumped nearly 50% year-over-year, with contributions from both Base44 and the core Wix platform. As of May, Base44's annualized recurring revenue (ARR) stood at approximately $150 million. Total ARR, which represents the annualized value of current subscription and monthly recurring revenue, reached $1.903 billion.
The company also announced a significant capital return program, spending roughly $1.6 billion in April to repurchase about 17.5 million ordinary shares at $92 each through a modified Dutch auction tender offer. This buyback reduced the outstanding share count to 41.85 million as of May 11.
Looking ahead, Wix reaffirmed its 2026 outlook, projecting mid-teens percentage growth for both revenue and bookings. For the second quarter, the company expects similar mid-teens revenue growth. Management also maintained its full-year free cash flow margin target, excluding acquisition costs, in the high teens percentage range.
However, the company acknowledged several risks, including a slower-than-expected start for its Partners segment, drag from the Middle East conflict on productivity, potential setbacks in new product launches, and uncertainty around demand for AI tools like Harmony and Base44. High spending without corresponding conversion improvements could continue to pressure margins, even as top-line growth persists.
Competition remains intense, with Wix facing off against GoDaddy and Shopify in the small-business web and commerce space. The rise of AI-driven coding and design tools has also raised questions about what users are willing to pay for traditional website-building platforms. Wix's ability to monetize its AI investments will be critical to restoring investor confidence.
