Wix Q2 2026 earnings: Revenue growth comes with weaker profitability

Wix.com (NASDAQ: WIX) reported Q2 2026 revenue of $563.1 million, up 15% from $489.9 million, while GAAP diluted EPS swung to a loss of $1.78 from earnings of $0.98. Revenue growth was supported by Base44 and core Wix, but non-GAAP operating margin fell to 12% from 22% and free cash flow declined to $52.6 million.

Core Earnings Data

Revenue grew faster than bookings, which rose 12% to $569.1 million. On a constant-currency basis, revenue and bookings increased 14% and 11%, respectively, indicating that foreign exchange provided a modest benefit to reported growth. Wix said Partners softness affected bookings more immediately than revenue.

Profitability moved in the opposite direction from revenue. GAAP operating expenses increased about 47% to $429.1 million, including a roughly 30% increase in research and development, a 61% increase in sales and marketing, and $27.1 million of restructuring and other costs. Non-GAAP operating income also declined, showing that the pressure extended beyond GAAP-only adjustments.

Bookings and non-GAAP measures are company-defined metrics. Free cash flow represents operating cash flow less capital expenditures.

Business and Segment Performance

Creative Subscriptions remained Wix’s largest revenue source, generating $398.4 million, up 15%. Bookings in the segment rose more slowly, increasing 11% to $405.8 million. Its non-GAAP gross margin fell to 80% from 85%, accounting for the main segment-level margin contraction.

Business Solutions revenue increased 14% to $164.7 million, while bookings rose 13% to $163.3 million. Transaction revenue, which includes revenue from Wix Payments and other commerce services, increased 12% to $71.5 million. Business Solutions’ non-GAAP gross margin held at 33%.

Partners revenue grew 17% to $213.8 million, and total annualized recurring revenue reached $1.963 billion, up 15%. Partners revenue includes agencies, freelancers, resellers, and revenue from both Creative Subscriptions and Business Solutions, including Base44. Despite the reported revenue growth, management said softer Partners activity was having a faster effect on bookings.

Profitability, Cash Flow and the Balance Sheet

The gap between GAAP and non-GAAP results reflected $144.6 million of total adjustments, including $53.4 million of share-based compensation, $41.1 million of acquisition-related expenses, and $27.1 million of restructuring and other costs. However, non-GAAP operating income still fell materially, so the deterioration was not solely the result of these adjustments.

The net-income comparison was also affected by taxes. Wix recorded a $4.4 million income tax expense in Q2 2026, compared with a $51.7 million tax benefit in the prior-year quarter, amplifying the change from net income to a net loss.

Operating cash flow fell to $55.6 million from $150.3 million. Capital expenditures remained relatively stable at $2.9 million, meaning the free-cash-flow decline primarily came from weaker operating cash generation. Free cash flow excluding acquisition and restructuring costs was $61.2 million, equal to 11% of revenue.

Wix ended June with $262.8 million in cash and equivalents, $355.3 million in short-term deposits, and $342.7 million in marketable securities. During the quarter, the company spent $1.623 billion on a share tender offer and borrowed $500 million through a credit facility, resulting in a $1.131 billion financing cash outflow. Convertible notes stood at $1.128 billion at quarter-end.

Base44’s Lower AI Costs Are Set to Fund More Growth Spending

Wix launched Base 1, Base44’s proprietary large language model, to gain more control over inference and computing expenses. Management expects Base44’s non-GAAP gross margin to reach approximately 60% in the second half, compared with a near-zero margin entering 2026. That improvement is expected to add approximately two percentage points to Wix’s consolidated non-GAAP gross margin in the second half compared with the first half.

The expected savings will not flow entirely into near-term operating profit. Wix plans to reinvest them in Base44 sales and marketing by moderately raising its target return-on-investment threshold. Management expects lower core Wix marketing expenses and AI costs to offset the additional Base44 spending, while research and development expenses should remain stable as the stronger Israeli shekel offsets savings from the organizational realignment.

Guidance

Wix maintained the full-year framework issued in its June 2026 update. The outlook calls for continued double-digit growth and improved second-half margins, although bookings are expected to trail revenue growth because of Partners softness.

Risks Investors Need to Watch

• Bookings are growing more slowly than revenue. Partners softness is affecting bookings sooner, potentially making bookings a more sensitive indicator of future demand than current recognized revenue.
• Base44’s margin target depends on AI cost execution. The expected second-half improvement relies on Base 1 materially lowering inference and compute expenses while Base44 continues growing.
• Operating leverage remains under pressure. Non-GAAP operating margin fell by 10 percentage points, and Wix plans to reinvest part of its AI savings in marketing rather than retain all of the benefit.
• Cash generation and financial obligations require monitoring. Free cash flow declined sharply, while the balance sheet now includes a $500.1 million current credit facility and $1.128 billion of convertible notes following the share tender offer.
• Foreign exchange could limit expense savings. Management expects the stronger Israeli shekel to offset savings from its organizational realignment within research and development.

Summary

Wix’s Q2 2026 top line continued to expand across Creative Subscriptions, Business Solutions, and Partners, but higher operating expenses, lower Creative Subscriptions margins, and weaker cash generation outweighed that growth at the profit level. The central issue for the second half is whether Base44’s proprietary AI model can deliver the expected cost reduction while Wix increases marketing investment and manages slower bookings growth from Partners.