Base44 is booming. So why is Wix collapsing?
The startup Wix bought to secure its AI future is growing at breakneck speed, but the costs are shaking investor confidence.
This is not what Wix management imagined the company’s stock would look like in May 2026, almost a year after it acquired Base44 and a month after it spent $1.6 billion to acquire 30% of its floating share capital. But the picture emerging from the stock chart is bleak: Wix’s stock has lost almost 50% since the beginning of the year, and its market value now stands at $2.2 billion, a four-year low.
Wix, one of the oldest and largest Israeli internet companies, with a peak valuation of $20 billion during the coronavirus pandemic, has apparently done everything right. It identified the threat posed by artificial intelligence early on and, a year ago, even before the SaaS (software-as-a-service) apocalypse began shaking software company stocks, acquired Base44, Maor Shlomo’s vibe-coding (natural language programming) startup. Even before that, it had cut its service lineup by 40% in favor of AI solutions, allowing it to improve profitability.
In recent months, it has done what many leading software giants have done and embarked on an expensive declarative move of buying back its own shares. But this was not the usual few hundred million dollars a year, as is customary for companies Wix’s size. Instead, it spent $1.6 billion, effectively draining its cash reserves. All of this was intended to signal to investors: We understand you are dealing with existential fears about the future of software companies, but look at our moves and you will understand that we know what we are doing.
The perfect storm of anxiety
Why haven’t all these moves worked for Wix so far, and what could change the direction? Ironically, Wix is not even a classic SaaS company. Originally a website-building platform and today focused largely on online stores, it combines subscription revenue from some services with a freemium model in which building a website is free, while advanced services such as additional storage or premium features require monthly payments.
But a significant portion of its revenue has long come from commissions on transactions processed through its payment solutions. Wix does not work with large enterprises, but rather with private customers and small businesses, and in recent years it has successfully expanded its Partners business. This activity, focused on businesses that build websites for others, such as digital agencies and software developers, has allowed Wix to reduce customer acquisition costs and become a major growth engine.
However, the fact that Wix does not work with large organizations also makes it more vulnerable to the upheaval sweeping the software market. Wix is not embedded deeply in enterprise systems. Unlike companies such as Salesforce or Nice, the functions Wix provides are more basic. It is not what is known as a “system of record,” mission-critical enterprise software used across multiple departments and by large numbers of employees.
While most users do not migrate their sites to competing platforms, anyone thinking about building a site today can seemingly do so easily using AI tools. On the other hand, Wix can react faster because it is not a cumbersome enterprise platform dependent on heavy corporate support structures. That is precisely what it attempted to do by acquiring Base44 for an initial $80 million, a figure that has since grown significantly, to give future customers access to a simple AI-powered programming tool requiring no professional coding knowledge.
But what now appears to have happened is that the move became too successful, and the creators turned against the company. Base44 is delivering results far beyond expectations: in March it reached the important milestone of $100 million in revenue, and by May it had already climbed to $150 million. In light of these figures, it increasingly appears that the addition of Base44’s vibe-coding capabilities is masking a significant slowdown in the growth of Wix’s original core products. In the first quarter, this became evident through slower revenue growth in partner activities, one of the developments that most alarmed investors.
Wix admitted in a conference call with analysts following the publication of its quarterly results that partners are enthusiastically adopting Base44 as well. Apparently, this is happening at the expense of classic Wix products. However, the success of the venture built by Shlomo, a 30-year-old reservist who developed the programming tool on his own before selling it to Wix, is costing the company much more than expected.
It begins with additional payments to Shlomo tied to milestones that Wix did not disclose at the time of the acquisition, but which are now becoming visible as Base44 grows rapidly. In the last quarter alone, Shlomo received another $38 million, and according to Wix CFO Lior Shemesh, the company is setting aside additional amounts for future payments.
But that is only one layer of the problem. Base44’s success comes with a heavy price tag in both computing and marketing costs. The first quarter, which triggered a 30% collapse in Wix’s stock, was burdened by spending in all these areas. The Super Bowl advertising campaign alone cost $20 million, with separate commercials produced for Wix and Base44. Beyond that, Wix spent $90 million acquiring customers for the new operation, an investment expected to pay for itself within seven to nine months. Added to that are the computing costs associated with free users of the vibe-coding platform. In effect, every new customer currently adds more costs.
Against this backdrop, Wix’s marketing expenses nearly doubled to $200 million in the first quarter, and together with surging computing costs, total operating expenses jumped 50% to $423 million. That represented 35% of revenue, compared with 21% in the corresponding quarter a year earlier. The result was an operating loss of $70 million and a net loss of $57 million, compared with a net profit of $34 million in the same period last year.
Base44’s rapid but expensive success is undermining the narrative Wix has worked hard to build since recovering from the “hangover” crisis that followed the end of the coronavirus pandemic. The company told investors that while it could no longer sustain the 30%-plus growth rates seen during lockdowns, when every grocery store rushed online, it could deliver more moderate growth of 15%-20% with strong profitability. That scenario now appears increasingly out of reach, even if the Super Bowl campaign was a one-time expense.
As Base44 continues to grow, Wix’s costs are likely to continue swelling. Earlier this year, the company launched its own AI solution called Harmony and also announced development of a proprietary large language model intended to lower operating costs. So far, however, those efforts are not yet reflected in the numbers. Wix also has not disclosed the details of its agreement with Shlomo, leaving investors uncertain about the scale of future payments he could receive.
On a technical level, after the massive share buyback, Wix’s cash position shrank to $900 million, meaning its financing income, which reached $19 million in the first quarter, will also decline. Although the lower number of shares outstanding will improve earnings per share calculations, increasing absolute profits will become more difficult. Moreover, at precisely the height of uncertainty surrounding its business, Wix is becoming a net debt company after raising $1 billion in convertible bonds in 2025 and then spending most of its cash reserves on the buyback.
Investors should look to the US and Sweden
Still, even investors who believe Wix’s traditional operations will ultimately be eroded by AI may find value in Base44 alone. According to Similarweb data, Shlomo’s company has already surpassed competitors such as Lovable and Replit in market share.
Swedish rival Lovable raised funding last December at a valuation of $6.6 billion, while American competitor Replit completed a funding round last March at a valuation of $9 billion. At the time, Replit said it was on track to reach an annual revenue run rate of $150 million, roughly similar to Base44’s current scale.
In light of these valuations, and given the typical gap between private and public market pricing, it appears Wix may have been punished too severely. This is especially true considering that, unlike the startups competing with Base44, Wix is managed by an experienced leadership team that has survived multiple crises, understands operational execution and financial discipline, and has accumulated more than a decade of experience running a public company.
Perhaps, in what may seem like an almost desperate move to become more attractive to investors and remind the market that it is fully committed to the AI era, Wix should place Shlomo more prominently at the forefront of management, and in doing so begin unlocking some of the value that has been lost.
