Wix Builds Its Own LLM: BASE44 Margins Soar and Growth Investment Intensifies
Proprietary Base1 model drops costs, lifts gross margins to ~60%, and frees cash for aggressive market share capture.
WIX · Earnings Call · 2026-08-04
The Strategy Shift
Wix.com Ltd. reported Q2 2026 with steady top-line growth, but the real story is the launch of Base1 model, its own proprietary LLM built for the fast-growing BASE44 application creation platform. As CEO Avishai Abrahami explained in prepared remarks: “Building this model in-house was a deliberate choice. It gives us tighter control over quality, faster iteration cycles and a better long-term cost structure.” — Avishai Abrahami, Chief Executive Officer and Co-Founder · 2026-08-04 This is a strategic pivot toward vertical integration in AI—a move that directly attacks the largest cost line in the business.
The impact is already visible. CFO Lior Shemesh stated: “We now expect non-GAAP gross margin for BASE44 to be approximately 60% in the second half of this year.” — Lior Shemesh, Chief Financial Officer · 2026-08-04 That's a dramatic jump from near 0% at the start of 2026. The improvement stems from shifting more inference to Base1 and continued optimization. As Avishai detailed in Q&A: “we are in a place that we can already see that the result of Base1 are better than any of the models that we have from frontier providers… it also costs dramatically less.” — Avishai Abrahami, Chief Executive Officer and Co-Founder · 2026-08-04
We do see some partners that reduce the activity on Wix. And then a lot of them have increased their activity on BASE44.
Reinvesting for Market Share
The margin savings aren't being pocketed—they're being plowed into growth. Nir Zohar noted that they plan to "invest further into BASE44" and are raising their TROI target moderately. This aligns with the margin profile improvement enabling more aggressive customer acquisition. The company is essentially trading near-term profitability for long-term dominance in the AI app creation space.
This isn't a complete surprise. In the May 2026 call, Nir had hinted at the potential of in-house models: “compared to using frontier models, it really is marginal cost.” — Nir Zohar, President and Co-Founder · 2026-05-13 And in March, Lior noted that “we are looking at less than one year of tROI” — Lior Shemesh, Chief Financial Officer · 2026-03-04 for BASE44. Now they're seeing the payoff and doubling down.
The move also strengthens their moat. frontier models are expensive and evolving, but WIX's own proprietary LLM gives them cost and quality control that competitors relying on external APIs can't match. This is a company-unique strategy that sets Wix apart in the crowded Open source AI landscape.
Why It Matters
The economics of BASE44 have fundamentally shifted. With gross margins now comparable to many SaaS businesses and a clear line to further improvements, WIX can afford to invest heavily in sales and marketing without sacrificing its free cash flow outlook. The company is maintaining its full-year guidance while redirecting capital into capturing share—a classic growth-over-profitability tradeoff that, in this case, is backed by tangible cost reductions.
This isn't just about one product. It signals a broader philosophy: WIX is willing to build its own infrastructure to control its destiny. As the AI arms race intensifies, having a proprietary model is a structural advantage. The market may reward this strategic foresight, especially if BASE44 continues to accelerate and margins hold.