Wix.com reports 14% revenue growth in Q3 and raises 2025 bookings outlook, driven by robust user adoption and accelerated base 44 performance.

OPERATOR - (00:01:20)

Good day and thank you for standing by. Welcome to Wix's third quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advice and your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host Emily Lu, Head of Investor Relations. Please go ahead. Thanks and good morning everyone. Welcome to Wix's third quarter 2025 earnings call. Joining me today to discuss our results are Abishai Abrahami, CEO and Co Founder Nir Zohar, President and Co Founder and Leor Shemesh, our CFO. During this call we may make forward looking statements and these statements are based on current expectations and assumptions. Please consider the risk factors included in our press release and most recent Form 20-F that could cause our actual results to differ materially from these forward looking statements. We do not undertake any obligation to update these forward looking statements. In addition, we will comment on non GAAP financial results and key operating metrics. You can find all reconciliations between our GAAP and non GAAP results in the earnings materials and in our Interactive Analyst center on the Investor Relations section of our website Investors wix. With that, I'll turn the call over to Abhishai.

Abishai Abrahami - CEO and Co-Founder - (00:02:57)

Thanks Emily. With Vibe coding and our decades of proven expertise in democratizing emerging technologies for everyone to enjoy, we will be able to deliver products that unlock entirely new value for small businesses and people. Let me start by setting the stage. When I think about Vibe coding, I try to simplify things by breaking the world apart into two categories. One is the Developer sphere. This is Claude, Cursor, Windsurf and all these tools which are great for engineers. These tools integrate directly on the source code of a project, enabling complex technical programming which requires significant user expertise. The second sphere is where everyone else lives. The majority of humanity who don't code. Or even think they can code. Suddenly with Vibe coding, they can create pieces of software that improve their personal lives or help to build their businesses, all by simply using natural language. For example, a schoolteacher can create a custom app to track attendance and post grades. A neighborhood restaurant can build an application to handle their staff schedule, another to manage vendors, another to sort inventory, and so on and so forth. These people can now build any type of application they need or want with zero coding knowledge. Bottom line, Vibe Coding is unlocking access for regular people to build software intuitively without any technical barriers. This story sounds exactly like Wix's story back in 2006. We didn't invent websites back then. They were already widely available, but only to big companies with engineering budgets. There was an absolute barrier for the average person. We knew there was a way to enable an online presence for everyone. This was and still is the mission of wix. We intend to do for software what we did for websites, enabling everybody to build applications without any need for a developer. What's different today is that the software application market is many, many times bigger than the website creation market. Think about it, that same neighborhood restaurant needs only one website, which they likely built on wix, but they may need many applications to successfully run their business. Up until now, creating the application a business owner may want has been too expensive or completely inaccessible and without this, new tech probably would never have been built. We are already seeing this huge opportunity materialize as the AI powered app building space has grown exponentially over the past year and we are taking a bigger and bigger piece of this pie. Base44's share of audience traffic increased from almost nothing to more than 10% in October. Among low code tools, Base44 is quickly proving to be a leader and the best solution on the market today. With enormous white space still ahead, Base44 is also getting better fast. We recently launched our new builder, transitioning Base44 from a predominantly user reliant tool to an expert developer partner for everyone. The new builder represents a fundamental architectural advancement, moving to an agent-based coding environment with multi agent layers. Base 44 can now validate, debug refactor for performance and fix its own work, making app creation faster, smarter and more powerful than before. Please do not mistake my obvious enthusiasm for Base44 and the AI powered app building opportunity as lack of excitement about Wix. It is no secret that we intended to release a new flagship product as early as this summer and as CEO, I am clearly unhappy that I still cannot share it with you today. However, seeing it in our labs gives me more and more confidence that the wait will be worthwhile. I expect it early 2026 and truly believe that it will deliver great value to our users. I want to impart one last thought about the massive importance of building products that allow humans and AI to work in tandem. People building big tech projects, creating websites or developing applications, whether engineers or not, need to be able to control the outcome of their creation. This is why we continue to put a huge emphasis both at Wix and at Base44 on curating the right combination of visual editing capabilities for humans and powerful AI Vibe coding. This combination will allow for high quality outcomes with lists iteration while giving humans the right level of control and calibration. The future of creation will be interactive, intelligent and accelerating. And we're just at the cusp of this transformation. With that, I'll turn it over to nir.

Nir Zohar - President and Co-Founder - (00:07:35)

Thanks Avishai we're pleased to see the new user cohort behavior in our core business from the first half of the year continue through Q3 and into October. These robust cohorts have been a key driver of our top line growth, fueling the momentum we've seen throughout the year. They also provide a solid foundation for continued growth as we move into Q4 and 2026. Organic traffic continued to improve as more users actively searched for wix online, underscoring wix's continuously improving brand awareness and top positioned platform for web creation. Solid traffic from paid channels also drove higher traffic as we captured robust demand while operating within our TROI guardrails. New users purchase more advanced website subscriptions, adopted more business applications and purchased longer duration subscriptions at an accelerating clip, demonstrating the growing trust our users place in wix with new cohort bookings Following a similar shape to the second quarter cohort, cohort growth continued to trend strongly through the third quarter. We also welcomed our first full quarter of new Base44 cohorts under the Wix banner in Q3, which performed better than anticipated. As the Vibe coding market has exploded this year, Base44 has meaningfully outgrown most peers. We now estimate our share of audience traffic to AI powered application builders to be more than 10% up from low single digits in June. This growth in a matter of just months is a result of a fantastic product with organic reach supercharged by our expertise and investments as well as application of Wix's proven strategic playbook to Base44. In addition to establishing a dedicated customer care team and expanding Base44's R&D capabilities, we focused on building up a comprehensive full scale brand and marketing function. Remember, Base44 did not have any marketing motion when we acquired it in June. On day one after the deal closed, we started to apply a marketing plan that has been fine tuned and tested over the past two decades. A key competitive differentiator for Wix to Base44. This included refining the company identity, messaging and visual system to better reflect our market ambition. We also launched campaigns in key channels and core geographies. Compelling branding and effective marketing is crucial to growing Base44's reach beyond just early adopters and capturing the huge white space Abhishai spoke about Returns on our initial marketing investments meaningfully exceeded expectations as demand ramped through the quarter. As a result, we were able to confidently scale marketing efforts above our initial August plan. Today, Base44 serves over 2 million users around the world. This is more than seven times more users than we had at the end of June. Impressively, this translates into more than 1,000 new paying subscribers joining daily. We now anticipate Base44 to achieve at least $50 million of ARR by year end, an increase from our previous expectations. We also continue to see positive trends in our main geographic markets as we improved monetization of a growing population of users and conversion improved sequentially. Better monetization was also a result of healthier commerce activity. In the third quarter. Transaction revenue accelerated, increasing by 20% year over year, driven by 13% growth in GPV and an elevated take rate. Merchants are continuing to opt for Wix payments. The opportunity remains large as we continue to strive towards capturing and addressing the full spectrum of merchant needs per our long term commerce strategy. To wrap it up, our solid Q3 results illustrate the durability of our core business which remains healthy against a dynamic operating environment. It also speaks to our ability to enter new markets efficiently and effectively, highlighting wix's innovation first mindset and a proven first mover advantage. I remain confident in our ability to drive long term growth by delivering essential tools that help users both new and old, adapt, operate and succeed in any environment. With that, I'll hand it over to lior.

Leor Shemesh - CFO - (00:12:26)

Thanks nir. We accelerated growth entering the second half of the year with third quarter results exceeding expectations. This performance was driven by strong fundamentals in our core business and an exceptional first full quarter of Base44 under the Wix banner. As you just heard about from nir, the team is executing well as we build the critical foundation for sustained momentum in 2026 and beyond. There were a few highlights in the third quarter, but I'd like to start with our financial results. Total bookings grew to $515 million in quarter three, up 14% year over year. This strong performance was driven by robust new user cohorts joining the platform, existing users finding success and adapting more business applications as well as better than expected results. From Base44, total revenue grew to $505 million, also up 14% year over year and above the high end of our guidance range. Partners revenue grew 24% year over year to $192 million, driven by continued traction among professional designers and solid studio adoption domains. Marketing Applications and Google Workspace saw particular strength within the Partners business. In the most recent quarter. Transaction revenue was $65 million, up a strong 20% year over year, driven by slightly improved GPV growth coupled with a sustained elevated take rate as merchants continue to attach WIX payments. GPV grew 13% year over year to $3.7 billion. Partners remained the primary driver of GPV growth, contributing approximately 55% of total GPV. Turning to the cost side, we recognized our first full quarter of cost associated with Base44. Before getting into the details, I'd like to start by explaining the business dynamics of Base44, which differs from core Wix. As Nir discussed, we are seeing top line growth for Base44 trend above our initial expectations. The very large majority of these users are on monthly subscription plans, a stark contrast to the more than 80% of Wix's mix attributed to annual or longer duration plans. This translates into a linear bookings dollar trajectory for Base44 compared to Wix's front loaded bookings behavior. As a result, most of Base44's bookings are expected to come in future quarters as these monthly cohorts build and renew. However, the costs associated with these Base44 users are impacting our financials today. This misalignment between bookings and operating expenses is resulting in a short term headwind to our free cash flow. We also anticipate a short term headwind on operating profit as we incur startup costs and initial growth investments for Base44 while revenue ramps but remains insignificant to our top line today. The two areas we see the most impact are cost of revenue and sales and marketing. On the cost of revenue side, we are incurring AI processing and compute costs to support ramping Base44 demand. These costs tend to be front end heavy as new users consume more AI tokens during their initial build phase. These expenses offset continued AI driven productivity efficiencies across the customer care organization and improve business solutions gross margin. As a result, total non GAAP gross margin in Q3 was 69%, down slightly from 70% in Q2 as expected. On the sales and marketing side, third quarter non GAAP sales and marketing expenses increased 23% sequentially as we built and deployed a marketing strategy for Base44. This is a result of accelerated branding and acquisition marketing investments above our initial August plan to capture stronger than expected demand, particularly in the back half of the quarter. I am very encouraged by Base44's Troi especially so early on, a signal of sustained user strength that isn't fully reflected in the P and L due to the monthly mix dynamic. We also saw a slight increase in non GAAP R and D expenses which were up 7% compared to the second quarter as a result of higher overhead, AI and other expenses as planned. As a result, non GAAP operating income was $90 million or 18% of revenue in the third quarter. This excludes $35 million of acquisition related expenses primarily Earn out payments for the Base44 team we expect earn out payments to continue to trend upwards as Base44ARR approaches the high end of its lofty previously Set Performance Target Q3 free cash flow was $159 million or 32% of revenue. This is an increase from free cash flow margin of 30% last quarter as we generated strong bookings and realized working capital benefit associated with the higher cost I just discussed. I expect operating and free cash flow margins to improve over time as we optimize multiple areas of our business model. Today we're already beginning to see AI costs decrease as LLMs improve and competition continues to ramp. I expect this to continue if not accelerate. Additionally, I expect sales and marketing expense leverage as branding investments normalize. Once we move past initial branding investment costs, Troi targets should tick lower as Base44 scales too. We also expect Base44's user and subscription mix to optimize over time. In the long term, I expect Base44 to have similar operating and free cash flow margins to wix. We continue to strategically manage our balance sheet. In September we issued $1.15 billion in 0% convertible senior notes due 2030. These notes follow the maturation and payback of our previous tranche of 2025 convertible notes. We expect to deploy this cash for business purposes. Potential M&A opportunities and Continued Share Repurchases we repurchased approximately 1.3 million Wix ordinary shares for approximately $175 million, underscoring our continued commitment to returning value to shareholders. This leaves approximately $225 million remaining on our current authorized program. Let's now talk about how we expect to finish out the year as health in our core offering. Along with ramping Base44 contribution is setting the foundation for a strong fourth quarter. We are raising our full year bookings outlook to 2060 to 2078 million or 13 to 14% year over year growth, up from the 11 to 13% year over year growth previously expected. This increased expectation is driven by meaningful outperformance of Base44 which we expect to continue as we accelerate marketing investments to capture the stronger than anticipated demand we're seeing today. As a result, we expect Base44 to achieve at least $50 million of ARR by year end, an increase from our previous plan. Our guidance also assumes a stable macro continued strength in our top of funnel and current FX rates for revenue. We are updating our previous full year outlook to 1,990 to 2,000 million dollars, up 13 to 14% year over year. This is a shift towards the high end of our plan, up from the 12 to 14% growth previously expected. The dynamics differ between bookings and revenue as Base44 outperformance is offset by a continued shift in our core business mix towards longer duration subscription packages. On the cost side, we now expect non GAAP gross margin to be 68 to 69% of revenue and non GAAP operating expenses to be approximately 50% of revenue for the full year. These updated expectations reflect the front end heavy AI and sales and marketing costs against linear revenue and bookings behavior due to higher anticipated bookings and working capital benefits. Partially offsetting these increased cost expectations, we expect a free cash flow of approximately $600 million in 2025 or 30% of revenue for the full year. I'm looking forward to a strong finish to 2025 as we enter 2026 on solid footing. Operator, we are now ready for questions.

OPERATOR - (00:22:02)

Thank you ladies and gentlemen. To ask a question at this time you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Please stand by while we compile the Q and A roster. Now first question coming from the line of Ygal Arounian with Citi Your line is now open.

Ygal Arounian - (00:22:27)

Hey guys, good morning. Good afternoon. So a couple on base 44. Can we just dive into the dynamics of the monthly subs versus the sort of more traditional annual subs that you get for core Wix? What are you seeing there in terms of churn and those subscription dynamics? As people sign up monthly, can you get them to sign up annually more often over time? Is that the expectation? How does that change your visibility into investment? As some of the margins come down here then I have a follow up on the cost side.

Abishai Abrahami - CEO and Co-Founder - (00:23:08)

Well this is Abhishai, I think that as regards to the percentage of course at this stage lean a lot more toward a monthly subscription than annual subscription. And we've also seen it in WIX in the beginning it takes time for people to trust the platform and then they will actually feel more comfortable to pay an annual subscription. And I think we are heading in that Vibe coding is still so new that we are heading toward that direction. But if on wix, the vast majority are annual subscriptions, annual subscription, then on base, most of our users are still on monthly subscriptions. When it comes to Churn. It'S very. Early to say and it's changing very quickly. So it's very hard to say. Obviously Churn is higher than the standard wix which almost doesn't exist. Right. There's almost no Churn, but if you look on a code basis. But Base44 is better than we expected and we know there's so much more we can do. So we're very optimistic and we think that Churn will probably not going to be our problem going forward if everything continue to advance in the same way it is now.

Ygal Arounian - (00:24:26)

Okay, you talked about Avochian in the past that these platforms of Vive coders are good for prototyping, but eventually when you have a finish product that sort of has to live somewhere else. Right. Because a lot of the back end stuff isn't developed. Is that part of the factor for Churn? And then on the cost side, just on the gross margins and the AI compute, is there anything that you can do within, within your control outside of, you know, LLM costs coming down to keep costs down, you know, for example, using your own internal data to help build versus you know, relying on third party LLMs as much. Thanks.

Abishai Abrahami - CEO and Co-Founder - (00:25:04)

Well, I'm not going to go into all the details here, but yes, there's a lot we can do on cost. Okay. It's not a priority at this stage. Right. It's something that we're also investigating. I think the priority now is to build a better product and capture more market share. But I think that long term and long is not multiple years, we can dramatically improve the cost of AI for base 44. There's so much we can do from training our own models to do part of it, from partnerships with the different vendors, from the fact, the simple reality that the cost is always declining. And so I think there's going to be a tremendous amount of opportunities for us to reduce the cost of the AI for base 44 and. Sorry. And so the first part. Sorry, I'm sorry, I missed that. So we do. See, you're right when you say a lot of it is just used for prototyping. Right. And that's great for people to actually build an application that is just for them or for a Few people and then the prototype is the application, right? It doesn't need scale. It's okay if it kind of like tiny bugs. But we are getting to a place that today with base 44 you can really build more full applications. There's still quite a way to go on what we can do there and how to make it even better. But we are getting to a place and of course we have some users that already built really large applications that have been deployed and we can see that. So now if a year ago you couldn't do vibe coding for anything real and a few months ago you could do vibe coding for multi prototypes for applications. I think today we are starting to see more applications that are real and are being used in a commercial level. For website it's still different. I think for website there's still a gap that needs to be closed with Vibe coding to build real websites that are Google friendly, that are LLM friendly, that are of all the privacy rules that require by law and a bunch of other things. And they still quite a distance to go, but we hope to close that early next year.

Leo - (00:27:42)

Igal, this is Leo. Just a couple of more points about the cost. I think that what is interesting here is that new users coming to base, they are obviously consuming more AI tokens, right? More bandwidth as they build their apps. But what we see is a big difference between obviously the cost of newcomers to the one that actually continue because they might modify, do some changes, but it's really not the same. But it means that for example, if you take this year compared to next year, next year you're going to have much more of the recurring revenue. It means that the profit obviously will be totally different. So it's not just about the fact that you know, as Avish I mentioned that we already started to see the cost of AI goes down. But it's also about the model itself that is so different between newcomers to the one that actually already built their apps and just maintaining it.

Ygal Arounian - (00:28:50)

Okay guys, very helpful. Thank you.

OPERATOR - (00:28:53)

Thank you. Our next question coming from the lineup. Deepak Mativanan with Cantor, Fitzgerald, Your line is, Nalpin.

Deepak Mativanan - Equity Analyst at Canaccord Genuity - (00:29:04)

Great, thanks for taking the questions. I wish. I just wanted to ask a big picture question for you. WIX is pretty well positioned to kind of re engineer the web for the AI era by making a lot of small business websites kind of agent ready so they can be discovered by Gemini, ChatGPT and others more effectively. Wix is the current web architecture which includes a lot of total consumption for them. Can you talk about the vision you have for wix for this era and how you're planning to capitalize on this big secular theme for the next three to four years. What are you doing, perhaps the new product or from others in the future to make the websites of both your current and future customers kind of agent friendly so they can get the traffic, transactions, everything from agents. So yes, you're right. I think that you're touching a very important point we're going to see in the next couple of years and we're already starting to see that, but probably going to accelerate a transition and change in many ways that you consume content or website or discover website with the content. And we'll just discover the content without even the website. Right. So there's a lot of things that are changing now. The first thing that we're doing in wix in order to enable all our customers to enjoy that new world is that every WIX website is now indexable by LLMs. So we make the data available to any LLM and there's a few formats for that. And so we ensure that ChatGPT can actually read your content and discover your website. That's the first part. The second part is that we continuously add new standards for how to do E commerce. The one that OpenAI released a few months ago, MPC and a bunch of others, in order to enable all the functionality to be available within LLMs or be discovered by LLMs and then run on your website. In addition to that, there's a few more things that we think that how the user interface will change in the next couple of years. I'm not going to go into details, but I think that that's another super interesting opportunity for our customers and we intend of course to provide fantastic solutions for that. If you look at it long term, the fact that and not just wix, there are other platforms out there, but if you are an owner of a business and you try to build a website in the old way, you're going to find that you are not supporting all this new standard that are coming every few months. There's a new standard that you need to support to be part of the new world of AI, then I think the platform will have to work for you pretty hard in order to make sure that all those standards that will ensure your business visibility in this new world are part of what we supply. Got it. And then maybe one quick one for Nir. Can you talk about the cohort retention trends of base 44 and how it compares versus Wix on monthly customer plans, perhaps on you know, one retention or month two retention given that you have had base 44 now for a few months. Hey sure Deepak. So naturally.

Nir Zohar - President and Co-Founder - (00:32:26)

It'S still very early. Just as you said, it's just a few months. When we look at it, we're seeing kind of similar, similar behavior to what we know from the monthlies on wix. And I would actually dare to say that it's better than what you used to see at WIX in the early days. So I think, you know, we're. Abishai referred to this in the beginning when he was talking about the monthly's behavior. Our belief is that we're going to work on a few different things in tandem that are going to eventually improve. The. One, as we garner more brand visibility and brand recognition, it will be easier for people to transition to the annual plans and then obviously will give us more visibility and better troi. Faster troi so to speak. And secondly there's a lot of more improvements we can do in create more motivation for people to retain and strengthen their connection with the platform. And our belief is that we should see better results as time progresses. Again, it's very, very early.

Deepak Mativanan - Equity Analyst at Canaccord Genuity - (00:33:45)

No, makes sense. Thank you so much.

OPERATOR - (00:33:49)

Thank you. Our next question coming from the line of Andrew Boone with Citizens Bank Your line is now open.

Andrew Boone - Equity Analyst at Citizens Bank - (00:33:57)

Thanks so much for taking the questions. I'd like to touch on wix Vibe and just the learnings of Vibe coding. As it relates to website creation day. How do we get self creator to that double digit kind of target that. We'Ve talked about in the past? And then going back to base 44, can you guys just help us understand the pathway to getting margins up to core WIX levels? What does that have to look like and kind of what are the assumptions that need to take place around retention? Thanks so much.

Nir Zohar - President and Co-Founder - (00:34:27)

Andrew. I'll take the first one about Wix Vibe. So you know WixVibe is a beta. Of something we're trying out and it's part of our general strategy in terms of product and understanding. Abhishai spoke about this today and in the past about the higher complexity there is between vite coding and building websites, all that Google friendly as you put it, Google friendly, LLM friendly, matching, accessibility needs, security, et cetera, et cetera, et cetera. And obviously we think there needs to be a better solution there and we're working towards it.

Leor Shemesh - CFO - (00:35:14)

Andrew, with regard to the second question, I think that we need to relate to different components in terms of the investments that we are making. The first one we spoke about it before is about the AI. And I think that, you know, I would like to take the opportunity and spend like a couple of minutes in order to, you know, in order to explain it better. By the way, for both cases, also for the sales and marketing and also for the cost of goods sold, we have a really proven track record, you know, how we can actually over time we can achieve growth and being a place where we believe that we can drive even more profitability. And I will try to explain. So with regard to the AI cost, you know, I kind of spoke about it before, we see a very strong user demand. Very important to mention that both of the investments, also sales and marketing and also the AI cost which is a part of the cost of goods sold, they are both drive because of a very, very strong demand. As we know from accounting point of view, we first recognize the cost only later recognize the revenue. So by definition when you have such a hyper growth business, you recognize more cost at the very beginning and then you recognize the revenue over time. So by definition we are going to see a higher profitability in a later stage. But at least at the very beginning, you know, this is the situation also in terms of the AI cost, I kind of spoke about it before new users consuming more AI tokens. So it means that the more that we have more customers and that are maintaining their application and stay with us in terms of the application. So obviously we are going to see that their margin profile is much better than the new one. But right now all of the customers, most of the customers because it's such a new platform are new. So we all understand this situation. The other thing is about the cost of AI. You know, we've already started to see, we are going to see more players in this market which eventually going to lower the cost. So I believe that we are going to see that dramatic change in term of the overall cost which obviously going to have a positive impact. Very much that you saw. We saw the very beginning when we started the business at wix, the hosting was totally different in terms of its cost. Right. And today is much, much, much more profitable than it used to be in the past. With regard to the marketing, it is really the same methodology as we use at wix, meaning that we invest marketing based on TROI. So it means that when you have such a hyper growth business you invest more right now in order to capture the demand under the TRI methodology. Meaning that we are not investing money in marketing and we don't see the short term returns. And this is something that is really Important to mention because when you have such a growth, you invest right now more you recognizing the cost immediately and only after you recognize the. The revenue. In order to summarize everything, I think that already next year we are going to see improve margin as a result of that. But yes, I mean we are going to see some pressure on margin in the short term definitely because of all the reasons that I mentioned before. We are going to see that the TROI target are optimized. We are going to see that AI costs decrease, we are going to see base 44 mix of customer change. All of that are going to drive the profitability to be very similar to the one that we see in weeks and we strongly believe because we've been there.

Andrew Boone - Equity Analyst at Citizens Bank - (00:39:34)

Thank you.

OPERATOR - (00:39:38)

Thank you. Our next question coming from the lineup, Josh Beckwith, Raymond James, your line is now open.

Josh Beckwith - Equity Analyst at Raymond James - (00:39:46)

Yes, thank you so much for taking the question. Maybe, you know, following up on Lior's comments there, you know, when we look at kind of the Q4 gross margin guidance implied, I think it's you know, something in the order of 66% or so. And you know, assuming that, you know, Creative Core subscriptions are kind of in the mid-80s, it would indicate, you know, a pretty big difference for base which as you mentioned, I think it has to do with this hyper growth dynamics. You have effectively these new cohorts being the vast, you know, majority. So should we kind of assume that as long as this is in a hyper growth phase going from 50 million to 100, you know, there should be kind of this, this drag and not until we get beyond that phase, it goes away. Just kind of any other guidepost to kind of help us think about the duration of this drag would be great.

Leor Shemesh - CFO - (00:40:51)

It's a great question. You know, it's. I think that it's kind of interesting because this kind of drug is a drug that we really like because it's coming from a very high growth and I believe that also profitable growth in the future. I think that it's too early for me to say because. Yes, right. The more that we have a very high growth, it means that we have more new customers that building their application and it's more expensive as I mentioned before from recurring customers. But we also see quite a big decrease in the air cost but also in terms of our ability, you know, for example to do changes in our model in order to take the margins, to take the margins up. So it's really hard for me to answer the question. It really depends on what is stronger meaning the growth effect or the ability to actually reduce the cost. But I do believe for sure, looking at the trends right now, that I believe that the margin just will continue to improve as we already started to see that from Q4 to Q, from Q3 to Q4.

Josh Beckwith - Equity Analyst at Raymond James - (00:42:10)

Okay, very helpful. And then maybe just a follow up on the pricing construct. Obviously we can all see the base 44 pricing and you know, the freemium and some, some permutation of, of good, better, best. You know, is that at a point where you're still experimenting or you know, do you feel like if you were to take one of these plans and kind of run out that customer's life cycle that it, it already does have, you know, quite attractive profitability built in or are you still tweaking the pricing? How are you, how are you thinking about that?

Nir Zohar - President and Co-Founder - (00:42:48)

Hey Josh, it's me again. I think it's very, very early. So naturally we're just going to be testing different things and different ideas and see what lands the most balanced and smart optimization between the margins and the financial results and our top priority, which. Is grabbing market share.

Josh Beckwith - Equity Analyst at Raymond James - (00:43:17)

Very helpful. Thank you.

OPERATOR - (00:43:20)

Thank you. Our next question coming from the line of Ken Wong with Oppenheimer. Your line is now open.

Ken Wong - (00:43:28)

Fantastic. Thanks for taking my question. Maybe first, just as we think about. That bookings guide last quarter, you guys had mentioned that the majority of the raise was coming from the core. Any color on how we should be. Thinking about the contributing factors to the 4Q bookings. And then second, just on the profitability. I think we get it a lot of upfront costs. You guys had already started messaging that perhaps less margins going forward as we try to rattle through the higher opex and the gross margins. Is it fair to assume that we. Might still see some margin expansion and any early thoughts there? Lior.

Leor Shemesh - CFO - (00:44:13)

Sure. So I will start with, with the guidance. I think that it's fair to say that most of the increase in guidance coming from the strength that we see with the base business, base 44 business. I think that it's very much kind of different from what we've seen only last earnings. Remember, it has been like five months from the minute that we've bought this business. The first earnings that we had like a few months ago, we've seen the demand, but in the last few months it's even much, much bigger than what we anticipated at the very beginning. This is why we've decided to invest more. And I do believe that base will turn out to be a significant growth driver for weeks. With regard to the margin headwind. Yes, I believe that it will continue. And let me even say differently, I hope that it will continue because it means that we are going to see a much higher demand. I think that, you know, in this case it's really the same as what we've seen in the past from weeks every time that we've launched a new product. It was actually the case the very beginning with the adi. Even when we started the partners business we saw such a huge demand and obviously we are investing in marketing to capture it. So yes, I mean in the short term we are going to see some more pressure on margin. I'm not sure where the margin expansion will start again. It is going to be 2026 or late 2026. It really depends on the demand that we are going to see for this business.

Ken Wong - (00:46:09)

Fantastic. Thank you.

OPERATOR - (00:46:13)

Thank you. Our next question coming from the lineup, Trevor Young with Barclays Yellen is now open.

Trevor Young - Equity Analyst at Barclays - (00:46:22)

Great, thanks for the question. First one Avishai on the new self creator tool that was expected first this summer and then pushed to the fall, now getting pushed out again to sometime in 26. Can you expand on what the delays are there? Is there some sort of reimagination going on with the tool? Just trying to figure out what's going on in terms of, you know, the product launch and timing.

Abishai Abrahami - CEO and Co-Founder - (00:46:42)

Actually most of the reason for the delay is about just fine tuning technology. So you know, it's solving a lot of technical challenges and bugs and making it really stable and working faster. And as opposed to most projects we're doing software which anyways tend to be delayed. But this one, to be fair to the team, right is using a lot of new technologies that didn't exist before. So a lot of AI stuff that never existed before. So it was a bit harder to estimate some of the effort that will go into finalizing them. I think we are beyond this point. In fact it's kind of entering already the first stage of a closed beta within here inside of wix. So I feel very confident we're going to see it very early in 2026 and we're actually going to have I think a much better product.

Trevor Young - Equity Analyst at Barclays - (00:47:54)

Great, thanks for that. And as a follow up question on the 3Q cohort commentary, trending similar to 1H if I recall correctly, 1Q cohort collections grew 12, 2Q was 14. So should we assume 3Q was kind of low teens growth territory? If so, did something change in August and September to cause a step down relative to the 20% growth that you had flagged back in the July timeframe?

Nir Zohar - President and Co-Founder - (00:48:22)

Hey, Trevor. It's near. Not so much, actually. No. I think we've, you know, we've. We've seen some expected seasonality, and generally we've seen the courts behave as we. As we expected, and we're seeing an ongoing strength going into the rest of Q3 and into Q4.

Trevor Young - Equity Analyst at Barclays - (00:48:47)

Great. Thanks, guys.

OPERATOR - (00:48:52)

Thank you. And that's the end of our Q and A session. Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.

UNKNOWN - (00:49:03)

Thank you, everyone. Thank you.