Wix.com (NASDAQ:WIX) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.
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Summary
Wix.com reported a strong Q1 2026 with total bookings of $585 million, up 15% year-over-year, and revenue at $541 million, up 14% year-over-year.
The company highlighted the successful integration and performance of Base44, achieving $150 million in ARR by mid-May 2026, indicating strong demand and effective monetization strategies.
Strategically, Wix.com continues to focus on AI integration, launching its proprietary LLM to enhance its product offerings and reduce inference costs, with plans to expand AI-driven innovations across its portfolio.
Management acknowledged delays in product timelines due to geopolitical tensions affecting productivity but affirmed commitment to its ambitious product roadmap.
The company completed a $1.6 billion share repurchase, reducing its equity base by 30%, and maintained guidance for mid-teens growth in bookings and revenue for the full year 2026.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Wix.com first quarter 2026 earnings conference call. At this time, all participants on the 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 advising that your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to our speaker host for today, Emily Lu, Head of Investigations. Please go ahead. Thanks and good morning everyone. Welcome to Wix's first quarter 2026 earnings call. Joining me today to discuss our results are Nir Zohar, President and co Founder and Lior 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 20F 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 except as required by law. 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.com with that I'll turn it over to Nir Zohar.
Nir Zohar (President and Co-Founder)
Thank you Emily hello everyone. Before we begin, I would like to share that Avishai sends his best. He won't be on the call today because he very recently celebrated the birth of his son. We offer him our warmest congratulations and I am certain he is looking forward to connecting with all of you soon. The velocity of change within our industry has been remarkable throughout the last few quarters. As this momentum increases, it is increasingly evident which organizations are truly designed for longevity. Over the past several quarters, the pace of change in our space has been extraordinary and the faster things move, the clearer it becomes to me which companies are built to last. The winners in the AI era will be ones that have the underlying systems and infrastructure needed to actually run and scale AI effectively, as well as the product depth. For AI to be integrated seamlessly into solutions that are genuinely useful for users, all of this needs to be underpinned by a deep understanding of the market and user expectations. This is a major competitive advantage for wix and importantly one that is very difficult to replicate in this new era. Our goals remain the same place value in the hands of our users, increase our market share cement our position as one of web creations defining players and be the platform users choose when they build online. I want to emphasize that we have been intentionally building toward AI's ability to transform online creation for years. This was demonstrated in as early as 2016 with our launch of artificial design intelligence, or ADI, and most recently in the rollout of Wixharmony as well as our acquisition of base 44, now the largest AI powered app creation platform in North America by market share. AI has made building online simple and anyone can generate a simple, good looking website in minutes, but that's as far as it goes. The real complexity begins the moment you hit publish. How does it drive engagement? How do you host it, get found on search engines, run your storefront, secure your customers data and actually operate a business day to day. These are the hard problems and we've been solving them for 20 years through continuous product innovation and user feedback. We continue to set the standard for what's possible in the online creation market and I am proud to share that we recently achieved an important innovation milestone. WIX has built and deployed our first proprietary LLM. This model was built specifically to power the design engine of WIX Harmony and the early results are compelling. Our internal testing shows our model is meaningfully faster than the alternatives, produces fewer errors, and delivers noticeably better outcomes for users building Harmony websites. We also have complete control in our own product development and improvement cycle. We can iterate daily, guided by feedback from our massive user base in ways that a general purpose model simply cannot. Importantly, building and relying on our own LLM means significantly lower inference costs that sit firmly within our own control as we scale the Harmony platform, We expect this WIX built LLM to be the first in a broader portfolio of proprietary AI models across a number of use cases as they become increasingly central to our product roadmap. As AI models become widely available across the industry, I believe differentiation will increasingly come from the experience built on top of these models and around agenti capabilities. That's exactly where we've invested and where we continue to push. Owning our proprietary model gives us a unique depth and data advantage that can't be replicated while also providing greater cost control and significantly lower inference costs. Still, we also have the flexibility to continue to leverage the best third party models for the right use cases, so we are never constrained. This breadth of options, combined with the unique assets we've built means our users will always get the best possible outcome. I also want to be clear about something fundamental for wix. Web creation has always been our mission not an off the cuff offering on the side. Two decades of singular focus on these users and on this market. That depth of expertise layered on top of the meaningful investments we've made into infrastructure and our integrated product environment over many years is not something a new entrant can replicate quickly or easily. This defining strategic advantage, combined with our brand strength, scale and ecosystem creates a powerful competitive moat, and it's why hundreds of millions of people around the world rely on us today for online creation. Turning now to the new first quarter cohort which saw 6.4 million users, which now includes Base 44, this Q1 2026 user cohort generated nearly $52 million in bookings in its first three months, a 46% increase compared to the bookings generated by the Q1 2025 cohort over its first three months. Putting Base 44 aside, our new Core WIX users generated healthy bookings with growth nearly as strong as what we saw in the Q1 2025 cohort last year despite a slightly smaller user base. This growth is particularly encouraging as Q1 2025 was by far the strongest post Covid cohort and a high bar to reach, underscoring the continued demand for our growing suite of web creation offerings and the power of our platform. New cohort bookings were driven by noticeably improved year over year and quarter over quarter conversion of new users into paid subscriptions powered by Harmony, which was rolled out in late January across our main geographic markets. Monetization of these new users was also strong as they purchased higher priced subscriptions and increased attach of business solutions, signaling the growing mix of high intent users compared to the prior year quarter Cohort this quarter we ramped up our marketing efforts meaningfully as anticipated, driven by incremental spend on base 44. We went all in on capturing base 44's robust top of funnel demand, which continued its strong upwards momentum in building our brand as a leading AI powered application creation platform. In addition to strong demand, we also saw positive signs in the user behavior and COHORT Quality of base 44 retention is improving as more users are choosing annual subscriptions either through new purchases or renewals. Monetization is also steadily increasing, resulting in stable TROI even as marketing spend stepped up in the first quarter. As a result, base 44 achieved $150 million in ARR in mid May, demonstrating sustained growth momentum on the $100 million of ARR achieved in early March. Acquisition Marketing spend for Base 44 and Core Wix, excluding Super bowl expenses and AI costs attributed to free users, totaled approximately $90 million this quarter. Time to return on this $90 million is projected to be seven to nine months. This accounts for a similar return timeline on spend in the core WIX business as we saw in previous years as well as Base 44's longer but stabilizing return horizon. Existing user cohorts were healthy with bookings growth continuing to be driven by strong retention and solid monetization. This strength was again slower than anticipated. Partners growth as a result of smaller partners cohorts added over the past few quarters as we pulled back partners focused marketing spend. This smaller top of funnel drove user mix to shift towards sales creators and away from partners in recent quarters. We expect this dynamic to remain a drag on partners bookings and revenue growth going forward as we continue to narrow our funnel while we realign our marketing strategy and build out significant platform and product enhancements. Before I turn it over to lior, I want to address how we are operating amid the current war in the Middle east that began in late February. First and foremost, our teammates and their families are safe, which always remains our top priority. That said, with more than 60% of Wix employees located in Israel, we did experience a headwind to the productivity of our team over the past couple of months. As a result, certain product timelines for our partners audience have been pushed out. We're working hard to catch up as fast as we can and minimize the impact of these delays. But above all else, we want to ensure all products perform against our high standards and are truly the best on the market before we put them out to users. Still, we are not backing off of our ambitious product roadmap and our excitement for the robust AI and more advanced tools still to come in 2026 remains unchanged. Finally, I want to quickly touch on our execution of the repurchase program that we announced earlier this year. In April, we completed a modified Dutch auction tender offer of approximately 18 million shares for $1.6 billion. By repurchasing nearly 30% of our equity base, we were able to return meaningful value to shareholders. We believe this will prove to be very accretive to our existing shareholder base in the long run as we execute on our strategic plan. With that, I'll hand it over to lior.
Lior Shemesh (Chief Financial Officer)
Thanks nir. In the first quarter we delivered solid top line growth and generated free cash flow against our guidance. As NIR mentioned, we're encouraged by the growth driven from positive early behavior from WIX Harmony and continued outperformance of base 44. Excitingly, base 44 achieved $150 million of ARR in mid May as we strengthened our leadership position in North America. We believe this demonstrates that our deliberate investments in sales and marketing, particularly in Q1, are paying off leading to better monetization and conversion against the near term margin pressure that we expect to improve over the long term. We continue to believe in the massive opportunity in AI powered online creation, particularly for SMBs and our focus is on executing on our product roadmap to deliver continued solid performance in the coming quarters and years ahead. Before I get into the detail of the quarter, I want to quickly address how we think about incorporating AI within our products and across our organization and the resulting margin dynamic. I think about this in two main ways with the most top of mind being the cost of delivering AI powered products to our Wix and Base 44 users. As Nir discussed, we have been lowering inference cost of users by optimizing third party AI model usage, leveraging open source models and most recently building our own LLM to Power Harmony. As we apply this strategy to more of our products, particularly base 44, we believe that the large majority of these AI costs will be firmly in our control. Second, we are leveraging AI internally at wix more broadly, which has already driven tangible benefits in certain areas of our business. In the customer care organization, for example, we have ramped the integration of AI over the past three plus years. This has allowed us to optimize headcount which has decreased by more than 40% since 2022 while maintaining or even improving in some areas our services to users. We believe that there is another opportunity to utilize AI across our R and D organization where we are seeing early signs of progress. For example, we are working to shift our WIX R and D structure to align more closely with that of base 44 which has been a leader in leveraging AI to drive productivity since day one. We are learning from them and working to implement those same operating principles at wix. As we execute on this strategy with good line of sight, we expect faster output will more than balance out the cost of AI usage across our organization. Onto our first quarter results. Total bookings in Q1 was $585 million up 15% year over year and total revenue was $541 million up 14% year over year. Top line growth was driven by strong new cohort behavior and retention of our existing user base in our core WIX business as well as base 44 outperformance during the quarter we experienced a larger than expected slowdown in partners growth which still grew 19% year over year despite a deliberate pullback in studio marketing efforts over the past few quarters. Additionally, GPV remained soft as SMBs on the platform continued to experience macro pressure. GPV grew 12% year over year to $3.8 billion in the first quarter. Turning to margins, first quarter total non GAAP gross margin was 66%, declining sequentially and year over year. This reflects stable gross margins in our core WIX business compared to the prior year period.
Lior Shemesh (Chief Financial Officer)
We expect AI costs to remain minimal and core WIGS gross margins to be relatively unchanged through the rest of 2026. Lower total non GAAP gross margin was driven by elevated investments in base 44 to support its rapid growth. We continue to incur elevated AI compute costs as we scale to meet stronger than expected base 44 demand and maximize gross profit dollars. As a reminder, we believe these AI costs to be front loaded as new users consume more AI inference bandwidth during their initial build phase.
Lior Shemesh (Chief Financial Officer)
Total non GAAP operating income came in at 5% of revenue, primarily driven by meaningfully higher sales and marketing expenses. In the quarter we leaned into the massive growth opportunity ahead and made significant advertising and branding investments in into base 44 against our Troi target which currently stands at less than 12 months. It is worth reiterating that our blended TROI across the company is seven to nine months as we balance stable returns on core WIX acquisition spend against the elevated spend and longer TROI of base 44 as demand ramps. First quarter sales and marketing investments also included approximately $24 million for the purchase and production of our super bowl ads for both Base 44 and Wix Harmony. We saw a significant uptick in traffic volume to both of our platforms following these commercials demonstrating the efficacy of these investments in driving brand awareness. This meaningful increase in sales and marketing expenses resulted in a large one time step up in working capital benefits.
Lior Shemesh (Chief Financial Officer)
As a result, we achieved free cash flow of $112 million in Q1 or 21% of revenue. Let's turn now to the outlook for the rest of 2026. We are maintaining our guidance and continue to expect both bookings and revenue to grow at a mid teens digit percentage on a year over year basis for the full year. Our outlook takes into consideration the slower than expected start to the year in our partners business which we are aiming to supplement with accelerated growth initiatives across our core WIX business, focusing on optimizing our top of funnel further as well as strengthening the performance of our existing user base. Of course, we also expect base 44 growth to continue on its current trajectory which is gaining momentum for the second quarter of 2026, we expect revenue to also grow at a mid teens percentage of on a year over year basis similar to the first quarter. For the full year 2026, we expect free cash flow margin excluding acquisition related expenses to be in the high teens. This includes the impact of foregone interest income on our cash balance that was used to fund our tender program as well as interest expense on our new $500 million credit facility. Assuming pretender completion capital structure, we expect full year free cash flow margin would be in the low to mid 20% range. Our full year free cash flow outlook also includes a sizable FX headwind on our cost base as a significant portion of our operating expenses are denominated in Israeli Shekels, which has strengthened meaningfully compared to the US Dollar over the past year and even more so through the first five months of 2026. We expect a $64 million headwind on our full year expense base primarily occurring in the second half of the year. We will continue to monitor our currency fluctuations and utilize our hedging program opportunistically. Finally turning to our balance sheet quickly following the completion of our $1.6 billion tender offer in early April, we are now in a net debt position. Having shrunk our total number of shares outstanding by nearly 30%. Our goal is to return to a net cash position efficiently. In conclusion, our conviction in our near term strategy and AI focused product roadmap remains firmly unchanged. Key initiatives such as Harmony and Base 44 continue to perform well, which gives me the confidence that these are the right areas of investment and that the bets we made were the right ones for wix. We are using this year to lean into our growth and to utilize AI in everything we do. We are making every function more productive through faster adoption of AI tools to drive higher output. The products that we build, refine and deliver are all powered by a singular belief in our early AI adoption. We believe that we have laid the foundation to capture additional market share across an evolving online creation ecosystem. This will drive strong compounding financial performance for our shareholders over time. Operator, we are now ready for questions.
OPERATOR
Thank you. Ladies and gentlemen, to ask a question at this time you will need to press Star 11 on your telephone keypad 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 lineup. Josh Beckwith, Raymond James, your line is now open.
Josh Beckwith (Equity Analyst)
Yes, thank you for taking the question. I wanted to maybe ask a two parter. So one on base 44 and the momentum there, obviously it's scaling very nicely. What have maybe been some of the standout use cases and how do you see it as additive to the core business? So that's one question. And then on the partner channel and how we should be thinking about the shape of a rebound, is that going to be very tied to the product cycle? Just what should we be looking at there? Thank you.
Nir Zohar (President and Co-Founder)
Hey Josh, it's Nir. So for your first question about the base 44, I think we're happy actually to say that we're still using a very wide variety of use cases and it's really. Some of it is personal use, some of it is solopreneur, some of it is small businesses. And we think that there's going to be more and more specialization that's going to go and happen throughout the platform over time as we understand where does differentiation happen between those different use cases and where everyone can benefit from the generalized platform. That being said, I think it's obviously a great expansion for our top of the funnel and it's very close to what we've been doing in WIX for many years. However, I think there's another opportunity that is very interesting which we're seeing, is that some of the more small business oriented use cases can also be relevant to applications needed by business owners that are wix. And that's another, I think, great opportunity that still lies ahead in terms of the partners business. Well, I think that the shape, I'm not sure how to answer what the shape will be, but it's definitely, definitely, definitely tied to product cycle. The fact of the matter that, you know, we had a big, big, big emphasis on small creators as well as base 44 in the last few quarters and we knew that with the massive changes that are happening around, around us in the environment of how things are being created with AI, the workflow and the needs of partners and how we can answer those is changing rapidly and we have to match that also in terms of our product offerings. So as I mentioned before, those are a little bit delayed and not the same cadence that we were hoping for throughout this year because of what's transpired throughout Q1 and beginning of Q2. But we are working diligently to catch up. So our hope is that we can introduce more innovation and more good news for our partners throughout the rest of the year and kind of catch up. Excellent. Thank you.
OPERATOR
Thank you. And our next question coming from the lineup, defakmativanan with Cantor, Fitzgerald, Dlns, Nelson.
Deepak
Hey guys, thanks for taking the question. So first, can you talk about what you're doing to building your own LLM? Is that based on fine tuning, open source models and anything you can share on how the inference compute cost compares versus frontier models? And when do you see the potential to deploy this in base 44 which is having significant inference cost? And then perhaps can I follow up on the partner business, particularly the studio users? Are you seeing some of the developers increasingly use other AI platforms as a part of their workflows? Anything you can see on how their behavior is changing. Thanks so much. Hey Deepak. So in relation to our own model that is now supporting Harmony and I have to say by the way you mentioned rightfully so, that it helps control the inference costs and bring them significantly down. I'm not gonna, I'm not gonna, I'm not gonna share exact numbers, but I can say that compared to using Frontier models, it really is marginal cost. By the way, that's not the only benefit. Another benefit that comes out of it is the fact that we get better quality and we can control it, so we can adapt it, add more to it and training further down the line of improving the output of the model. So this is obviously something we're very happy about on the weak side and the Harmony side. Your question towards where can we expect to have the same thing on base 44? The answer is that I don't have an exact timeline. Obviously it's a bigger or more complex undertaking than the Harmony one just because it is much more generalized. The Harmony use case. That being said, it is something we believe and our top engineers are the ones who are dealing with it. So we put really like the, the best commando team on it. And Avishai is actually very closely managing himself because it's his area of expertise as well as his passion. And we do believe that this is a problem that we can solve, but it's really hard for us to quantify or to quantify the timeline at this point for the partners. So I think it's a variety of things and I also think in terms of what they're using, they are using some AI platforms by the way, some of them are using Harmony and are very happy with it on one end. And also they're pointing out to us specific holes if you may, or missing capabilities that are obviously there because we build Harmony for self creators and not in the view of partners, but it gives us great visibility into what kind of innovation, what do we need to do next on the partner side in order to make them more successful and happier. We are also starting to see some overlap, very interesting overlap I would say for some of the partners we space 44 and we think that can be another great opportunity further down the road. Thanks Nir.
OPERATOR
Thank you. Our next question coming from the line of Brent Hill with Jeffrey CLN is now open.
John Bian
Hi, this is John Bian for Brent Hill. Actually on the last comment you just made, I mean some of our surveys show that a lot of partners are increasingly adopting base 44. Just wanted to see how widespread you think that is. And, and then in terms of another question related to Base 44 in terms of the current broad pool of users and customers, what are you seeing in terms of them using both base 44 and Wix? Are you starting to see any dual usage or synergies there? Thank you.
Nir Zohar (President and Co-Founder)
Yeah, so I think, you know, obviously I'm not going to share percentages but I can say that we are seeing like there is a decent amount of partners usage on base 44. So it's not marginal. It's something that we do believe can become a deeper trend and obviously this is something we would love to support. I think it makes a lot of sense first of all, because if partners see that as a better avenue and a better path to build the core website of the business, then why not? And secondly, and I think even more Importantly, if a base 44 becomes the main hub for them to supplement and increase the value they can deliver to the business with creating their own custom needed applications to improve the business, then obviously that's a great addition. So from that standpoint this is something different. We're definitely looking deeper into and would love to, we love to cultivate and obviously over time we can create more and more synergies also between the two platforms that will just make both the life of the partner more effective and their business more effective, but also will make the running the business more effective. And this is definitely something that's interesting for us. Thank you.
OPERATOR
Thank you. Our next question coming from the line of Trevor Young with Barclays, your line is now open.
Trevor Young
Great, thank you. First question, can you size the spend it took to get your LLM up and running and then going forward, how should we think about the cost to continue to improve models? As it sounds like that's becoming a bit more core to the strategy going forward. And then second question, Lior maybe a bit more of a housekeeping one. On the balance sheet, 1.6 billion cash went out here in 2Q 600 million came in from the credit facility which sounds like that was fully tapped just to confirm kind of pro forma here in 2Q are we around 900 million of cash and equivalents on hand plus any free cash flow in the quarter. Thank you.
Nir Zohar (President and Co-Founder)
Hey Trevor, I'll take the first part, I think and can then shift gears to LIOR for the second part. So in terms of the spend on the harmony LLM and again, we're not breaking out the exact number, but it's quite small. Okay. These are not like massive research costs and GPU investments that you can we consider. When you think about big frontier models, this is something, you know, that we managed to do it at a very reasonable cost. Which also means that for us to continue training it and improving it should not be something that puts any real weights on our expenses.
Lior Shemesh (Chief Financial Officer)
So with regard to the cash treasury, yes, it's about $900 million in cash and cash equivalent for the, for the second quarter. Obviously it doesn't take into consideration the cash that we are going to generate in the near term. Great. Thank you both.
OPERATOR
Thank you. Our next question coming from the line of Brad Erickson with RBC Capital, Yolanis Malafin.
Brad Erickson
Hey guys, thanks. First, just, you know, obviously investors are worried here about the competitive risk from all the vibe coating platforms. So I guess when we think about the kind of and notice the lack of visible customer growth even when you put together the core and base 44, what would you guys point investors to in the results or just other observations in the business of why that's not the case, why that competitive risk is not the case. And then second, just to housekeeping with the new cap structure, maybe could you give us any quick numbers on what's baked into the guide on interest, income and expenses? Thanks.
Nir Zohar (President and Co-Founder)
Hey Brad, I'll take the first part and then switch over to lior. So I think, I think that from the kind of competitive vibe coding risk generally, I think there are lots of noise and lots of noise out there about what everyone is doing. I think, you know, if you look at specific or direct competitors to base 44, such as lovable and such and obviously definitely that, you know, that's a solution that's crafted to similar, not exact, but similar targets. And I think that from that standpoint we're seeing a healthy, what I would say a healthy competition. There's so much going out there going out there right now that obviously competition is something you have to be very alert to and can actually make you better all of the time. If I look at the more kind of the bigger platforms. I think so far what we've seen from them is not really putting any pressure either on Wix or base 44. It doesn't mean that that's not going to change and they might innovate towards that end at some point. I think that our role here is to be able to keep on pushing for the best product out there in terms of the solutions and what it gives our users and customers, as well as I think doing what we're doing right now, which is working hard and diligently to capture market share and to become leaders. I think base 44 managed in a very short time span to really take the lead, at least in the kind of the key and the most lucrative markets in North America. And the goal is to keep on working on maintaining a leadership position there and globally. So I think for investors, if they're worried, then I think definitely competition is something we're looking out for. But I think at this point it is actually making us better Both on the base 44 side as well as the harmony side.
Lior Shemesh (Chief Financial Officer)
Yeah. So with regard to the question about the interest income and interest expenses in the outlook, I think that it's a good question and it's exactly the differences between what we provided before, which we maintain in terms of the overall free cash flow, low to mid 20s and it's about $100 million. Meaning that if you take the differences between what we provided before last quarter, which we maintain, meaning that we are not going to have any change in our free cash flow guidance between the first quarter, between what we provided last time to what we provide right now. The only difference coming from the what I call like the non operational free cash flow expenses, which is mostly the interest that we paid for the loan and the interest that we lost for the fact that we paid for the buyback. All in all, it's approximately $100 million. Helpful. Thanks guys.
OPERATOR
Thank you. Our next question coming from the lineup, Stefanis Chris with Needham Co. Alanis Nalpin.
Stefanis Chris
Hi, thanks for taking the question. Just wanted to ask on the sales and marketing step up, can you quantify how much of that was like the one time for the super bowl and then how should we think of run rate for the rest of the year? Thank you.
Lior Shemesh (Chief Financial Officer)
Sure. So yeah, I mean some of it is with regard was about the Super Bowl. I can tell you that the overall super bowl was the entire cost of the Super bowl. Remember we had two both for weeks and for base 44 and it was more than $20 million. Now this is One time, which we're not going to repeat, at least not this year. So yes, I mean you should see a drop in the overall sales and marketing at more or less at the same amount. But most of the increase that we had in the first quarter actually coming from the investment in base, we saw a very big demand to the product. I mean you actually saw that, that in literally in just more than two months we got to $150 million of ARR. You know, we are building the foundation for, I think that you know, an amazing business. So definitely, you know, we spoke about it last time. We'd like to invest based on the same tri that we had. So we will continue to invest as long we maintain the same tri. But yes, I mean you should see drop in the sales and marketing expenses starting the second quarter.
Stefanis Chris
Got it, thank you. And if I could follow up on the acquisition earnouts, if you could just give any color on expectations for the rest of the year. Thank you. Expectation about what again? The acquisition earnouts from base 44. I think there was 37 million in the first quarter expectations.
Lior Shemesh (Chief Financial Officer)
So look, every quarter we are going to have increase the provision for the M and A and it's strictly dependent on, you know, those milestones that we set as part of the M and A agreement. So you know, my belief that as we see that these continue to grow, every quarter we are going to see another provision up to a certain cap that we have as part of our MA agreement. Got it. Thank you.
OPERATOR
Thank you. Our next question coming from the lineup, David Kang would be Riley Securities Yolanis now open.
David Kang
Great, thank you very much. I just wanted to clarify something on base 44. It seems like you're seeing usage pick up with partners. Previously I think Avishai's commentary had been that the usage was more tilted towards individuals and not professionals and SMBs. So should we expect that mix to kind of shift as you, as you press on the gas pedal with marketing and as the product changes and evolves. So that's my first question and the second question is just on the base 44 gross margin, how much or what this may be qualitatively talk about like how much gross margin improvement we can expect to see as we move through the year and as the business continues to scale. Thank you
Nir Zohar (President and Co-Founder)
for the first question about partners in base 44. I have to say these are early days of it, so it's hard for me to say what is the expectation of that base 44 is going to be driving into the partners growth again over time. My hope is that it can definitely serve them, but I don't think I have enough track record at this point in order to project it and give any kind of accurate prediction to it. We definitely think that this can potentially become something more meaningful over time.
Lior Shemesh (Chief Financial Officer)
So I'm going to take the question about the gross margin improvement we are going to see on a quarter over quarter basis improvement in the gross margin of base. Now remember that for the entire company there are two things that we need to take into consideration. The gross margin for weeks is stable. We talk about harmony and we talk about the model which actually enable us to be in a gross margin where the gross margin is stable throughout the year. Now with regard to base, also the mix is changing, meaning that base become more and more significant as part of the overall revenue. So this is why the consolidated gross margin is going to have an impact because of that. But when we look at the gross margin for base on a stand alone basis, we see significant change in the gross margin. We managed to reduce the cost significantly. Again we spoke about some of the reasons also in the last quarter everything that we said actually happened. We managed to optimize more and more the model. Still there is a lot of optimization that we can do over there. But I can tell you that just in the last three months the changes were significant. Also remember that usually when people build their application, most of the AI costs happen when they start to build application later on the cost is not that significant. Definitely we are going to see a big change in the gross margin between the first quarter to the fourth quarter. I'm not going to provide numbers. I think that it's very soon but. But we already positive in terms of the overall gross margin for base and I expect to have a significant change throughout the year definitely on a quarter to over quarter basis. Thank you Leo. Thank you Neil.
OPERATOR
Thank you. Now our next question coming from the lineup. James Michael Sherman, Lewiswood City Johannes, Melbourne.
James Michael Sherman
Good morning. Thank you for taking my questions. The 46% new cohort bookings growth is encouraging. Could you help impact the contribution from base 44 users or harmony improving conversions versus core Wix users at minimum. Last quarter I think we talked about base 44 new signups at nearly 2/3 of new WIX customers and then my follow up through April and May. How are these newer cohorts performing and is your top of funnel expanding again? Thank you.
Nir Zohar (President and Co-Founder)
Hey James. Well actually I'm not going to separate base and WIX for the course. I can say that generally we've seen health on both Sides and naturally Base is becoming a much bigger contributor than before. From our standpoint, this is very encouraging because this is exactly why we wanted to. We made the acquisition as well as the ongoing investment, which I think kind of materialized and proved itself to be more and more sound and healthy throughout 2025 and going into this year. So I'm not going to break out the numbers, but I can say that we definitely've seen good performance in good health in terms of April and May. Generally. I think we're seeing ongoing good trends in terms of the core growth and performance. So I don't think there's anything specific to call for in terms of what we've seen so far. And then the second part of the question is about Harmony and its improved conversion monetization. What's exactly the question about it? Sorry, I missed that part. Sorry. The second half of the question was around the top of funnel expansion. Are you seeing any improvement there relative to one Q that I touched when I spoke about April and May? But I would say definitely. I think a good, you know, the good signs are coming from. On the weak side is coming from obviously from the Harmony that's been very well received. And naturally, with it being a new product and a new editor, it impacts first and foremost the new users and the new cohorts. So we are encouraged about it. I think it's also worth pointing out that Harmony is still a very young product, meaning that there's a lot of additional improvement that we plan to put into it in order to solidify it and make it even better. Perfect. Thank you.
OPERATOR
Thank you. Now, last questioner will come from the lineup. Andrew Boone with Citizens Bank. Yoland is now open.
Andrew Boone
Thanks so much for taking the questions. I wanted to go back to base 44. You guys now have cohorts that are nearing a year in terms of base 44. Can you maybe compare some of the older, more mature cohorts, their retention trends versus core wix? How should we think about that? And then on pricing, as we think about just the core WIX product and the price that you guys have enacted over the past years, does AI change anything in terms of your pricing strategy? Thank you.
Nir Zohar (President and Co-Founder)
Hey, Andrew. So I think first of all, you have to remember I'm not going to share deep details on this. We see this is highly competitive. But I can say for the base 44 courts, you know, for the, for annual subscriptions, obviously we still need more time for them to get to the, to the full year mark and renew and learn more about them, I think that the. For the. For the monthly subscriptions on base 44, we've been measuring them for a while now. We've been measuring them also against what we're seeing and used to see on wics. So we can understand the comparison and we can say that there's an ongoing improvement that is really kind of incremental improvement from one month to the next, which is part of the things we find encouraging. Baseball becoming a better and better business all of the time in terms of pricing strategy. So I don't think at this point that it makes a significant change for our pricing strategy. Obviously, the model on base 44 is different than Wix, so I'm assuming you're referring mostly to Wix. And I think on Wix at this stage, we think the current structure is the right one. Obviously, if at some point we introduce something which is very intense on token consumption, then we'll have to charge for that as well. But at least for now, that's not the case. Thank you.
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