Key Takeaways
Wix.com (WIX) shares plummeted 29 percent after the company reported first-quarter adjusted earnings of 68 cents per share, significantly missing analyst estimates of $1.24.
"As innovation in the web and app building space has accelerated over the past few quarters, my conviction in its long-term value and Wix’s market positioning remains strong,” CEO Avishai Abrahami said in a statement.
The web development platform's revenue rose 14 percent from a year ago to $541.2 million, but still fell short of the $544 million consensus forecast. The company attributed the wide earnings miss to higher spending on marketing and investments in its Base44 app-building platform.
The sharp decline in shares reflects investor concern over rising costs and competition from artificial intelligence-native tools. The stock is down 72% over the last year.
Wix’s sales and marketing expenses surged 50% from the prior year to $167.8 million in the first quarter. The company is also investing heavily in AI, including developing its own proprietary large-language model (LLM) to integrate into its offerings.
While Wix believes its own LLM will provide a competitive advantage and control costs long-term by reducing reliance on third-party models, the strategy comes with heavy front-loaded expenses for computing power. The company argues these costs will decline over time as AI usage scales.
The significant earnings miss and rising costs raise questions about Wix's ability to defend its market share against new AI competitors. Investors will be watching for any return on its increased marketing and AI development spending in the Q2 report.
This article is for informational purposes only and does not constitute investment advice.
