Wix.Com Ltd (WIX) delivered a solid earnings beat on Thursday, but investors weren't exactly throwing a party. Shares declined even as the website-building platform exceeded expectations, with analysts cutting their price targets amid concerns about the company's aggressive investment cycle in its Base44 AI initiative.

Here's how Wall Street reacted to the quarter:

• Scotiabank analyst Nat Schindler maintained a Sector Outperform rating but slashed his price target from $255 to $175.
• Needham analyst Bernie McTernan kept his Buy rating while trimming the target from $200 to $180.
• Citizens JMP Securities analyst Andrew Boone held his Market Outperform rating but reduced the target to $185.
• Cantor Fitzgerald analyst Deepak Mathivanan reiterated an Overweight rating while lowering the target from $160 to $135.
• Benchmark analyst Mark Zgutowicz maintained a Buy rating and $185 price target.

The Numbers Behind the Beat

Wix delivered what Scotiabank's Schindler called "a clean beat" on both the top and bottom lines. Revenue hit $505 million, slightly ahead of the $502 million consensus, driven by core platform strength and strong acceleration from Base44. The company raised its revenue guidance by roughly $15 million at the low end and boosted its bookings outlook by about $11.5 million at the midpoint.

But here's the catch: operating expenses came in higher than expected, primarily due to increased R&D costs tied to Base44. "We've entered an era where unbridled AI enthusiasm has gradually been replaced with skepticism about monetization of endless AI investments," Schindler noted.

Base44 Takes Center Stage

The real story here is Base44, Wix's AI-powered self-creator solution. Needham's McTernan pointed out that the company is doubling down on Base44 and plans to ramp up investment to accelerate growth, which could pressure margins in the near term. The platform could scale from its current $15 million run rate to $70 million by 2026, and that estimate might prove conservative.

"WIX has made significant progression on FCF margins over the past years, however, is willing to stall this growth given the growth and potential they see in Base44 and vibe coding," McTernan explained.

Citizens JMP's Boone noted that Wix raised its 2025 operating expense guidance by one percentage point as it invests in marketing spend to support Base44 growth. The company appears to be "tracking towards $50M+ of ARR next month," he added. However, the 2025 guidance suggests gross profit margins could contract sequentially by 220 basis points in the fourth quarter.

The Margin Pressure Question

Cantor Fitzgerald's Mathivanan highlighted that while bookings and revenue exceeded Street estimates by 1%, EBIT came in 7% below expectations due to "incremental compute and marketing spend on Base44." The company guided to fourth-quarter revenue growth of 13% to 15%, representing a slight acceleration versus the third quarter.

One notable development: Wix now expects its AI self-creator solution to launch in early 2026, rather than the second half of 2025, due to the expanded scope of the offering.

Benchmark's Zgutowicz noted that while results and outlook point to accelerated bookings and revenue growth through year-end, the guidance implies gross and operating margin deleverage in the back half of this year and into 2026. This reflects incremental marketing spend and AI compute and server costs that are well ahead of consensus expectations.

"Given an accelerated investment profile, Base44 will need to demonstrate significant growth through 1H'26E to instill investor confidence in 2H'26E op. margin expansion," Zgutowicz wrote.

The market's reaction suggests investors are wrestling with a classic dilemma: betting on future AI-driven growth versus near-term margin compression. Wix is clearly making that bet, but shareholders will need to see Base44 deliver meaningful results to justify the investment cycle.

WIX Price Action: Shares of Wix had declined by 1.63% to $100.04 at the time of publication on Thursday.