Wix.com Ltd. (NASDAQ: WIX) had a good day on Tuesday. The website-building company reported second-quarter results that beat expectations, and the stock responded by jumping more than 16%. But there's a twist: a big chunk of that move was likely fueled by a short squeeze, with nearly 26% of the public float sold short. When a stock with that much bearish positioning delivers good news, the bears have to cover, and that can send the price soaring even higher.

Revenue and Earnings Beat

Wix reported adjusted earnings of $1.39 per diluted share, beating the Wall Street estimate of $1.16. Revenue increased 15% year over year to $563.1 million, topping the consensus estimate of $554.4 million. Total bookings rose 12% to $569.1 million, while annual recurring revenue increased 15% to $1.96 billion at the end of the quarter.

Breaking it down, Creative Subscriptions revenue climbed 15% to $398.4 million, while Business Solutions revenue rose 14% to $164.7 million. Partners revenue increased 17% to $213.8 million, despite previously flagged softness in parts of the business.

AI Strategy Drives Margin Improvement

The company highlighted Base44, its AI-powered no-code application platform, as a key growth driver. During the quarter, Wix launched Base 1, a proprietary large language model designed to reduce AI inference costs and improve profitability. Management said Base44's non-GAAP gross margin is expected to improve to about 60% in the second half of 2026 from near zero at the start of the year, allowing the company to increase marketing investments to capture additional market share.

CEO and Co-founder Avishai Abrahami said Wix is expanding its portfolio of proprietary AI models through both Wix Harmony and Base44, giving the company greater control over costs and product development. During the earnings call, management said the in-house Base 1 model already delivers better results than frontier AI models for Base44-specific use cases while significantly lowering costs. Executives also said strong demand for Base44 continued during the quarter, with improving user adoption of annual plans and increasing use by agencies and professional partners.

Margins, Cash Flow, and Outlook

Non-GAAP gross margin was 67%, down three percentage points from a year earlier as Wix continued investing heavily in Base44 and AI infrastructure. The company generated $55.6 million in operating cash flow and $52.6 million in free cash flow during the quarter. As of June 30, the company had approximately $961 million in cash, short-term deposits and marketable securities, along with $1.63 billion in short- and long-term debt.

For the third quarter, Wix expects revenue to grow at a low-double-digit percentage year over year. The company reaffirmed its full-year 2026 outlook, calling for revenue growth in the low- to mid-teens, bookings growth in the low teens despite continued Partners softness, and a high-teens free cash flow margin excluding acquisition and restructuring costs.

Price Action

Wix.com shares were up 16.34% at $66.13 at the time of publication on Tuesday, according to market data.