Wix (WIX)

Website building platform Wix (NASDAQ:WIX) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 13.6% year on year to $505.2 million. The company expects next quarter’s revenue to be around $526 million, close to analysts’ estimates. Its non-GAAP profit of $1.68 per share was 12.6% above analysts’ consensus estimates.

Company Overview

Powering over 263 million registered users worldwide with its AI-driven tools, Wix (NASDAQ:WIX) provides a cloud-based platform that helps individuals and businesses create and manage professional websites without requiring coding skills.

While e-commerce has been around for over two decades and enjoyed meaningful growth, its overall penetration of retail still remains low. Only around $1 in every $5 spent on retail purchases comes from digital orders, leaving over 80% of the retail market still ripe for online disruption. It is these large swathes of the retail where e-commerce has not yet taken hold that drives the demand for various e-commerce software solutions.

Wix competes with other website building platforms like Squarespace (NYSE:SQSP), Shopify (NYSE:SHOP) for e-commerce, WordPress.com by Automattic (private), GoDaddy (NYSE:GDDY), and Webflow (private).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Wix grew its sales at a 16.2% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Wix’s recent performance shows its demand has slowed as its annualized revenue growth of 12.9% over the last two years was below its five-year trend.

This quarter, Wix reported year-on-year revenue growth of 13.6%, and its $505.2 million of revenue exceeded Wall Street’s estimates by 0.6%. Company management is currently guiding for a 14.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 13.9% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not accelerate its top-line performance yet.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Wix’s billings came in at $514.5 million in Q3, and over the last four quarters, its growth slightly lagged the sector as it averaged 13.7% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in acquiring/retaining customers.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Wix is quite efficient at acquiring new customers, and its CAC payback period checked in at 32.1 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.

For software companies like Wix, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Wix’s gross margin is worse than the software industry average, giving it less room than its competitors to hire new talent that can expand its products and services. As you can see below, it averaged a 68.5% gross margin over the last year. Said differently, Wix had to pay a chunky $31.54 to its service providers for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Wix has seen gross margins improve by 2.5 percentage points over the last 2 year, which is very good in the software space.

This quarter, Wix’s gross profit margin was 68.3%, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.

Wix has managed its cost base well over the last year. It demonstrated solid profitability for a software business, producing an average operating margin of 5.7%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, Wix’s operating margin rose by 1.9 percentage points over the last two years, as its sales growth gave it operating leverage.

This quarter, Wix generated an operating margin profit margin of negative 1.5%, down 7.3 percentage points year on year. Since Wix’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Wix has shown robust cash profitability, driven by its cost-effective customer acquisition strategy that enables it to invest in new products and services rather than sales and marketing. The company’s free cash flow margin averaged 28.5% over the last year, quite impressive for a software business.

Wix’s free cash flow clocked in at $127.3 million in Q3, equivalent to a 25.2% margin. The company’s cash profitability regressed as it was 3.5 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Over the next year, analysts’ consensus estimates show they’re expecting Wix’s free cash flow margin of 28.5% for the last 12 months to remain the same.

Companies with more cash than debt have lower bankruptcy risk.

Wix is a profitable, well-capitalized company with $1.58 billion of cash and $1.57 billion of debt on its balance sheet. This $13.63 million net cash position gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

Revenue beat slightly but operating income missed. Revenue guidance for next quarter was just in line. Zooming out, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 5.6% to $119.75 immediately after reporting.

Updated: December 3, 2025 at 9:17 PM EST

Before investing in or passing on Wix, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Wix isn’t a terrible business, but it doesn’t pass our bar. For starters, its revenue growth was a little slower over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its bountiful generation of free cash flow empowers it to invest in growth initiatives, the downside is its expanding operating margin shows it’s becoming more efficient at building and selling its software. On top of that, its gross margin is below our standards.

Wix’s price-to-sales ratio based on the next 12 months is 2.4x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $167.76 on the company (compared to the current share price of $102.09).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.