Even if AI dramatically lowers coding costs, it won't destroy established SaaS businesses. Technical expenses only account for 10-20% of revenue for major SaaS players. The other 80% is spent on marketing, events, and client service, creating an opportunity for significant margin expansion.

In the commoditized AI tool space, Base44's founder cited distribution as the main reason for selling to Wix. With 300 million registered users, Wix can cross-promote the AI tool at a scale that standalone, cash-burning competitors cannot match, making distribution the real moat.

Wix develops its own AI models for its Base44 product primarily to improve quality by training on its vast, specific user data. This creates a superior user experience compared to generic frontier models. The cost savings are a secondary benefit and are not as dramatic as often perceived.

Many AI coding agents are unprofitable because their business model is broken. They charge a fixed subscription fee but pay variable, per-token costs for model inference. This means their most engaged power users, who should be their best customers, are actually their biggest cost centers, leading to negative gross margins.

Unlike traditional SaaS, AI companies have significant variable costs for compute and tokens. This makes revenue a poor proxy for profitability, as their gross margins are fundamentally different from high-margin software businesses—a fact many investors miss.

"Vibe coding" platforms, which allow users to create apps from natural language, pose a direct threat to the B2B SaaS market. For simple workflows, it is becoming faster for a team to build its own personalized app than to navigate the sales, procurement, and integration process for an existing SaaS product.

Unlike in traditional SaaS, low gross margins in an AI company can be a positive indicator. They often reflect high inference costs, which directly correlates with strong user engagement with core AI features. High margins might suggest the AI is not the main product driver.

Traditional SaaS models benefited from near-zero costs for new users. AI's high computational and token costs upend this, creating deeply unprofitable users and workflows unless firms carefully manage implementation and pricing.

Wix's CEO argues that public markets undervalue SaaS companies by fixating on AI disruption. They overlook crucial moats like the deep trust Salesforce has with enterprises or the simple fact that Wix's core SMB customers aren't developers and won't "vibe-code" their business.