Shares dropped 27.1% following earnings as investors were evidently disappointed by a cautious outlook and the ramp-up in marketing expenses, particularly related to the BASE44 acquisition, which pressured near-term profitability.

• Marketing spend increased significantly in Q1, driven by efforts to capture BASE44’s demand and integrate the acquisition.
• BASE44 showed solid growth, hitting $150 million ARR in mid-May, up from $100 million ARR in early March, but marketing ROI (TROI) remained stable rather than improving.
• New user cohorts generated nearly $52 million in bookings in the first three months, a 46% increase over Q1 2025 cohorts, bolstered by improved conversion and monetization linked to the Harmony platform.
• Management emphasized proprietary AI model deployment and AI integration as strategic advantages, but there was no clear evidence this translated into near-term financial upside.
• Despite healthy cohort trends, the combination of increased spending and cautious forward commentary likely weighed on investor sentiment.