📝 usncan Note: What’s Happening With Figma Stock?
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CANADA – 2025/07/22: In this photo illustration, the Figma AI logo is seen displayed on a smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Figma’s stock (NYSE:FIG) experienced a nearly 15% decline in after-hours trading, even after reporting impressive second-quarter results that demonstrated a 41% increase in revenue, alongside the company raising its full-year guidance to between $1.021 billion and $1.025 billion, indicative of strong demand for design tools. The decline is primarily due to investor apprehensions that extend beyond the headline financials, as approximately 25% of shares held by employees have become eligible for sale starting September 5, leading to worries about greater supply and potential stock price adjustments.
Earnings Strength
Financially, the quarter was strong. Revenue increased by 41% year-over-year to $249.6 million, driven by robust customer demand and several product launches. Figma reported net income of $28.2 million, while the non-GAAP net income was $19.8 million, a rise from $14.28 million last year. Additionally, other operating metrics remained solid. The company’s 129% Net Dollar Retention rate reflects remarkable customer loyalty and growth, and its Rule of 40 metric (the sum of margins and revenue growth rates) was recorded at 63, indicating that the company is effectively balancing growth and profitability. During the quarter, Figma introduced four new tools — Make, Draw, Sites, and Buzz — expanding its platform across areas of design, prototyping, publishing, and marketing. Furthermore, the strategic acquisitions of Modify and Payload have enhanced the company’s capabilities in aspects such as motion, animation, and content management. Figma Stock Downside To $40
Stock Sell-Off
The significant fundamental performance was eclipsed by worries regarding an increase in stock supply. Lock-up expirations often induce selling pressure as insiders and employees are permitted to cash out. In this case, approximately 25% of shares held by employees will be available for sale after the earnings report, creating a potential overhang on the stock. While top executives were excluded from this action, investors are speculating that many employees are likely to realize profits following the stock’s considerable appreciation since the IPO. Figma was launched at $33 per share and continues to trade around $58 despite the recent sell-off. The current early expiration of the lock-up period is linked to performance and timeline conditions, and investors likely did not anticipate this outcome. Additionally, there exists a longer lock-up agreement affecting most major stakeholders, which will remain in effect until approximately mid-2026.
Valuation Concerns
Looking forward, management has projected Q3 revenue between $263 million and $265 million, with a full-year goal set at $1.021 billion to $1.025 billion. Although ongoing investments in AI-enhanced tools and platform expansion continue to be pivotal for Figma, valuation remains a contentious issue. Trading at more than 30 times future revenues, Figma’s stock is valued at a premium multiple that already anticipates significant growth. For comparison, Adobe (NASDAQ:ADBE) is trading at less than 7 times future sales, Microsoft (NASDAQ:MSFT) at 12 times, and Snowflake (NYSE:SNOW) at 18 times revenues. Figma’s long-term optimistic outlook depends on expanding its market beyond its original designer base to include software developers, marketers, and cross-functional teams. If significant advancements are not made in these related markets, Figma risks stagnation within a niche, potentially limiting its capacity to achieve valuations akin to those of major tech companies.
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