41% growth rate is not impressive + performance outlook is mediocre Figma's first earnings report after going public fails to support high valuation

According to the Zhitong Finance APP, Figma (FIG.US), a new force in the global software industry, saw its stock price plummet over 14% in after-hours trading on Wednesday, primarily due to the design software leader's first earnings report since its initial public offering (IPO) in July falling short of Wall Street's expectations. As of Wednesday's market close, Figma's stock price had nearly doubled from its IPO price; however, the market began to believe that Figma's earnings report and future outlook could not support the company's valuation, which is far above that of its software peers, leading to a massive sell-off of the stock.

The latest earnings report shows that Figma reported total revenue of approximately $249.6 million for the second quarter (ending June 30, 2025), achieving a year-on-year growth of 41%, but slightly below the average expectation of $250 million from Wall Street analysts. Under GAAP standards, the company achieved a net profit of approximately $846,000 in the second quarter, compared to a loss of about $827.9 million in the second quarter of 2024, translating to essentially a breakeven quarter (i.e., earnings per share of $0), but below Wall Street's average expectation of earnings per share of $0.09.

The earnings report indicated that Figma's reported net revenue retention rate was 129%, which reflects expansion from existing customers, a crucial operational metric for software companies. This metric not only demonstrates increased purchases from existing customers and product stickiness but also serves as strong evidence of robust revenue generation based on AI. However, this figure is a decline from 132% in the first quarter, which is a key logic for the market's belief that Figma's performance cannot support its high valuation.

The report also showed that Figma had as many as 1,119 customers with annualized revenue exceeding $100,000, up from 1,031 customers as of the March quarter.

Figma stated that total revenue for the second quarter grew by 41% year-on-year, increasing from $177.2 million a year ago to $249.6 million, which is consistent with the company's preliminary estimate range of $247 million to $250 million provided in its IPO regulatory filings in July. The company's adjusted (non-GAAP) operating profit for the second quarter was approximately $11.5 million, while Figma had previously provided a preliminary operating profit estimate range of $9 million to $12 million.

For the third quarter, Figma expects total revenue to be in the range of $263 million to $265 million, which, based on the midpoint of the range, represents a year-on-year growth of approximately 33%, better than Wall Street analysts' average expectation of $262 million. However, for the highly valued Figma, merely slightly exceeding expectations in crucial performance guidance is no longer sufficient to meet market expectations.

Regarding the full-year outlook, the company's management expects adjusted operating profit for the year to be between $88 million and $98 million, with total revenue expected to be between $1.021 billion and $1.025 billion for the year. The latest midpoint of this revenue range implies a year-on-year growth expectation of about 37%, just slightly above Wall Street's average expectation of $1.022 billion, which also fails to satisfy the market's appetite for Figma's high valuation What kind of entity is Figma, which was almost acquired by Adobe back in the day?

As Figma officially debuts on the U.S. stock market, it has been over a year since its merger plan with American software giant Adobe, the developer of popular creative software like Photoshop and Illustrator, fell through.

Figma is a platform software company focused on cloud-based collaborative design and product development, with core products including Figma Design (interface design and prototyping), FigJam (whiteboard/collaboration), and Dev Mode (specifications and handovers covering design to product development) aimed at engineers. The company is set to be listed on the New York Stock Exchange on July 31, 2025, under the stock code FIG. The core selling point of the Figma software platform is not just "design tools," but rather a collaborative product development platform: designers are the entry point, which then permeates into product, engineering, marketing, and operations. Major Wall Street brokerages estimate that its potential market size for design and various adjacent roles is about $26 billion, highlighting a low penetration rate and a long growth runway.

From the perspectives of business landscape and product capability, end-to-end workflow is one of the core advantages of the Figma software platform: completing idea generation (FigJam), interface design and componentization (Design/Variables/Auto Layout), prototyping and motion effects (Prototyping), to the actual delivery workflow of large design projects (Dev Mode specifications, code snippets, design variables) all on the same platform; the other two major advantages are the industry's strongest cross-role collaboration and Figma's exclusive design and development ecosystem.

From last year to now, Figma has achieved strong revenue data by selling Dev Mode to customers. The company's co-founder and CEO Dylan Field stated in an interview that the strong momentum has resulted in a high base that is suppressing revenue growth in the third quarter.

In the second quarter, Figma launched Figma Make (using artificial intelligence to generate application and website designs based on user descriptions) and Figma Sites (transforming design blueprints into functional websites). The company also acquired vector graphics startup Modyfi and content management system startup Payload.

Figma has not yet started charging for its AI-based software product line comprehensively but has indicated that it has incorporated the underlying potential costs into its model. The company did not provide guidance on adjusted operating profit for the third quarter.

"We plan to inform customers that in the future they will have the opportunity to purchase additional AI credits," Figma's Chief Financial Officer Praveer Melwani said during a call with analysts.

Figma is effectively turning AI large models into dual amplifiers for efficiency and product boundaries, but not fully automating all processes; rather, it aims to speed up and expand creative space based on high-efficiency human-machine collaboration. At the 2025 Config conference, Figma launched major new products such as Sites / Make / Buzz / Draw, deeply embedding generative AI tools into website building, prototype development, brand material generation, and vector creation, expanding the coverage of AI-driven innovative tools from design to publication Since the beginning of this year, many software vendors have been under pressure due to concerns surrounding AI and whether AI will replace SaaS software businesses. However, Field stated that he has not seen this situation within the company; if anything, the role of designers will only become more critical.

"I believe that as software becomes easier to build with the help of AI, people will increasingly recognize the need for a designer's touch," Field said in an interview. He acknowledged that Figma has been adopting so-called "vibe-coding" tools for AI-driven software development.

After the IPO, Figma expects that the lock-up period for 25% of the shares held by some employees will expire after the market closes on September 4. Investors holding slightly more than half of Figma's issued Class A common stock have agreed to extend the lock-up arrangement, meaning that the remaining 35% of their shares will expire in August 2026.

On Wednesday, the company's stock closed at $68.13. The issuance price in the IPO was $33, and on the first day of trading, the stock price soared to $115.50 at one point.

Documents show that as of June 30, the company held approximately $1.6 billion in cash, cash equivalents, and marketable securities, including $90.8 million in a Bitcoin exchange-traded fund (i.e., Bitcoin ETF).

"We do not intend to become Michael Saylor," Field said in the interview, referring to the co-founder and executive chairman of Strategy. "This is not a treasury company based on Bitcoin holdings. This is a design company, but I believe it has its place in the balance sheet and diversified financial strategy."

Wall Street analysts generally take a cautious stance on Figma: strong software product capabilities but high valuation

Due to the high valuation, most Wall Street analysts covering Figma have given the company neutral or market perform ratings, leaning towards a wait-and-see approach rather than optimistic "buy" or "outperform" ratings.

There is no doubt that Figma's unique design and product development platform that embeds AI large models has impressed Wall Street, but these top analysts have refrained from giving optimistic bullish ratings due to Figma's high valuation, and the 12-month target prices they provided are relatively cautious, indicating that Figma's future stock price growth is unlikely to replicate the explosive rise seen at the time of its IPO.

Overall, major investment institutions on Wall Street hold Figma's accumulated products and large customer base in high regard, believing that the company's comprehensive product capabilities are strongly leading the entire SaaS software industry. However, the extremely high valuation since its public trading has caused them anxiety.

"While investors may worry that AI applications launched by leaders like OpenAI will simplify application software design/development, thereby competing with Figma, we believe AI could become a true tailwind for Figma," said RBC analysts led by Rishi Jaluria in an investor report on Monday "We note that the company is actively embedding AI throughout its software platform, including its newly launched Figma Make (AI-driven prototyping tool), FigJam AI, and Dev Mode MCP server. These investments may put pressure on gross margins in the short term, but they are positive driving factors for long-term growth prospects."

RBC stated that the market's general valuation for Figma implies a 32x expected revenue scale for 2026 (2026E), while comparable software peers are only about 10x, prompting RBC to give Figma a "market perform" cautious rating with an initial coverage target price of $75.

Similarly, Wall Street giant Morgan Stanley initiated coverage with a "neutral" rating and a bullish target price of $80; JP Morgan also initiated coverage with a "neutral" rating but a lower target price of only $65.

"Our target price of $65 as of December 2025 is based on approximately 30x EV/CY26E revenue, while comparable software companies are around 12x," said JP Morgan analysts led by Mark Murphy in a report. "Given the model's upside potential, the early stage of new product categories, and expectations for AI monetization, a moderate premium multiple is reasonable, but excessive premiums are not a rational performance."

At the same time, Goldman Sachs also initiated coverage with a "neutral" rating but gave the most bearish target price of only $48, indicating a significant decline in the future