Why Figma Stock Jumped 44% in May
Key Points
Figma beat estimates on the top and bottom lines in its first-quarter earnings report.
Figma has been under pressure from threats of disruption.
The company is seeing strong adoption with new AI tools.
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Shares of Figma (NYSE: FIG), the design software stock, were soaring last month as shares jumped on a strong earnings report and rode a broader recovery in the software sector.
Figma went public last July and jumped out of the gate before falling sharply from its peak. Eventually, the stock sank below its IPO price of $33, and it remains there today.
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At first, Figma was dogged by concerns about its valuation, and later it became one of the software stocks that investors believed to be primed for AI disruption, especially after Anthropic launched its own competing design product, Claude Design.
Nonetheless, Figma has delivered strong results since it went public, and that was part of the reason that it finished last month up 44%, according to data from S&P Global Market Intelligence.
As you can see from the chart below, it wasn't a straight line up for Figma last month, but it was able to rack up some strong gains, especially after its earnings report in the middle of the month.
FIG data by YCharts
What happened with Figma
Figma jumped 13% on May 15 after its first-quarter earnings report came out, following a rally the day before heading into the report.
Figma posted 46% revenue growth to $333.4 million, well ahead of estimates at $316 million, and accelerating from 40% growth in the previous quarter. Its net dollar retention rate reached 139%, showing existing customers over the last four quarters increased their spending by 39%, its fastest pace in two years.
New AI products like Figma Make and Figma Weave are helping to drive growth, and it's seeing strong conversion from free to paid users and to their paid tier.
On the bottom line, adjusted operating income improved from $40 million to $52.1 million, and adjusted earnings per share came in at $0.10, which beat estimates at $0.06.
After giving up some of those gains in the following week, it closed out the month strong, rising with other software stocks, and as activist investor Findell Capital Management complimented the company but also suggested changes.
What's next for Figma
Looking ahead, Figma raised its full-year revenue guidance to $1.422 billion-$1.428 billion, implying 35% year-over-year revenue growth, up $55 million from its previous range. It also called for adjusted operating income of $125 million-$135 million.
If Figma can execute on those goals, the stock looks like a good candidate to keep moving higher.
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Jeremy Bowman has positions in Figma. The Motley Fool has positions in and recommends Figma. The Motley Fool has a disclosure policy.
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