Figma's Revenue Growth Is Impressive, but Is Wall Street Expecting Too Much?

Key Points

• Figma posted an impressive 46.5% revenue growth in its first quarter as a public company.

• The company faces intense competition from proven software giants, including Adobe, Microsoft, and Apple, across multiple product categories.

• CEO Dylan Field started Figma at age 19 as an Ivy League dropout -- an impressive success story but also a significant execution risk for investors.

• 10 stocks we like better than Figma ›

Digital content creation specialist Figma (NYSE: FIG) entered the stock market with a bang at the end of July. The company raised $1.2 billion in its initial public offering (IPO), and share prices soared right away. Figma's stock closed at $122 on the first day, far above the official IPO price of $33 per share.

But the stock has been sliding since then, and the first financial test didn't stop Figma's downtrend. Earlier this week, Figma posted its first quarterly earnings report as a public company. The stock closed 19.9% lower the next day, resulting in a 55.3% decline from the IPO's $122.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

As it turns out, Figma's top-line sales showed an impressive 46.5% year-over-year jump. However, an annualized revenue stream of approximately $1 billion is trying to support a $26.6 billion market cap, as of Sept. 4. Is that financial foundation strong enough, or is Figma's sinking stock still overvalued?

Figma's fickle financials

Let's take a look at Figma's financial results first:

Data source: SEC filings. YOY = year over year.

This is an unusual setup. Figma's revenue is rising, as expected from a young and hungry high-growth company. But Figma's operating expenses are way down with 85.5% lower costs for research and development and a 64.5% cut for sales and marketing.

This unusual pattern makes sense, though. The lower operating costs sprang from the IPO itself. Figma has been running a stock-based compensation program for years, including pre-IPO shares as a paycheck booster long before they had a real market value. The year-ago period's operating expenses included $463.3 million of stock-based compensation, dropping to $5.9 million in Q2 2025.

Without these accounting tricks, Figma's adjusted operating income rose from $4.9 million to $11.5 million. On this basis, adjusted earnings fell slightly from $0.09 to $0.08 per diluted share.

Figma's P/E ratio could make a growth investor blush

So Figma was actually profitable in a certain slant of light, but that tiny income doesn't offer much support to the massive market value, either. Multiply the quarterly net profit by four (to create a full-year run rate for the sake of discussion) and you get a heavily adjusted price-to-earnings ratio (P/E) of 170.4.

That's a lot, even among high-growth market darlings in the software industry. Figma's P/E ratio makes skyrocketing stocks like MicroStrategy (P/E 28.8) and Shopify (P/E 80.6) look cheap. Only by comparison, mind you -- I can't call Shopify and Strategy objectively affordable with a straight face.

Risks, challenges, and potential liabilities

The company competes against proven software giants Adobe, Microsoft, and Apple. Figma Slides is a Microsoft PowerPoint and Apple Keynote rival, for example. Figma Draw and Figma Design go up against Adobe's Photoshop and Illustrator packages. Other tools in Figma's portfolio are more direct plays on artificial intelligence (AI), making it tougher to find head-to-head rivals, but it's a crowded market. Figma is still a small fish in a massive pond.

The huge revenue growth you see right now still has a lot of room to continue in the long run. With strong execution along the way, Figma could grow its business results many times over, and still leave space for healthy competition in the digital design arena.

I wouldn't be so quick to assume many years of perfect operations, though. The software giants mentioned above will do their absolute best to tamp down this dangerous challenger. Figma CEO Dylan Field started the company at the age of 19, as an Ivy League dropout with big-name investor support. He's no tech industry superstar with decades of proven success. Sure, he's a creative entrepreneur with an all-star team of boardroom advisors, but his inexperience is a significant risk.

Image source: Getty Images.

Where will Figma go from here?

The company needs to keep those growth engines running, not just for a quarter or two but over a long time. The market cap should eventually find a comfortable level as investors get a good look at Figma's soaring sales and developing profits.

A market cap of $26.6 billion may be a reasonable valuation someday, but not yet. For now, I want to see some of the company's unique risks reflected in the stock price. This overheated IPO stock has some more cooling down to do. Until then, me owning this stock will just be a Figma of your imagination.

Should you invest $1,000 in Figma right now?

Before you buy stock in Figma, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Figma wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $678,148!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,052,193!*

Now, it’s worth noting Stock Advisor’s total average return is 1,065% — a market-crushing outperformance compared to 186% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 25, 2025

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, Apple, Microsoft, and Shopify. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.