Is Now the Time to Buy Figma Stock?

Figma (NYSE: FIG) has had trouble finding its footing since the company's New York Stock Exchange debut at the end of July 2025. The darling of the design world is down more than 50% since its initial public offering (IPO).

This large slide is eye-popping, but not all of it can be attributed to Figma itself. There was a broader sell-off among tech stocks, and some would argue that the company's initial valuation was overpriced and needed correction.

Much of Figma's 2025 stock decline was due to macro factors outside of the company's control. The design platform, which was founded in 2012, has an incredibly strong business and an innovative edge in the ever-competitive software-as-a-service (SaaS) industry.

The company's leadership is focused on what it can control -- creating design tools that users love. The features created by Figma have become the default for designers around the world.

Regarding fundamentals, Figma's are rock solid, which is why investors should look beyond the short-term volatility in stock price. This is an opportunity to buy low and let Figma recover from a tumultuous introduction to the public markets.

Image source: Getty Images.

Customer loyalty is Figma's superpower

Loyalty is the name of the game for Figma, and the company has plenty of it among its expanding customer base. It boasts more than 1,200 customers that pay over $100,000 in annual recurring revenue (ARR), and another 12,910 customers paying more than $10,000 annually.

Even more positive is that Figma is adding a considerable number of customers at these levels each quarter. The company reported 140 new customers at the $100,000 ARR level in Q3 2025 alone. Net revenue retention among its customers with ARR of $10,000 or more was 131% in the most recent quarter. That's an impressive number, to say the least.

Figma's Q3 earnings boasted revenue of $274.2 million, which is a 38% increase year over year. The company also reached an annual revenue run rate of more than $1 billion, which represents a 40% year-over-year increase. Its free cash flow continues to improve, as well, increasing from negative $139 million to $204 million for the first nine months of 2024 and 2025, respectively.

The company's rollout of new artificial intelligence (AI)-focused tools should also stimulate continued growth and diversify its revenue streams. It announced Figma Weave at the end of October. This new generative AI feature brings extraordinary capabilities in video, animation, motion design, and VFX media creation and editing to its users. All told, the company released more than 50 new features across the platform in Q3 alone.

The company started as a design tool mainly for product teams in start-ups but has since been widely adopted by enterprises and across product, marketing, engineering, and UX teams alike. Figma dominates its space with more than 40% market share. The next closest competitor is Adobe's Adobe XD, which takes up just 13.5%. Adobe has all but conceded the race to Figma since abandoning an attempt to acquire the company in 2022.

Figma's valuation is still high

Figma competes in an industry that's rife with competition. Its opponents are well-established tech giants, such as Adobe and Canva, as well as quick-moving start-ups, like Framer and UXPin. Should any of these companies catch up on the innovation side, Figma could suffer.

The stock's valuation is also still inflated by many measures even after the dismal year-to-date performance. If growth doesn't keep pace or if margins dip with its ongoing acquisitions and AI-related expenses, the company's investors will continue to be none too pleased.

An innovative winner

Ultimately, it may take a few years, but Figma's stock will rebound due to its profitable business, which has a quickly growing and fiercely loyal customer base. Its AI innovations and quick release of useful features keep the company at the top of the design tool food chain.

Its valuation is large but justified, if investors are looking at it through the lens of long-term growth and healthy margins. Ultimately, Figma's valuation shouldn't deter investors from buying if they have a longer time horizon. A lower stock price now might prove to be the best time to get in.

Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe. The Motley Fool recommends the following options: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.