Figma Stock Lost More Than Half Its Value Since July. Time to Buy?

Key Points

• Figma's design platform has attracted a diverse client base.

• The company has maintained a rapid but slowing revenue growth rate.

• Its valuation remains a concern despite the stock's pullback.

• 10 stocks we like better than Figma ›

Figma (NYSE: FIG) stock launched its IPO on July 31. After an initial surge, the stock has steadily slid since that time, and it is down by just over 50% in its brief trading history. That decline continued when the design software company made its first earnings announcement on Sept. 3.

Investors have to remember that such pullbacks do not typically go on forever. Nonetheless, investors have to decide whether the stock is worth owning, and if it is, when they might consider buying the stock. Let's dive in.

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Image source: Getty Images.

What is Figma?

As a company, Figma supports what it describes as a collaborative tool for interface design. While it continues to support that function, the software acts more as an AI-powered and AI-connected ecosystem that helps teams turn ideas into finished products. Figma fosters a process for design and product development that is efficient, collaborative, and keeps all parties informed along the way.

The synergies of Figma's software have drawn the interest of numerous well-known enterprises. Companies such as Zoom Video Communications, Duolingo, and Atlassian are Figma clients. Amid such successes, industry analysts and investors had widely anticipated its IPO.

Also, Adobe attempted to acquire it in 2022 but abandoned the deal the following year after regulators in the UK and the European Union expressed skepticism. Instead, Adobe and other companies have tried to compete with Figma. According to 6Sense, Figma is the No. 1 company in its industry. Still, with competitors like Adobe better able to invest in artificial intelligence (AI) and other technologies, it is unclear whether Figma will hold that lead over time.

What is more clear is that having Figma as an independent company looks like a win for investors. Even after the recent pullback, Figma's market cap of $27 billion is well above Adobe's proposed acquisition price of $20 billion.

The Figma investment case

Moreover, at first glance, its numbers look impressive. In the first half of 2025, revenue of $478 million increased by 43% compared to the same year-ago period. Also, the net dollar retention rate in Q2 was 129%, showing that existing customers are spending more on the platform.

Additionally, it turned a profit of $22 million in the first half of the year. In comparison, Figma lost $814 million in the first two quarters of 2024 as it spent heavily on operating expenses during that time.

Still, investors tend to punish stocks when growth rates slow, and that seems to be the case with Figma. Revenue grew by 46% yearly in Q1 and 41% in Q2. Also, that trend is on track to continue, with Figma forecasting 33% yearly revenue growth for Q3 and 37% for 2025. Such results likely prompted investors to continue selling the stock.

Unfortunately, Figma's valuation could lead to further selling. Losses in the second half of 2024 have left it without a P/E ratio. Still, its price-to-sales (P/S) ratio of 29 is high by almost any measure, especially given the average S&P 500 sales multiple of 3.3. With revenue growth slowing and the company likely to return to losses if it ramps up spending on operations, investors may want to stay on the sidelines.

Should I buy Figma stock?

Under current conditions, investors should consider watching rather than buying Figma stock. Admittedly, an industry lead, along with its rapid revenue growth and positive net income, makes it look like a compelling investment case at first glance. Also, the discount of more than 50% from where it traded just a few weeks ago could make investors wonder if they should buy now.

Unfortunately, the falling stock price does little to make Figma more attractive. Investors tend to turn on stocks with falling revenue growth, and in Figma's case, that metric continues to trend downward. That is especially true when valuations are high, likely making Figma's lofty P/S ratio of 29 too difficult to justify for prospective investors.

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

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Annie Dean, a Vice President at Atlassian, is a member of The Motley Fool's board of directors. Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, Atlassian, and Zoom Communications. The Motley Fool recommends Duolingo. The Motley Fool has a disclosure policy.