Figma Stock Analysis: Is It Time to Buy? Growth, Valuation, and Competition

Figma Stock Analysis: Is It Time to Buy?

Figma (FIG 5.05%) launched its IPO on July 31. After an initial surge, the stock has steadily declined, down by over 50% in its brief trading history. This decline continued following its first earnings announcement on Sept. 3.

Investors should remember that such pullbacks don't last forever. However, they must decide if the stock is worth owning and, if so, when to buy. Let's dive in.

What is Figma?

Figma offers a collaborative tool for interface design. It now acts as an AI-powered ecosystem that helps teams turn ideas into finished products. Figma promotes efficiency, collaboration, and informed decision-making in design and product development.

Figma's software has attracted companies like Zoom, Duolingo, and Atlassian. Its IPO was highly anticipated. Adobe attempted to acquire it in 2022 but abandoned the deal after regulatory concerns. Now, Adobe and others are competing with Figma. According to 6Sense, Figma is the industry leader. However, with competitors like Adobe investing more in AI, Figma's future leadership is uncertain.

Figma's independence appears to be a positive for investors. Even after the recent pullback, Figma's $27 billion market cap exceeds Adobe's proposed $20 billion acquisition price.

The Figma Investment Case

Its numbers look promising. In the first half of 2025, revenue increased by 43% to $478 million. The Q2 net dollar retention rate was 129%, indicating increased spending by existing customers.

Additionally, it turned a profit of $22 million in the first half of the year, compared to an $814 million loss in the first two quarters of 2024 due to high operating expenses.

However, investors often penalize stocks with slowing growth. Revenue growth slowed from 46% in Q1 to 41% in Q2, and Figma projects 33% growth for Q3 and 37% for 2025. This likely fueled further stock selling.

Figma's valuation could lead to more selling. Losses in the second half of 2024 mean it lacks a P/E ratio. Its price-to-sales (P/S) ratio of 29 is high, especially compared to the S&P 500 average of 3.3. With slowing revenue growth and potential losses if spending increases, investors might stay on the sidelines.

Should I Buy Figma Stock?

Under current conditions, consider watching Figma stock rather than buying. Its industry lead, rapid revenue growth, and positive net income initially seem compelling. The 50% discount might tempt investors.

However, the falling stock price doesn't make Figma more attractive. Investors often turn away from stocks with declining revenue growth, and Figma's trend is downward. The high P/S ratio of 29 is likely too difficult to justify, especially when growth is slowing. Further due diligence is needed.