Investors who have participated in initial public offerings (IPOs) like CoreWeave, Circle Internet Group, and Chime Financial have done quite well this year, which is why it's no surprise to see big hype around another incoming IPO, Figma. Positioned as the Google Sheets of the design and user interface world, Figma allows multiple people to collaborate on design projects, although the company has really morphed into a way for companies to turn ideas into software.
Figma sees immense potential to integrate artificial intelligence into its business and even owns crypto as well. Figma is planning to IPO at a valuation in the range of $13.6 billion to $16.5 billion on a fully diluted basis. But does the company's exciting business justify this large valuation?
A real game changer in design
Brown University alums Dylan Field and Evan Wallace launched Figma in 2012, seeking a way to make the design process more collaborative from a technological perspective. They would eventually create a platform that allowed multiple people to work on design projects through the power of the web but also with high-quality graphics.
Image source: Getty Images.
As technology advanced, the platform did as well, particularly with the release of Dev Mode in 2023, which allowed designers to translate their concepts into code without changing the design file. This ultimately made it easier for designers and coders to work together. Products like this have gained traction, and today, Figma has 13 million unique monthly users, two-thirds of whom aren't designers. Roughly 95% of companies in the Fortune 500 use Figma, so the company is not reliant on a few core customers.
Additionally, Figma sees immense potential to integrate more artificial intelligence (AI) tools into its business. Figma Make already lets users convert a conversational prompt into a working prototype in just minutes. The company believes it stands to benefit from the growth of AI, projecting that there will be 1 billion new apps in the world by 2028, many of which will come to Figma for their branding and user interface.
Do the financials justify the valuation?
The big question with all of these new and exciting IPOs is: Are they too hot out of the gate, or can their growth really justify the valuation? Figma is looking to raise $1 billion and list shares at $25 to $28, giving it a valuation of $13.6 billion at the high end of that range. However, Barron's estimates that the valuation could really be as high as $16.5 billion on a fully diluted basis.
In 2023, Figma reported $737.8 million in net income on revenue of $504.9 million. However, net income included a $1 billion termination fee after Adobe failed to acquire the company for a total value of $20 billion, due to regulatory issues. In 2024, Figma significantly grew revenue to $749.0 million but reported a loss of $732.1 million. The company's operating expenses that year nearly tripled to $1.54 billion, led by a 356% increase in research and development spending.
Over the last two quarters, however, Figma has continued to grow revenue and turned profitable. Figma generated net income of $44.9 million in the first quarter of 2025 on revenue of $228.2 million. The company has also released preliminary results for its second quarter, with management expecting as much as $2.5 million in operating income, significantly lower than the first quarter, but on revenue of about $250 million. Based on these two quarters, Figma certainly could reach $1 billion of annual revenue in 2025.
Of course, this space is going to be competitive, considering AI's capabilities to generate images and write code, so Figma could significantly ramp up its operating expenses to try to get ahead on its AI product road map, which may impact profitability. But the company's balance sheet is strong with about $330 million of debt and $1.56 billion of cash, cash equivalents, and marketable securities.
Is the company overvalued? I would say yes, on a price-to-sales and price-to-earnings basis. However, that's become the norm in the AI sector. With strong revenue growth, signs of profitability, a clean balance sheet, and its AI potential, Figma's valuation is not exactly unreasonable in the current environment. That said, investors should keep in mind that there's a good chance, especially considering recent IPO performances, that Figma's offering receives strong demand and soars on day one, which would make the stock even more overvalued by the time most retail investors can get their first crack at it.
