In late 2022 and into 2023, Adobe tried to remove a key competitor from its landscape by acquiring the innovative design and coding company Figma (FIG -0.36%) for $20 billion. The deal would ultimately fall apart, and today, most Figma's shareholders are likely thankful it did.
Figma went public on Aug. 1, and its stock price more than tripled, quickly catapulting to a more than $59 billion market cap, due to insatiable demand from investors. Large IPOs have seen success this year, as the market has begun to thaw after a few difficult years. While Figma is certainly a very promising company and the stock has begun pulling back to a market cap of $44 billion, it's still valued for more than twice as Adobe's offer. Does Figma truly deserve this monstrous valuation?
The right ingredients to make a big splash
As I mentioned above, large IPOs like CoreWeave and Circle have performed tremendously well. It could perhaps be due to a lack of IPOs in recent years or exuberance around the crypto and artificial intelligence sectors. IPOs that can show big growth and some semblance of profitability have been met with high praise and excitement.
Image source: Getty Images.
And that's exactly what Figma offered. Between the first quarter of 2023 and the second quarter of 2025, Figma generated average quarterly revenue growth of 10%. In the second quarter of 2025, Figma grew revenue 41% year over year, and is now on pace for $1 billion in annual revenue. The company also achieved decent profitability in the fourth quarter of 2024 and the first quarter of 2025. In its preliminary second-quarter results, management projected $9 million to $12 million in operating profits.
At Figma's initial projected valuation of $13.6 billion to $16.5 billion, that didn't look so bad in today's environment. Plus, Figma has an AI angle. The company is essentially the Google Sheets of design and user interface, allowing designers and coders to collaboratively build an array of projects with high-quality graphics. In 2023, Figma released Dev Mode, which easily translates designs into code. Other AI features on Figma include the ability to automate many tasks and First Draft, an AI tool that allows users to transition from a blank canvas to user interfaces that can be edited with a simple prompt.
Figma already counts 95% of Fortune 500 companies as clients. Management also sees huge potential to incorporate more AI tools and capture business from the 1 billion new applications that are expected to be made by 2028.
Fact or Fiction: Figma should trade close to a $60 billion market cap?
At this valuation, Figma trades somewhere in the range of over 44 times 2025 revenue, assuming the company keeps growing quarterly revenue at a 10% rate. That is an extremely expensive valuation. If investors do view Figma as an AI play or a monopoly in the space, that could lead to a higher premium valuation.
However, there's no certainty that Figma will hold this position forever because AI is clearly going to have a big use-case in design and coding. After all, OpenAI's ChatGPT already demonstrated some pretty impressive capabilities in this regard. Recently on CNBC, Figma co-founder and CEO Dylan Field said that superintelligence is not likely to replace Figma's graphics engine or technology.
"I think that's not stuff that you can learn from looking at code and sort of various places on the internet," said Field. "It's not part of the pretraining data mix. I believe that doing that at scale -- it's quite difficult."
However, it's really tough to know how far AI and superintelligence can go. Figma will also likely need to invest heavily in AI. I certainly think Figma has strong potential, and I did expect the stock to jump out of the gate. But at this kind of valuation, the stock has run too far, too fast. The risk-reward proposition is no longer favorable, which is why I think investors should wait for dips before buying.
