Digital content creation specialist Figma (FIG 0.37%) entered the stock market with a bang at the end of July. The company raised $1.2 billion in its initial public offering (IPO), and share prices soared right away. Figma's stock closed at $122 on the first day, far above the official IPO price of $33 per share.
But the stock has been sliding since then, and the first financial test didn't stop Figma's downtrend. Earlier this week, Figma posted its first quarterly earnings report as a public company. The stock closed 19.9% lower the next day, resulting in a 55.3% decline from the IPO's $122.
As it turns out, Figma's top-line sales showed an impressive 46.5% year-over-year jump. However, an annualized revenue stream of approximately $1 billion is trying to support a $26.6 billion market cap, as of Sept. 4. Is that financial foundation strong enough, or is Figma's sinking stock still overvalued?
Figma's fickle financials
Let's take a look at Figma's financial results first:
|
Financial Metric |
Q2 2024 |
Q2 2025 |
Change (YOY) |
|---|---|---|---|
|
Revenue |
$177.2 million |
$259.6 million |
46.5% |
|
Operating expenses |
$1.032 billion |
$219.7 million |
(78.7%) |
|
Net income (loss) |
($837.9 million) |
$28.2 million |
N/A |
|
($4.39) |
breakeven |
N/A |
Data source: SEC filings. YOY = year over year.
This is an unusual setup. Figma's revenue is rising, as expected from a young and hungry high-growth company. But Figma's operating expenses are way down with 85.5% lower costs for research and development and a 64.5% cut for sales and marketing.
This unusual pattern makes sense, though. The lower operating costs sprang from the IPO itself. Figma has been running a stock-based compensation program for years, including pre-IPO shares as a paycheck booster long before they had a real market value. The year-ago period's operating expenses included $463.3 million of stock-based compensation, dropping to $5.9 million in Q2 2025.
Without these accounting tricks, Figma's adjusted operating income rose from $4.9 million to $11.5 million. On this basis, adjusted earnings fell slightly from $0.09 to $0.08 per diluted share.
Figma's P/E ratio could make a growth investor blush
So Figma was actually profitable in a certain slant of light, but that tiny income doesn't offer much support to the massive market value, either. Multiply the quarterly net profit by four (to create a full-year run rate for the sake of discussion) and you get a heavily adjusted price-to-earnings ratio (P/E) of 170.4.
That's a lot, even among high-growth market darlings in the software industry. Figma's P/E ratio makes skyrocketing stocks like MicroStrategy (P/E 28.8) and Shopify (P/E 80.6) look cheap. Only by comparison, mind you -- I can't call Shopify and Strategy objectively affordable with a straight face.
Risks, challenges, and potential liabilities
The company competes against proven software giants Adobe, Microsoft, and Apple. Figma Slides is a Microsoft PowerPoint and Apple Keynote rival, for example. Figma Draw and Figma Design go up against Adobe's Photoshop and Illustrator packages. Other tools in Figma's portfolio are more direct plays on artificial intelligence (AI), making it tougher to find head-to-head rivals, but it's a crowded market. Figma is still a small fish in a massive pond.
The huge revenue growth you see right now still has a lot of room to continue in the long run. With strong execution along the way, Figma could grow its business results many times over, and still leave space for healthy competition in the digital design arena.
I wouldn't be so quick to assume many years of perfect operations, though. The software giants mentioned above will do their absolute best to tamp down this dangerous challenger. Figma CEO Dylan Field started the company at the age of 19, as an Ivy League dropout with big-name investor support. He's no tech industry superstar with decades of proven success. Sure, he's a creative entrepreneur with an all-star team of boardroom advisors, but his inexperience is a significant risk.
Image source: Getty Images.
Where will Figma go from here?
The company needs to keep those growth engines running, not just for a quarter or two but over a long time. The market cap should eventually find a comfortable level as investors get a good look at Figma's soaring sales and developing profits.
A market cap of $26.6 billion may be a reasonable valuation someday, but not yet. For now, I want to see some of the company's unique risks reflected in the stock price. This overheated IPO stock has some more cooling down to do. Until then, me owning this stock will just be a Figma of your imagination.
