Figma (FIG +0.83%) was a hot stock when it went public in the summer of 2025. But after initially rocketing higher, the stock has been on a long slide. Figma now sits more than 75% off its all-time high, stomach-churning results for most who bought shares at some point.
Given how quickly Figma went from hot to cold on Wall Street, the enterprise software company could be one of the market's most underestimated names right now.
Here is why writing off Figma stock for 2026 could be a huge mistake.
Image source: Getty Images.
Tough times in the software space
Figma isn't alone in its dire circumstances. The market has turned an icy shoulder toward almost every software stock. There seems to be an overwhelming sentiment right now that artificial intelligence (AI) will make many software applications obsolete. Time will tell, but as with the internet in the late 1990s, sentiment is often many years ahead of a new technology's real-world impact.
It seems unlikely that entrenched software products will go away overnight, or anytime soon. People can create almost any digital website, product, or interface in Figma, even collaborating in real time with others using its multiplayer technology. It utilizes AI features and third-party AI applications such as OpenAI's ChatGPT. If anything, Figma is a new-age software company.
What makes Figma a potential long-term winner
Figma's financials back up the narrative here. The company is approaching $1 billion in trailing-12-month revenue, and analysts expect it to increase to nearly $1.3 billion this year and over $1.5 billion the following year. The company also boasts an impressive revenue retention rate of 131%, indicating that Figma users continue to spend more as they use it over time.
Meanwhile, the stock's continued decline has created attractive investment opportunities amid Figma's continued growth. The price-to-sales ratio on shares has slipped to 14, a solid valuation for a business that could increase revenue by 50% over the next two years and is already profitable enough to convert over a quarter of its sales into free cash flow.
NYSE: FIG
Key Data Points
The stock could simply stay at its current valuation, and meeting Wall Street growth estimates over the next two years would probably mean outperforming the broader market. If this widespread fear of an AI-driven software armageddon dissipates, investors could easily see Figma's valuation rise, further increasing the stock's potential upside.
Sure, Figma's months-long slump hasn't been pretty. Yes, AI has spooked Wall Street away from just about every software stock. But underestimating Figma in 2026 could come at your portfolio's expense. Eventually, the company's strong growth and shifting market sentiment could send Figma stock off and running again.
