Figma, Inc. (FIG -14.85%) stock finished Thursday down 14.9%, while the S&P 500 was down 0.2% and the Nasdaq Composite was flat.
Shares of the design software company are falling after disappointing earnings, showing the cost of running its AI features is climbing much faster than revenue.
NYSE: FIG
Key Data Points
Figma beats estimates but AI costs tell a different story
Figma reported second-quarter results after the close on Wednesday. Revenue rose 48% year over year to just above $370 million. That beats the $351.5 million analysts were looking for. Adjusted earnings came in at $0.08 per share, twice the consensus estimate.
But the costs are where it got ugly. Cost of revenue jumped a whopping 117%, with AI infrastructure and hosting responsible for most of that increase. Third-quarter revenue guidance of $373 million to $375 million implies growth of about 36% -- considerably less than this quarter's 48%.
And to round things out, CEO Dylan Field announced on the call that both the chief marketing officer and the chief product officer are leaving.
Management explains the AI spending problem
The company said that it is paying to run AI features it isn't fully charging for yet. Newer products like its Figma agent are still in beta and early access, and management said those aren't drawing down the paid AI credits customers buy.
Why I'm staying on the sidelines
Much of the underlying business still looks healthy. Net dollar retention -- how much more existing customers spend compared with a year ago -- was 136%, and the number of customers paying at least $10,000 a year grew 34% to 15,964.
But I'm not a fan of the stock. There are too many headwinds and rising competition from new entrants like Claude Design. And there's a supply problem arriving soon: a lock-up expiration frees up millions of new shares that could hit the market in the coming weeks.
