While Figma's business looks strong, prospective investors also have to consider its valuation, and after the post-IPO surge, the stock is pricey. As of Aug. 1, when the stock was trading at $123 a share, its market cap had reached $60 billion, giving it a price-to-sales (P/S) ratio of 73.
High valuations aren't unusual in the software sector, but 73 times sales is extreme, even for a fast-growing new issue like Figma. By comparison, Adobe trades at a P/S of 7 and has a price-to-earnings ratio (P/E) of 23, though it's growing much more slowly.
In the S&P 500, only one company has a higher P/S ratio: Palantir (PLTR +3.60%), whose P/S ratio has recently been above 100. The number reflects its accelerating revenue growth, improving operating margins, and advantages in artificial intelligence (AI). Figma's valuation shows that it's priced for perfection, meaning it could be vulnerable to weaker-than-expected results or a macroeconomic slowdown.
Is Figma profitable?
As of its most recent quarter, Figma was not only profitable but also growing rapidly. The strong results help explain the company's decision to go public in 2025. In the first quarter of 2025, Figma reported revenue of $228.2 million, up 46% from a year ago, and had an operating profit of $39.8 million, giving it an operating margin of 17.4%.
On the bottom line, the company reported net income of $44.9 million in the quarter. In the two previous years, Figma had been unprofitable on a GAAP basis. In 2023, it reported an operating loss of $73.5 million on revenue of $504.9 million. In 2024, its operating loss exploded to $877.4 million on revenue of $749 million.
On an adjusted basis, however, the company was profitable. It reported a $27.1 million adjusted operating profit in 2023, which excludes $97.8 million in expenses associated with the failed merger with Adobe.
In 2024, Figma's adjusted operating profit was $127.2 million due to $947.5 million in stock-based compensation, which the company granted through a restricted stock unit release to reward shareholders following the abandoned merger with Adobe.
Over the last four quarters, the company has had an 18% adjusted operating margin on $821 million in revenue. By any reasonable definition, Figma is profitable, and its other financial metrics are impressive, including a 91% gross margin and 132% net dollar retention, meaning revenue from existing customers increased by 32% over the previous four quarters.
