When Figma burst onto the public markets in July, it felt like a storybook debut. The cloud-based design platform priced its shares at $33 but then rocketed more than 250% in its first few days of trading.
For a brief moment, this collaboration-centric start-up commanded a market value north of $33 billion, nearly doubling the price tag Adobe offered three years ago.
The euphoria didn’t last. By early September, investors were nursing a brutal hangover after the first earnings report, sending the stock down 19%. That whiplash has left many people asking a simple question of whether Figma’s stock is truly worth what the market is paying, or has the narrative outpaced reality?
What Makes Figma Different
One of the reasons Figma attracts so much attention is that it doesn’t behave like most software companies. Traditional design tools live on your computer but Figma is browser-based.
Rather than locking files on a local machine, it invites designers, developers, marketers and product managers to join a shared canvas and tinker in real time.
That collaborative magic has created a self-sustaining growth loop because for every designer who starts using Figma, the product draws in two additional non-designers from the same organization.
Management reported about 450,000 paying customers and 13 million monthly active users, and roughly two-thirds of those users aren’t designers at all. It’s a bit like Slack in its early days in that once someone invited you, it became hard to imagine working without it.
This viral growth model also shows up in the numbers with 95% of Fortune 500 companies using Figma. Net dollar retention has consistently topped 130%, meaning existing customers spend about a third more each year. Gross dollar retention sits at about 96%, so very few customers ever leave.
And because Figma delivers its software via the web, gross margins hover above 90%. Combined with subscription revenue, you get a business that looks like a perpetual money machine, at least on paper.
Figma hasn’t rested on its flagship design tool either. In the two years since regulators torpedoed the Adobe takeover, the company has launched an entire suite of adjacent products. FigJam helps teams brainstorm. Dev Mode bridges the gap between design and code. Slides turns design files into polished presentations. Sites lets users publish websites directly from their Figma workspace.
More recently, Figma has rolled out artificial-intelligence-powered products like Buzz, Make and Draw that promise to generate mock-ups and prototypes from text prompts. Each tool widens the moat by making it harder for teams to abandon the platform because once your design system, prototypes, presentations and web content live in Figma, switching becomes a herculean task.
What’s Everyone Watching?
Before deciding whether Figma’s stock is overvalued, it’s worth looking at the financials. For all of last year, revenue jumped 48% to $749 million, while net income improved to $44.9 million from $13.5 million.
In the first quarter of 2025, sales reached $228.2 million, up 46%. Q2 results reported just weeks after the IPO, showed revenue of $249.6 million and adjusted earnings per share of $0.09. Those numbers were slightly ahead of Street expectations and even suggested Figma was profitable on an adjusted basis.
Yet the market’s reaction was swift and brutal. Despite the solid growth, the stock plummeted because investors were expecting perfection. With only about 41% of shares available for trading due to lock-up agreements, the selling pressure was magnified.
Analysts at Bank of America sliced their price target to $69 and warned that the company’s valuation multiples were “unsustainable relative to its growth trajectory.”
The Elephant In the Room
So what are those multiples everyone keeps talking about? Before the earnings sell-off, Figma traded at roughly 21x forward revenue. Some third-party analysts estimated the multiple at 68.6x trailing revenue.
For comparison, Adobe trades around 11x sales, and the broader SaaS sector averages near 15x. On an earnings basis, the picture looks even more stretched.
Figma’s stock was valued at nearly 200x forward earnings by some estimates. Reuters calculated the price as a whopping 299 times profit expectations, compared with 15.3 for Adobe and 23.7 for the S&P 500.
These numbers are dizzying. To put them into context, the ill-fated Adobe acquisition valued Figma at about 50x revenue. Many observers considered that price tag overblown at the time, yet Figma has since commanded multiples even higher.
As one might expect, skeptics argue that paying 50 to 70x revenue requires a level of growth and profitability that is almost unheard of outside of early-stage biotech or pioneer AI companies.
Bulls counter that Figma’s growth engine and potential to become a ubiquitous platform across design, collaboration, presentations and web development justify the premium.
Creative Toolbox Battle
Figma’s story doesn’t unfold in a vacuum. On one side is Adobe, the 800-pound gorilla of creative software. Even a basic Photoshop subscription costs about $23 per month, while the full Creative Cloud bundle runs around $70.
Figma’s professional plan, at $16 per month, looks like a bargain. Adobe recognised the threat early and attempted to buy Figma, but regulators blocked the deal. Since then, Adobe has accelerated AI features in its own products to counter Figma’s appeal.
On another flank is a wave of upstart and established competitors. Canva has moved beyond social media templates to target designers and enterprises.
Microsoft has been bundling design and whiteboarding tools into Office 365. Notion and Miro are expanding into collaboration hubs.
Start-ups like Uizard and DhiWise offer AI-driven design-to-code tools. Even open-source alternatives, like GIMP, and the emergence of generative AI that can create user interfaces from text are looming threats.
For Figma, the challenge is to stay far enough ahead that its customers continue to see the value of paying for its ecosystem.
What’s Been Overlooked?
Behind Figma’s glossy growth story lie several mostly missed details. First, although Figma boasts that 95% of Fortune 500 companies use its software, only 1,031 customers pay more than $100,000 annually.
The land-and-expand strategy has plenty of room to play out within those accounts, but there are only so many large enterprises to win.
Second, Figma’s international business is surprisingly small and about 20% of revenue comes from outside the United States. Cracking non-U.S. markets could be a source of growth, but building the necessary sales infrastructure requires investment and time.
Third, governance is firmly in the hands of CEO Dylan Field. Through super-voting shares that carry 15 votes each and a proxy agreement with co-founder Evan Wallace, Field controls a majority of the vote. Concentrated control can be a blessing, allowing the company to make bold, long-term decisions without short-term shareholder pressure, but it also leaves public investors with little say over strategic direction.
Next, Figma’s free float is relatively small with only 41% of shares are available to trade. Lock-ups for employees and venture investors begin to expire soon, which could increase supply and weigh on the share price in the months ahead.
Finally, it’s important to recognize that Figma’s initial profitability was aided by an extraordinary event, which is the $1 billion breakup fee Adobe paid when regulators scuttled their merger. That cash gave Figma a long runway to invest in product development and marketing.
While the company has shown it can be profitable on an adjusted basis, maintaining profitability while investing heavily in AI and international expansion is not a given.
Does The Price Match the Promise?
What does all of this mean for investors trying to decide whether Figma is overvalued? On the bullish side, you have a company with strong network effects, enviable retention metrics, a rapidly expanding product suite and margins that most software CEOs would envy.
Figma has proven that collaborative, browser-based design tools can become the backbone of product development. Its user base extends far beyond designers, and it is moving quickly to entrench itself in presentations, websites and, potentially, no-code development. For believers, the vision of Figma becoming the “digital operating system” for product creation makes the current valuation less daunting.
On the bearish side, valuation cannot be ignored. Paying 50-plus times revenue or 200-plus times earnings leaves almost no margin for error. Growth has already begun to slow, from 46% in the first quarter to around 40% in the second and the company’s future depends on successfully monetizing new products and international markets while fending off well-funded rivals.
The concentrated governance structure and limited free float add risk. And there’s the very real possibility that generative AI will dramatically reduce the need for large design teams, undermining Figma’s seat-based pricing model.
Figma is not overvalued if you believe Figma can maintain 40% growth, expand margins and become the default platform for collaborative product creation worldwide.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.