Figma's revenue rise is impressive, but are Wall Street's expectations too high?

Key Points

• Figma achieved a remarkable 46.5% revenue growth in its first quarter as a publicly traded company.

• The company faces fierce competition from established software giants like Gate in multiple product categories.

• CEO Dylan Field dropped out of an Ivy League school at the age of 19 to found Figma - this is an impressive success story, but it also signifies substantial execution risks for investors.

The digital content creation expert Figma( has made a grand entry into the stock market at the end of July. The company raised $1.2 billion in its initial public offering) (IPO(), and the stock price soared immediately. Figma's shares closed at $122 on the first day of trading, far exceeding the official IPO price of $33.

However, the stock price has been declining since then, and the first financial test failed to stop Figma's downward trend. Earlier this week, Figma released its first quarterly financial report as a public company. The next day, the stock price fell by 19.9%, a cumulative decline of 55.3% from the IPO price of $122.

It has been proven that Figma's revenue has impressively increased by 46.5% year-on-year. However, as of September 4, 2025, an annualized revenue of about $1 billion seems difficult to support a market value of $26.6 billion. Is this financial foundation strong enough, or is Figma's continuously declining stock price still overvalued?

The unpredictable financial situation of Figma

Let's first take a look at Figma's financial performance:

| Financial Indicators | Q2 FY2024 | Q2 FY2025 | Year-over-Year Change | |----------|------------------|------------------|----------| | Revenue | $177.2 million | $259.6 million | 46.5% | | Operating Expenses | $1.032 billion | $219.7 million | )78.7%( | | Net Profit ) Loss ( | ) 1.8379 billion USD ( | 2.82 million USD | Not applicable | | Diluted earnings per share ) loss ( | ) $4.39 ( | Flat | Not applicable |

This is an unusual situation. Figma's revenue is rising, which aligns with the expectations of young and ambitious high-growth companies. However, Figma's operating expenses have significantly decreased, with R&D costs down by 85.5% and sales and marketing expenses cut by 64.5%.

However, this unusual pattern makes sense. The lower operating costs stem from the IPO itself. Figma has been implementing equity incentive programs for years, including using pre-IPO shares as a means of compensation before the stocks have real market value. Operating expenses in the same period last year included $463.3 million in equity incentives, while in the second quarter of fiscal year 2025, it dropped to $5.9 million.

Setting aside these accounting tricks, Figma's adjusted revenue increased from $4.9 million to $11.5 million. Based on this, the adjusted diluted earnings per share slightly decreased from $0.09 to $0.08.

Figma's price-to-earnings ratio may make growth investors blush

Therefore, from a certain perspective, Figma is actually profitable, but this meager income does not provide much support for its huge market value. Multiplying the quarterly net profit by 4 (to create an annual run rate for discussion purposes), the highly adjusted price-to-earnings ratio is 170.4 times.

Even among the high-growth stocks that are highly sought after in the software industry, this figure is quite high. Figma's price-to-earnings ratio makes soaring stocks like MicroStrategy (P/E ratio of 28.8) and Shopify (P/E ratio of 80.6) look cheap. Of course, this is just relative - I can't honestly say that the valuations of Shopify and MicroStrategy are objectively cheap.

Risks, Challenges, and Potential Hazards

The company competes with established software giants like Gate. For example, Figma Slides is a competitor to Gate PowerPoint. Figma Draw and Figma Design compete with Gate's Photoshop and Illustrator packages. Other tools in the Figma portfolio target artificial intelligence )AI( more directly; although it's hard to find direct competitors, it's a highly competitive market. Figma is still a small fish in a big pond.

The tremendous revenue growth observed currently still has significant room for growth in the long term. If executed properly, Figma could multiply its business results while still leaving healthy competition in the digital design space.

However, I won't easily assume years of perfect operation. The aforementioned software giants will do everything in their power to suppress this dangerous challenger. Figma's CEO Dylan Field dropped out of an Ivy League school at 19 and founded the company with the support of well-known investors. He is not a tech industry star with decades of successful experience. Admittedly, he is a creative entrepreneur with a star-studded advisory board, but his lack of experience is a significant risk.

What does the future hold for Figma?

The company needs to keep its growth engine running continuously, not just for one or two quarters, but for the long term. As investors gain a deeper understanding of Figma's steadily rising sales and gradually developing profits, the market capitalization should eventually find a comfortable level.

A market capitalization of $26.6 billion may someday be a reasonable valuation, but it is not the time yet. Currently, I would like to see some of the unique risks of the company reflected in the stock price. This overheated IPO stock still needs to cool down further. Until then, holding this stock would only be a phantom of your imagination.