Figma Shares Sink Despite Strong Revenue Growth. Should Investors Buy the Stock on the Dip?

Key Points

• Figma saw strong revenue growth when it reported its first quarterly results as a public company.

• However, the stock plunged as the company warned of pressure on its gross margins.

• Despite a big sell-off, shares of the design software company are still not cheap.

• 10 stocks we like better than Figma ›

Figma (NYSE: FIG) just reported its first quarterly results as a public company, and while the numbers came in strong, the stock plunged on the news. The biggest culprit for the drop appears to stem from the company lowering its margin guidance due to increased artificial intelligence (AI) costs.

Let's take a closer look at the company's report and guidance to see if investors should buy the dip. Ark Invest portfolio manager Cathie Wood, for one, already has.

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Strong growth

Figma's stock was one of the hottest initial public offerings of 2025. The stock skyrocketed 250% its first day of trading, pricing at $33 and closing its first day at $115.50. It eventually soared to over $140, but has since come back down to earth.

For those unfamiliar with Figma, it started out simply as a design tool. However, it has blossomed into an entire collaborative design and product development platform to help streamline product development while keeping brand consistency. It's now used by designers and developers alike.

The company has recently launched several new AI products that significantly expand its platform. This includes Figma Make, which allows users to create functional prototypes and web apps simply using natural language prompts. Figma Sites, meanwhile, gives customers the ability to publish designs into live websites. It also introduced Buzz to help customers create templates for social media posts and ad displays while staying on brand.

The company noted that over 80% of customers are now using at least two of its products, with two-thirds using three or more. Existing customers are expanding their usage and adding more modules, with Figma's net revenue retention a robust 129% in the quarter. Any number above 100% indicates expansion within its existing customer base after any customer churn. Developers, meanwhile, are also becoming an important piece of the story, now making up about 30% of Figma's monthly active users.

The company saw strong growth in Q2, with revenue surging 41% year over year to $249.6 million. That topped the $248.8 million analyst consensus, as compiled by LSEG. Meanwhile, Figma squeezed out a small $846,000 profit, which was breakeven on a per share basis.

New customer growth was strong. Figma ended the quarter with 11,900 customers generating more than $10,000 in annual recurring revenue and 1,119 paying more than $100,000. The latter figure was a 42% year-over-year increase, demonstrating the strong enterprise adoption that Figma is seeing.

Following its IPO, Figma is in a strong position financially, with $1.6 billion in cash and short-term investments on its balance sheet and no debt. It also generated $61.3 million in free cash flow in the quarter. That financial flexibility has already been put to work with the acquisitions of Modyfi and Payload in the quarter to help bolster its animation and content management capabilities.

Looking ahead, the company guided for Q3 revenue of between $263 million to $265 million, representing 33% growth. For the full year, it expects about $1.02 billion in revenue, good for 37% growth. While that level of top-line growth would be the envy of most software companies, management cautioned that AI-related inference costs will pressure gross margins.

Image source: Getty Images.

Is it time to buy the dip?

Despite the sharp post-earnings drop, Figma still looks like a business with a long runway of growth. It's quickly innovating and expanding its platform, which is drawing in new customers and helping it expand within its existing customer base. Meanwhile, the company is already free-cash-flow positive and has a massive cash cushion to support continued investment and make bolt-on acquisitions.

While it is expected to see some gross margin compression as AI costs scale, this is not a low-margin business. The company's Q2 gross margin of 90% was quite impressive, so a little margin compression isn't the end of the world.

That said, Figma's stock is not cheap, even after the sell-off. It trades at a forward price-to-sales multiple of about 20.5 times 2026 analyst estimates. Given its 40% revenue growth and still top-tier margins, that's not a ridiculous valuation, but the stock is far from being on sale.

With the shares now well off their highs, long-term investors can consider taking a small position, but given the current valuation, I wouldn't be piling into the name.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.