Figma Shares Plunge 9.4% Amid Software Sell-Off
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1d ago
0mins
Source: Fool
- Stock Decline: Figma's shares fell 9.4% amid a broader software sector sell-off, nearing all-time lows, reflecting investor concerns over AI potentially cannibalizing design software revenues, prompting a reassessment of high valuations.
- Industry Impact: Despite strong earnings from ServiceNow and Microsoft, both reporting 21% subscription revenue growth, market unease about AI's long-term effects continues to pressure Figma's stock price.
- Market Expectations: Figma is set to report its fourth-quarter earnings on February 18, with analysts forecasting revenue of $293.2 million and adjusted earnings per share of $0.06, but the company's ability to counter the AI disruption narrative remains a critical challenge.
- Valuation Reevaluation: As AI threats loom, investors are reassessing the software sector's historically high valuations, which were previously supported by the resilience of cloud subscription models and high gross margins, potentially leading to further stock price volatility.
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Analyst Views on FIG
Wall Street analysts forecast FIG stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for FIG is 53.13 USD with a low forecast of 38.00 USD and a high forecast of 70.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
9 Analyst Rating
3 Buy
6 Hold
0 Sell
Moderate Buy
Current: 27.070
Low
38.00
Averages
53.13
High
70.00
Current: 27.070
Low
38.00
Averages
53.13
High
70.00
About FIG
Figma, Inc. designs and develops platforms for people who build digital products together. The Company helps cross-functional teams align and build software more efficiently and ensure the advanced access and controls that large organizations require. Its products include Figma Design, Dev Mode, Figma Sites, Figma Make, Figma Draw, Figma Buzz, FigJam and Figma Slides. Figma Sites is a product that lets clients design a Website and directly publish it to the Web, with a custom URL. Figma Make is an AI-powered tool that turns a prompt into a fully functional prototype. Figma Buzz is a product for easily creating marketing assets (like social media assets and digital ads) at a scale that is consistent with brand or visual identity. Figma Draw provides a space for finer vector editing required when drawing detailed iconography and product illustrations. Figma Design combines powerful features with a collaborative workspace to help teams design and build better products together.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Figma's Stock Volatility and AI Strategy
- IPO Performance Review: Figma went public at $33 per share last July, soaring to a 52-week high of $142.92 in August, but by January 21, the stock had plummeted to $26.79, indicating market caution regarding its future prospects.
- Customer Growth and Retention: In Q3 2025, Figma added over 1,000 customers with annual recurring revenue of $10,000 or more, achieving a net dollar retention rate of 131%, which indicates that high-value customers are increasing their spending, reflecting the market appeal of its products.
- Strong Financial Performance: Figma achieved record revenue of $274.2 million in Q3, a 38% year-over-year increase, and anticipates Q4 revenue between $292 million and $294 million, showcasing its ongoing sales growth potential.
- Profitability Challenges: Despite robust revenue growth, Figma faced a massive net loss of $1.1 billion in Q3 primarily due to stock-based compensation costs related to its IPO; however, the company posted a net income of $28.2 million in Q2, suggesting a potential return to profitability in the future.
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Figma's Stock Volatility and AI Strategy
- Stock Volatility: Figma debuted at $33 per share and soared to a 52-week high of $142.92 in August, but by January 21, the stock had plummeted to $26.79, below the IPO price, indicating market concerns about its future performance.
- Customer Growth: In Q3 2025, Figma added over 1,000 customers with annual recurring revenue (ARR) of $10,000 or more, showcasing robust expansion of its customer base, with a net dollar retention rate of 131%, indicating increased spending from high-value clients.
- Financial Performance: Figma achieved record revenue of $274.2 million in Q3, a 38% year-over-year increase, and anticipates Q4 revenue between $292 million and $294 million, reflecting ongoing sales growth potential.
- Profitability Challenges: Despite strong revenue growth, Figma faced a massive net loss of $1.1 billion in Q3 due to stock-based compensation costs related to its IPO, although it posted a net income of $28.2 million in Q2, suggesting a potential return to profitability in future quarters.
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