Can Figma Justify Its $27 Billion Valuation After a Strong Yet Underwhelming Q2?

Just weeks ago, Figma (FIG 1.83%) had one of the biggest IPO pops in years, jumping from its listing price of $33 to a closing price on July 31 of $115, before topping out at $142.92 the following day. However, since that euphoric surge, valuation concerns have spread, and the stock gradually pulled back as investors looked forward to its first earnings report as a publicly traded company, which came out on Sept. 3. Though the design software company delivered a strong debut earnings report, it also seemed to confirm the valuation concerns that were driving the earlier sell-off as the stock fell 20% on the report. After the reset, is Figma now fairly valued at a $27 billion market cap? Let's look at the Q2 numbers before answering that question. Image source: Getty Images. What we learned from Figma's Q2 report Figma's second-quarter numbers weren't a total surprise since it had given preliminary results in its S-1 prospectus, using a range. In the full report, Figma posted 41% revenue growth to $249.6 million, ahead of estimates at $248.7 million. That growth rate represented a deceleration from 46% in the first quarter. On the bottom line, Figma reported a generally accepted accounting principles (GAAP) operating profit of $2.1 million and adjusted operating income of $11.5 million. Adjusted earnings per share was $0.09, compared to the consensus of $0.08. What seemed to trigger the sell-off wasn't the Q2 results, but Figma's guidance. The company sees revenue growth slowing to 33% in the third quarter at the midpoint of its guidance of $263 million-$265 million. For the full year, it now expects adjusted operating income of $88 million-$98 million, down from the $127 million it made in 2024, and implying lower margins in the second half of the year. While that might sound like a problem, the declining profit margin seems mostly by design as Figma rolled out four new products in the second quarter, Make, Draw, Sites, and Buzz, doubling its product portfolio and leaning into AI-powered features. The company's guidance reflects the new product push, including the sales cost to introduce them to customers, and uncertainty around the adoption curve. Additionally, management is likely being conservative with its guidance since this is its first earnings report, and it wants to be sure that it can hit it. Referring to the company's AI investments, CEO Dylan Field said, "We expect margins to come down in the near term as we invest in the long term." However, with its track record of profitability and execution, the company has earned investor trust. Can Figma justify its valuation? Trading at a share price of $55, the stock is down by more than half from its closing price on opening day, but Figma is still expensive by traditional metrics, though cloud software stocks tend to fetch high valuations. The stock currently trades at a price-to-sales ratio of 30, making it expensive even for a cloud software stock. By comparison, rival Adobe trades at a P/S ratio of just 7, though it is growing much more slowly and is at a different stage of its life cycle. That valuation would make it more expensive than any other stock in the S&P 500 except Palantir. Still, Figma deserves a premium, considering its strong growth, profitability, and disruptive impact thus far as it continues to grab market share from Adobe. In fact, Adobe tried to buy Figma for $20 billion back in 2022, and investors should keep that in mind, as that price should act as a floor on the stock, especially since it's much bigger today than it was then. At a market cap of $27 billion, Figma's valuation seems justified. While the share price could certainly drift lower, the stock has a lot of upside potential, given its new products and investments in AI. Investors should expect the stock to be volatile, but its valuation has fallen to a reasonable purchase range.