Figma’s Earnings Disappointment as a Buying Opportunity: A Valuation Correction in High-Growth Tech

The recent earnings report from Figma (NYSE: FIG) has sparked a wave of investor concern, with shares plummeting over 50% from their IPO price despite strong revenue growth and profitability. This sharp correction, however, may represent a compelling buying opportunity for long-term investors. By analyzing Figma’s valuation metrics, competitive positioning, and operational fundamentals, it becomes clear that the market’s overreaction has created an undervalued entry point for a company with durable growth potential.

Valuation Correction: From Speculative to Strategic

Figma’s post-IPO valuation was arguably disconnected from its fundamentals, with a price-to-sales (P/S) ratio peaking at 60x [2]. Following the Q2 2025 earnings report—despite 41% year-over-year revenue growth to $249.6 million [1]—the stock corrected to a P/S ratio of 29x [3], a 52% reduction. This adjustment aligns Figma’s valuation more closely with its growth trajectory. For context, Adobe (ADBE), a mature SaaS leader, trades at a P/S ratio of 11x [2], while Canva, a private competitor with $3.3 billion in revenue, commands a valuation of $42 billion [5]. Figma’s current P/S ratio of 29x, while still elevated, now reflects a more rational multiple for a high-growth company expanding its product suite and customer base.

Operational Fundamentals: Profitability and Product Innovation

Figma’s Q2 results underscore its operational strength. The company reported a net income of $28.2 million [1], a stark contrast to its $827.9 million loss in Q2 2024. Its adjusted operating income rose 135% year-over-year to $11.5 million [1], and it maintained a 24% adjusted free cash flow margin [5]. These metrics highlight Figma’s ability to scale profitably, even as it invests in AI-driven innovations like Figma Make and Figma Sites [3].

Customer growth further reinforces this narrative. Figma now serves 11,900 paid customers spending over $10,000 in annual recurring revenue (ARR), with a 129% net dollar retention rate for high-ARR clients [3]. The launch of four new products in Q2 alone—doubling its product portfolio—demonstrates its capacity to drive cross-selling and expand its value proposition [5].

Guidance Concerns and Market Overreaction

The stock’s post-earnings selloff was fueled by concerns over slowing growth. Figma’s Q2 growth of 41% trailed Q1’s 46.5% and Q2 2024’s 48% [4], while its Q3 guidance of 33% year-over-year growth [1] fell short of investor expectations. However, this deceleration is typical for high-growth companies maturing in a competitive landscape. Adobe, for instance, reported 11% year-over-year revenue growth in Q2 2025 [3], yet its stock remains a market darling due to its entrenched position and AI integration.

Figma’s near-term margin pressures, driven by AI investments, are also temporary. The company’s gross margin dipped to 90% in Q2 [4], but its $1.6 billion cash reserves [1] provide ample flexibility to navigate these costs while maintaining innovation.

Strategic Position in the SaaS Ecosystem

Figma’s dominance in collaborative design software remains unchallenged. Its product-led growth strategy—where users drive adoption organically—creates a sticky ecosystem. Over 80% of customers use two or more Figma products [3], and its international expansion into Korean and Brazilian Portuguese markets [5] opens new revenue streams.

While Adobe and Canva pose competitive threats, Figma’s AI-first approach differentiates it. Features like Figma Make, which leverages AI for design creation, position the company to capture market share from traditional tools [5].

Conclusion: A Correction, Not a Collapse

Figma’s earnings-driven selloff has overcorrected its valuation, creating an attractive entry point for investors who recognize its long-term potential. At a P/S ratio of 29x, the stock trades at a discount to its historical premium while maintaining robust growth, profitability, and product innovation. For a company with a 37% full-year revenue growth forecast [1] and a defensible position in the SaaS market, this correction represents a strategic buying opportunity rather than a warning sign.

Source:
[1] Figma Announces Second Quarter 2025 Financial Results [https://www.businesswire.com/news/home/20250903760601/en/Figma-Announces-Second-Quarter-2025-Financial-Results]
[2] Figma IPO: Hold Your Horses, This Valuation Is Too High [https://seekingalpha.com/article/4808460-figma-ipo-hold-your-horses-this-valuation-is-too-high]
[3] Figma (FIG) Q2 2025 Earnings Call Transcript [https://www.fool.com/earnings/call-transcripts/2025/09/04/figma-fig-q2-2025-earnings-call-transcript/]
[4] Figma Reports 41% Revenue Growth [https://www.aol.com/finance/figma-reports-41-revenue-growth-203933062.html]
[5] Adobe's SWOT analysis: AI integration fuels growth as stock faces competitive pressures [https://www.investing.com/news/swot-analysis/adobes-swot-analysis-ai-integration-fuels-growth-as-stock-faces-competitive-pressures-93CH-4218497]