Figma's IPO: A Strategic Challenge to Adobe and a Test of Post-M&A Exit Valuations in Tech

Figma's upcoming IPO, set to price on July 30, 2025, represents more than just another high-profile tech listing. It is a strategic challenge to Adobe, a test of post-M&A exit valuations in the design software sector, and a potential harbinger of how AI-driven tools are reshaping the tech IPO landscape. With a fully diluted valuation of $17.6 billion to $18.8 billion, Figma's offering—oversubscribed 40 times—has already signaled investor confidence in its ability to disrupt Adobe's dominance in UI/UX design. But does this valuation, and the company's broader ambitions, justify its position as a redefiner of the industry?

The Adobe-Figma Rivalry: Ecosystem vs. Accessibility

Adobe's Creative Cloud remains the gold standard in design software, commanding 60% of the overall market. Its Digital Media segment reported $4.35 billion in revenue for Q2 2025, a 12% year-over-year increase. Adobe's AI-driven tools, such as Firefly and generative fill in Photoshop, are embedded in a mature ecosystem that locks in users with cross-product workflows. However, Adobe's focus has shifted away from standalone UI/UX tools like Adobe XD, opting instead to integrate these features into its broader Creative Cloud suite. This strategy, while leveraging Adobe's existing 100 million subscribers, has left a gap in the UI/UX niche—where Figma now thrives.

Figma's strength lies in its web-native platform, real-time collaboration, and AI-driven features that democratize design. Its 13 million monthly active users include not just designers but developers and product managers, reflecting its role as a team-first tool. By 2024, Figma had captured 40.65% of the UI/UX market, with 95% of Fortune 500 companies using its platform. This enterprise penetration, combined with a 48% revenue growth in 2024 ($749 million), underscores Figma's appeal to organizations prioritizing agility and cross-functional collaboration.

Profitability and AI-Driven Growth: A Tale of Two Models

Adobe's profitability is a stark contrast to Figma's current financials. Adobe reported 44.5% non-GAAP operating margins in 2024 and a 89% gross margin, reflecting the maturity of its SaaS model. Figma, by comparison, had 18% operating margins and 91% gross margins in Q1 2025. While Figma's margins are impressive for a high-growth company, its path to profitability is less certain. The IPO's $1.2 billion in expected proceeds will likely fuel R&D, marketing, and enterprise sales, but investors must weigh these costs against Adobe's established cash flow.

Figma's AI roadmap, however, could bridge this gap. Features like “Make Design,” which generates UI drafts from natural language prompts, and “Search Similar,” which finds design assets based on rough sketches, are redefining productivity. These tools are not just incremental improvements—they are reshaping the design workflow for non-experts. Adobe's Firefly, while powerful, remains a complementary tool within a larger ecosystem. Figma's approach is more accessible, aligning with the trend of AI democratization.

Adobe's AI strategy, meanwhile, is generating $250 million in ARR by 2025, but Figma's enterprise focus and AI-driven collaboration tools position it to capture a growing segment of the market. The question is whether Figma can scale its AI features without sacrificing margins or ceding ground to Adobe's ecosystem.

Valuation Justification: A Post-M&A Benchmark?

Figma's $16.4 billion valuation—lower than Adobe's $156.7 billion but higher than the $20 billion Adobe offered in 2022—must be contextualized within the broader tech IPO landscape. Post-pandemic, IPO valuations have contracted, but Figma's 40x oversubscription suggests demand for high-growth, AI-native companies. Its auction-like pricing mechanism, which allows investors to bid on shares, is a novel approach that could set a precedent for future tech listings.

Comparisons to Adobe's 2022 acquisition attempt are instructive. At $20 billion, Adobe's offer reflected optimism about Figma's enterprise potential. Today's valuation, while lower, is buoyed by Figma's standalone growth and AI integration. The company's 11,100+ customers generating over $10,000 in annual recurring revenue further validate its enterprise value proposition.

However, risks remain. Adobe's ecosystem lock-in and AI investments could erode Figma's competitive edge. Additionally, Figma's reliance on enterprise clients exposes it to macroeconomic headwinds. If tech spending slows, Figma's growth could stall, pressuring its valuation.

Investment Implications and the Future of Design Software

For investors, Figma's IPO offers a bet on the future of design software and AI-driven collaboration. Its valuation is justified by its enterprise traction, AI innovation, and pricing power in a niche market. However, Adobe's scale and profitability remain formidable.

The IPO also tests the viability of post-M&A exit valuations in tech. Figma's standalone path, rather than a buyout, reflects a broader trend of private companies opting for public markets to maximize value. If successful, Figma's listing could embolden other high-growth startups to pursue IPOs over acquisitions.

Conclusion: A Defining Moment for Design and Tech

Figma's IPO is more than a financial event—it is a strategic inflection point for Adobe and the design software industry. While Adobe's dominance is far from threatened, Figma's AI-driven tools and enterprise focus have carved out a unique value proposition. At $16.4 billion, Figma's valuation is ambitious but plausible, assuming it can sustain its growth and execute its AI roadmap. For investors, the key will be monitoring Figma's ability to innovate, maintain margins, and defend against Adobe's ecosystem.

In the end, Figma's IPO is a microcosm of the broader tech shift: AI is not just enhancing tools—it is redefining industries. Whether Figma becomes a long-term rival to Adobe or a fleeting disruptor, its journey will offer valuable insights into the future of design, collaboration, and tech IPOs.