IPO Stock Volatility and Management of Expectations: Lessons from Figma and Lululemon

The recent performances of Figma and Lululemon underscore the precarious balance between investor optimism and the harsh realities of public market scrutiny. Both companies, despite strong initial traction, have faced sharp stock corrections following earnings reports that revealed decelerating growth and revised guidance. For investors, these cases highlight critical lessons about the risks of overvaluing high-growth narratives and the importance of aligning expectations with operational realities.

Figma: The Perils of Overvaluation and Growth Deceleration

Figma’s IPO in July 2025 was hailed as a triumph for design-software innovation, with its stock trading at a valuation exceeding 30 times sales. However, the company’s first quarterly earnings report as a public entity revealed cracks in this narrative. While revenue grew 41% year-over-year to $249.6 million, the slowdown from prior quarters—where growth had exceeded 50%—alarmed investors [1]. Management’s guidance for the third quarter of $265 million (33% growth) and a projected 30% growth in Q4 further signaled a decelerating trajectory [1].

The stock’s 20% plunge on September 4, 2025, was compounded by the expiration of a lock-up agreement, allowing employees to sell shares and exacerbating downward pressure [4]. This volatility underscores a key risk for newly public companies: the market’s intolerance for even minor deviations from growth expectations. As Bloomberg notes, Figma’s valuation premium over industry benchmarks now appears unsustainable, with the stock down more than 50% from its post-IPO high [1].

Lululemon: Earnings Beats vs. Revenue Misses and Guidance Cuts

Lululemon’s Q2 2025 earnings report presented a mixed bag. The athleisure brand exceeded EPS estimates at $3.10, but revenue of $2.5 billion fell short of the $2.54 billion forecast [3]. The stock’s 17% premarket drop reflected investor concerns about the U.S. premium athletic wear market’s decline and intensifying competition [3]. CEO Calvin McDonald attributed part of the challenge to external factors, including higher tariffs and the removal of the de minimis exemption, which reduced gross profit by $240 million [2].

The company’s revised full-year guidance—projecting revenue of $10.85 billion to $11 billion (2–4% growth)—marked its second downward revision in three months [1]. This pattern of guidance cuts has eroded confidence, with analysts slashing price targets and the stock now down 46% year-to-date [1]. Lululemon’s case illustrates how even established brands can struggle to maintain growth in saturated markets, particularly when macroeconomic headwinds amplify competitive pressures.

Broader Implications for Investors

The experiences of Figma and Lululemon highlight two critical risks for newly public companies:
1. Overvaluation in the Face of Decelerating Growth: High multiples often rely on the assumption of sustained hypergrowth. When growth slows, as with Figma, the market reacts swiftly to reprice expectations [1].
2. Management’s Role in Guiding Expectations: Lululemon’s repeated guidance cuts demonstrate the dangers of overpromising. As CNBC notes, investors punish companies that fail to align forecasts with operational realities [2].

Opportunities, however, exist for investors who can differentiate between temporary setbacks and structural challenges. Figma’s profitability and Lululemon’s international expansion plans suggest resilience. Yet, both companies must navigate competitive landscapes and macroeconomic shifts that could further test their models.

Conclusion

The IPO market’s current climate demands a nuanced approach to risk assessment. While Figma and Lululemon have faced significant headwinds, their cases offer valuable insights: investors must scrutinize not just growth metrics but also the sustainability of those metrics and the credibility of management’s guidance. As the market continues to recalibrate, companies that adapt their strategies—whether through product innovation or cost optimization—may yet regain investor trust.

Source:
[1] Figma Just Posted 41% Revenue Growth and Was Profitable [https://finance.yahoo.com/news/figma-just-posted-41-revenue-104252194.html]
[2] Lululemon (LULU) Q2 2025 earnings [https://www.cnbc.com/2025/09/04/lululemon-lulu-q2-2025-earnings.html]
[3] Earnings call transcript: Lululemon Athletica Q2 2025 beats ... [https://www.investing.com/news/transcripts/earnings-call-transcript-lululemon-athletica-q2-2025-beats-eps-forecast-stock-drops-93CH-4226090]
[4] Figma shares slump as earnings miss lofty post-IPO ... [https://www.reuters.com/technology/figma-shares-slump-earnings-miss-lofty-post-ipo-expectations-2025-09-04/]