Figma Stock Slides Before Earnings
Shares in design software company Figma crashed 4% ahead of its February earnings report. The pre-earnings sell-off was reportedly driven by market concerns over potential client churn and margin pressure. Despite strong growth, analysts note that the stock appears undervalued as market multiples for the software sector have compressed.
The pre-earnings jitters follow a volatile period for Figma, which went public in July 2025. The IPO came after the collapse of a planned $20 billion acquisition by Adobe in December 2023, a deal undone by regulatory opposition in the UK and EU. As a result of the failed merger, Adobe paid Figma a $1 billion cash termination fee. Following the IPO, Figma's stock surged 250% on its first day of trading but has since fallen more than 80% from its peak. The company's valuation has compressed in a broader market correction for software-as-a-service (SaaS) companies, where median enterprise value to revenue multiples have fallen from a high of 18.6x in 2021 to a more historically average 6x-7x range in early 2026. Despite market concerns, Figma's last reported quarter (Q4 2025) showed strong underlying growth, with revenue climbing 40% year-over-year to $303.8 million. The company also posted a net dollar retention rate of 136%, indicating that existing customers significantly increased their spending, a metric that pushes back against the client churn narrative. Looking ahead, the company guided for 2026 revenue between $1.366 and $1.374 billion, implying 30% year-over-year growth and beating analyst estimates. However, projected non-GAAP operating margin is expected to drop to around 8% from 14% in Q4, as the company ramps up investment in artificial intelligence. This margin pressure is a key investor focus, as Figma plans to introduce a new consumption-based pricing model for AI credits in March to offset rising infrastructure costs. The stock's recent slide was also intensified by competitive fears after Google introduced a free, pro-grade image-generation model in its Gemini app, stoking concerns over Figma's long-term pricing power.
