Has Figma experienced a threefold surge in value following its IPO, prompting the question of whether it's worth purchasing now?
Figma, the innovative design platform, made a splash with its 2025 Initial Public Offering (IPO). The stock soared an impressive 158% on its opening day, opening at $85 after pricing its IPO at $33. This dramatic surge came as the stock market was at all-time highs and tech stocks were favoured, fuelling investor enthusiasm for Figma's future potential.
The high valuation of Figma's stock can be attributed to several key factors. Firstly, the company's robust financials are a testament to its cost-efficiency. In Q1 2025, Figma reported $228.2 million in revenue—a 46% increase year-over-year—and $44.9 million in net income, tripling from the prior year. This strong performance earned Figma a Rule of 40 score of 63, well above the SaaS industry benchmark of 40, indicating solid combined growth and profits.
Moreover, Figma's market leadership is undeniable. With 13 million monthly active users and 11,100 enterprise customers, including 95% of Fortune 500 companies, Figma has established itself as a go-to design platform for enterprises. Its AI-driven product innovation, such as Figma Make for design generation and Dev Mode for developer collaboration, positions it as a forward-looking productivity and collaboration platform, tapping into the current AI-centric technology trend.
The IPO was highly anticipated, following a prior failed $20 billion acquisition attempt by Adobe in 2023. The surge in demand caused immediate trading halts and order fulfilment quirks, with shares nearly tripling on debut—a sign of intense market speculation and confidence.
However, some analysts caution that Figma's valuation might be stretched relative to fundamentals, labeling it as part of broader market hype around SaaS and AI companies. With a P/S ratio of around 70, the analyst suggests waiting for the P/S ratio to fall below 50 before considering Figma a buy.
Despite the high valuation, Figma deserves a healthy premium from the market, given its impressive quarterly numbers, 91% gross margin, and a 17% operating margin on a GAAP basis. The company's estimated total addressable market (TAM) of $33 billion also underscores its potential for growth.
The attempted acquisition by Adobe is considered a significant endorsement for Figma's IPO. Despite the high valuation, the analyst admits that Figma's IPO price valued the company for less than what Adobe offered in 2022. The combination of Adobe and Figma was feared to have a negative impact on competition in the design software industry.
With Figma's IPO, the company has secured a market cap of roughly $60 billion. The rare IPO that has all these qualities, Figma continues to capture the attention of investors and industry experts alike, promising an exciting future in the world of design technology.
- The high valuation of Figma, following its successful IPO, can be attributed to its robust financials, strong performance, and market leadership in design technology.
- Despite some analysts cautioning that Figma's valuation may be stretched, the company's impressive quarterly numbers, high gross margin, and large estimated total addressable market suggest a promising future.
- The attempted acquisition by Adobe in 2023 and the company's subsequent IPO in 2025, both of which valued Figma at high levels, underscore the company's potential for growth and its position as a leader in the design technology industry.
