Figma Stock Is Down 85% From Its Peak, The Business Grew 40%. Something Doesn’t Add Up

With the practiced composure of someone who had been preparing for this moment for a very long time, Dylan Field stood on the floor of the New York Stock Exchange and rang the opening bell on July 31, 2025. Figma’s initial public offering (IPO) saw a 229 percent increase. When the opportunity to invest in the most popular collaborative design tool in the world finally presented itself, investors jumped at the chance. The stock hit $142.92 by August. It was trading at slightly more than $20 by April 2026. During that same period, the company’s revenue increased by 40%. The discrepancy between the performance of the company and the behavior of the stock is not insignificant. It’s the whole tale.

The only accurate description of what has happened to Figma stock since its post-IPO peak is the collapse, which cannot be linked to either a competitive rout or a product failure. By all accounts, the Q4 2025 results were impressive: $303.78 million in revenue exceeded projections by 3.62 percent, and earnings per share surpassed projections by almost 24 percent. The company is projecting full-year 2026 revenue of $1.37 billion, growing at a rate that is about three times faster than Adobe’s. Large enterprise clients have a net dollar retention rate of 136%, which indicates that current clients are spending significantly more annually rather than less. That is not a picture of a failing company. Nevertheless, the stock was trading close to its 52-week low of $19.82 as of early April. There is obviously a problem with both the product and the price.

The majority of the decline was caused by two forces that came in quick succession. The first was the lockup expiration on January 27, 2026, which was a planned event that was widely anticipated but nevertheless caused a significant surge in shares to enter the market at the same time. After years of holding, early investors and staff members were finally allowed to sell, and enough of them did so to significantly affect the price.

The second, more persistent force was what Wall Street traders began referring to as the “SaaSpocalypse”—a widespread sell-off in software-as-a-service stocks motivated by the concern that subscription software would eventually become obsolete due to AI tools that could perform tasks previously performed by software workers. The iShares software ETF entered a bear market. Intuit, Salesforce, and ServiceNow all suffered double-digit losses. Figma received a harsher punishment than most because it was situated right at the nexus of design and AI threat.

When Google updated Stitch, its AI-powered design tool that creates high-fidelity user interface designs from natural language prompts, including voice input, in mid-March 2026, it was the precise moment that best encapsulated the market’s anxiety. Google dubbed the strategy “vibe designing,” purposefully mimicking the “vibe coding” movement that had already caused a stir in the developer tools industry. It’s free to stitch. It doesn’t require a subscription. Figma’s stock fell 12% in 48 hours, falling 8% on the day of the announcement and an additional 4% the following day. Because Adobe’s business encompasses photography, video, and enterprise publishing—a wider field that doesn’t depend as much on UI design as Figma’s does—Adobe, which faces a similar threat, saw a less severe decline.

Instead of acting in a panic, Figma has responded to this competitive pressure in a calculated manner. “Code to Canvas” is a feature that transforms code created by Claude Code into fully editable Figma designs. The company announced this partnership with Anthropic in February 2026. The reasoning is straightforward: if AI agents are going to create the initial draft of every interface, Figma should be the location where teams edit, review, and approve that draft instead of being completely ignored.

Additionally, the company introduced an MCP server integration that lets AI agents—like GitHub Copilot—create and edit designs right inside Figma’s canvas. It is still genuinely unclear if this approach is successful in repositioning Figma as the editing and collaboration layer for AI-generated work rather than the generation layer itself. It’s possible that the wager pays off and Figma ends up controlling a bigger portion of the design process than it previously did. It’s also possible that AI tools advance so quickly that the refinement stage eventually vanishes as well.

As you watch Figma navigate this specific moment, you get the impression that they are an excellent company trapped in a story that doesn’t quite fit. Millions of designers, product managers, and engineers at companies that have built their entire development process around Figma’s canvas use the product on a daily basis. Operational stickiness like that doesn’t go away very fast.

The 136 percent net retention rate provides quantitative proof of what the majority of Figma users already know from personal experience: leaving the platform after your team has established procedures around it is actually disruptive. That moat is not insignificant.

Looking at the same scenario, Trefis analysts wrote that the business looks good and the chart looks ugly, framing the current price as the kind of entry point where low cost and certainty rarely arrive together. Figma is currently trading at its most appealing valuation since its founding, at about 6.5 times projected 2027 sales. There is currently a gap between what the financials say and what the stock price suggests due to the market’s lack of patience with SaaS. Investors who are willing to sit with real uncertainty may eventually find this gap to be highly intriguing.