Figma's stock falls as the company's AI push requires steep investments

By Christine Ji

While Figma's consumption-based AI monetization strategy is showing promise, the company's margins are taking a hit

Figma's newest products are still in beta testing and not being monetized yet.

Figma's artificial-intelligence design solutions are showing early traction, helping drive an earnings beat for the company on Wednesday. But to maintain that edge, the company will need to spend more in the coming quarters.

For the second quarter, Figma's revenue grew 48% from a year before to $370.1 million, above consensus analyst estimates for $352 million. The company posted adjusted earnings per share of 8 cents, surpassing the 4 cents projected by Wall Street.

Figma's stock (FIG) fell 15% after hours as investors scrutinized the company's growing AI-related expenses, which led to a $117.3 million GAAP loss from operations. This time last year, the company posted $2 million in income from operations. Its free-cash-flow margin also compressed to 14%, from 24% a year ago.

While the overall iShares Expanded Tech-Software Sector exchange-traded fund IGV has clawed back most of its losses from earlier this year, shares of Figma are down 26% since January.

CFO Praveer Melwani shared on the company's earnings call that the variance in year-over-year free cash flow was driven by increased inference spending, as well as expenses from the Config conference this June.

Figma aims to bring new capabilities to the platform "and become the canvas for full-stack creation," Melwani told MarketWatch. "There's going to be an opportunity here for us to both ... bring more and more folks into the process, and then also raise the ceiling, allowing folks to unlock real workflows that they've got in their head and productionize them across the platform."

For the third quarter, Figma guided for revenue between $373 million and $375 million, beating the $365 million expected by analysts. The guidance implies 36% year-over-year growth at the midpoint, which CEO Dylan Field attributed to limited visibility from newer products that are in beta testing. AI credit limits haven't been applied to these newer products yet, the company said.

Figma raised its full-year revenue guidance by $40 million. It now expects between $1.463 billion and $1.467 billion, exceeding the $1.437 billion consensus analyst view.

Figma launched its own design agent in May, which customers are using to automate repetitive layout tasks, write component documentation and enforce compliance, Melwani said. As of the end of July, over 50% of paid customers with more than $10,000 in annual recurring revenue were using the Figma agent on a weekly basis, according to the company.

Figma's first-party AI models can deliver comparable quality at lower costs and "will continue to represent a key area of investment and development in the second half of the year," Melwani shared on the earnings call.

As the company looks to unite designers, marketing and engineering teams, it's also monetizing its growing user base. Figma just finished its first full quarter of credit monetization after introducing the pricing policy in March. On top of standard seat-based pricing, customers purchase AI credit packages to run generative features.

The Figma agent in particular serves as an "opportunity for us to increase our overall number of credit-consuming users on the platform," Melwani said.

Net dollar retention rate, a measure of recurring revenue retained from existing customers over 12 months, was 136% at the end of the second quarter, thanks to customers purchasing additional licenses and AI credit add-ons.

"A number of the newer products that we just rolled out, either in beta or early-access programs, are not drawing down paid credits today," Melwani said on the earnings call. They require "an investment that we make in driving ubiquity of these newer services."

As a result, gross margins will fluctuate quarter to quarter in the near term. "And then in a period where we flip on monetization, we can then start to see the acceleration in gross profit," Melwani added.

-Christine Ji

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08-05-26 1812ET