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Figma Stock Plunges 27.4% YTD: Should Investors Buy, Sell or Hold?
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Key Takeaways
FIG shares are down 27.4% YTD, lagging the industry's decline while trading at a premium valuation.
FIG faces pressure from Adobe, Microsoft and Atlassian as AI investment and infrastructure costs rise.
FIG relies on seat expansion for growth, leaving revenues vulnerable if enterprise spending slows.
Figma (FIG - Free Report) shares have lost 27.4% year to date (YTD), underperforming the Zacks Internet - Software industry’s decline of 6.2%.
Figma YTD Performance Chart
Image Source: Zacks Investment Research
Despite its decline in share price, FIG stock has been trading at a premium, as reflected by the Value Score of F. Figma stock is trading at a premium, with a forward 12-month Price/Sales of 7.8X compared with the Computer and Technology sector’s 4.06X.
Image Source: Zacks Investment Research
The underperformance and overvaluation of FIG stock raises the question: Should investors buy, sell or hold Figma stock? Let’s discuss the fundamentals in detail.
Figma Faces Stiff Competitive Challenges
Figma operates in a crowded design and product workflow market with established incumbents and newer AI-native tools, including AI coding tools, AI design tools, AI website builders and AI product-development platforms.
Figma faces constant competitive challenges from established players, including Adobe (ADBE - Free Report) , Microsoft (MSFT - Free Report) and Atlassian (TEAM - Free Report) . Adobe’s Firefly and Microsoft Copilot have been playing a crucial role in driving their respective top-line growth and profitability, causing them to burn into Figma’s market share.
Microsoft’s Teams and Office 365 suite provides collaboration and enterprise workflows that directly compete with Figma across whiteboarding, developer workflows, AI productivity, and enterprise adoption, leaving Figma with all these areas to defend. Furthermore, Adobe recently partnered with Google Cloud to enhance Adobe’s creative ecosystem with AI.
Atlassian is focusing on adding generative AI features to some of its collaboration software. Atlassian is partnering with Google Cloud to bring Atlassian’s AI-powered teamwork platform, including Jira, Confluence and Loom, onto Google’s AI-optimized infrastructure. Maintaining product leadership in this marketplace requires sustained investment and higher operating costs.
The high infrastructure cost, paired with AI serving costs, can keep FIG’s margins below prior peaks even as revenues grow. The higher usage of advanced AI models increases inference expenses for Figma, and its gross margins could come under pressure if AI usage grows faster than monetization. For instance, Figma’s non-GAAP gross margin was 82% in the first quarter of 2026, below the high-80% range reported in late 2025. Figma’s bottom line for 2026 is pegged at 23 cents per share, indicating a year-over-year decline of 23%. The estimates have remained unchanged for 60 days.
Image Source: Zacks Investment Research
FIG’s Dependence on Seat Expansion Poses Risks
Figma's growth continues to be driven by strong seat expansion across its customer base, supported by large enterprise agreements, increasing adoption of Full seats by developers, and broader usage of the platform across functions beyond design teams. Management highlighted that organizations are expanding Figma usage among product, engineering and business teams, contributing to the company's industry-leading 139% net dollar retention rate.
However, this growth model also creates a potential risk. If hiring activity slows, enterprise technology budgets come under pressure, or companies reduce software spending amid a weaker economic environment, seat expansion could moderate. Because Figma's retention and revenue growth are heavily dependent on customers adding more users and expanding platform adoption, any slowdown in seat growth could negatively impact net dollar retention and overall revenue growth rates.
Furthermore, FIG’s seat plus credit model introduces new consumption dynamics that can increase quarter-to-quarter variability. Management emphasized that guidance reflects areas of higher confidence and that it will observe sustained post-enforcement trends before fully incorporating benefits where visibility is limited.
Co-termed credit packs can help plan for repeat usage, while pay-as-you-go supports burst demand but can add variability to billings and renewals. The pricing and packaging changes introduced in March 2025 will also fade through the back half of 2026, which can make growth comparisons less supportive as cohorts normalize under the new credit framework.
Conclusion
Figma continues to deliver impressive revenue growth, strong customer retention and growing AI adoption. However, intense competition from larger technology companies, rising AI infrastructure costs, premium valuation, declining earnings expectations and heavy reliance on seat expansion create meaningful risks.
With growth facing tougher comparisons and visibility around AI monetization still evolving, the risk-reward profile appears unfavorable at current levels. Investors may be better served waiting for a more attractive entry point or clearer evidence of sustained profitability before considering exposure to FIG stock. Considering these factors, we suggest that investors should stay away from this Zacks Rank #4 (Sell) stock right now.
View the Zacks #1 Rank List
Image: Bigstock
Figma Stock Plunges 27.4% YTD: Should Investors Buy, Sell or Hold?
Key Takeaways
Figma (FIG - Free Report) shares have lost 27.4% year to date (YTD), underperforming the Zacks Internet - Software industry’s decline of 6.2%.
Figma YTD Performance Chart
Image Source: Zacks Investment Research
Despite its decline in share price, FIG stock has been trading at a premium, as reflected by the Value Score of F. Figma stock is trading at a premium, with a forward 12-month Price/Sales of 7.8X compared with the Computer and Technology sector’s 4.06X.
Image Source: Zacks Investment Research
The underperformance and overvaluation of FIG stock raises the question: Should investors buy, sell or hold Figma stock? Let’s discuss the fundamentals in detail.
Figma Faces Stiff Competitive Challenges
Figma operates in a crowded design and product workflow market with established incumbents and newer AI-native tools, including AI coding tools, AI design tools, AI website builders and AI product-development platforms.
Figma faces constant competitive challenges from established players, including Adobe (ADBE - Free Report) , Microsoft (MSFT - Free Report) and Atlassian (TEAM - Free Report) . Adobe’s Firefly and Microsoft Copilot have been playing a crucial role in driving their respective top-line growth and profitability, causing them to burn into Figma’s market share.
Microsoft’s Teams and Office 365 suite provides collaboration and enterprise workflows that directly compete with Figma across whiteboarding, developer workflows, AI productivity, and enterprise adoption, leaving Figma with all these areas to defend. Furthermore, Adobe recently partnered with Google Cloud to enhance Adobe’s creative ecosystem with AI.
Atlassian is focusing on adding generative AI features to some of its collaboration software. Atlassian is partnering with Google Cloud to bring Atlassian’s AI-powered teamwork platform, including Jira, Confluence and Loom, onto Google’s AI-optimized infrastructure. Maintaining product leadership in this marketplace requires sustained investment and higher operating costs.
The high infrastructure cost, paired with AI serving costs, can keep FIG’s margins below prior peaks even as revenues grow. The higher usage of advanced AI models increases inference expenses for Figma, and its gross margins could come under pressure if AI usage grows faster than monetization. For instance, Figma’s non-GAAP gross margin was 82% in the first quarter of 2026, below the high-80% range reported in late 2025. Figma’s bottom line for 2026 is pegged at 23 cents per share, indicating a year-over-year decline of 23%. The estimates have remained unchanged for 60 days.
Image Source: Zacks Investment Research
FIG’s Dependence on Seat Expansion Poses Risks
Figma's growth continues to be driven by strong seat expansion across its customer base, supported by large enterprise agreements, increasing adoption of Full seats by developers, and broader usage of the platform across functions beyond design teams. Management highlighted that organizations are expanding Figma usage among product, engineering and business teams, contributing to the company's industry-leading 139% net dollar retention rate.
However, this growth model also creates a potential risk. If hiring activity slows, enterprise technology budgets come under pressure, or companies reduce software spending amid a weaker economic environment, seat expansion could moderate. Because Figma's retention and revenue growth are heavily dependent on customers adding more users and expanding platform adoption, any slowdown in seat growth could negatively impact net dollar retention and overall revenue growth rates.
Furthermore, FIG’s seat plus credit model introduces new consumption dynamics that can increase quarter-to-quarter variability. Management emphasized that guidance reflects areas of higher confidence and that it will observe sustained post-enforcement trends before fully incorporating benefits where visibility is limited.
Co-termed credit packs can help plan for repeat usage, while pay-as-you-go supports burst demand but can add variability to billings and renewals. The pricing and packaging changes introduced in March 2025 will also fade through the back half of 2026, which can make growth comparisons less supportive as cohorts normalize under the new credit framework.
Conclusion
Figma continues to deliver impressive revenue growth, strong customer retention and growing AI adoption. However, intense competition from larger technology companies, rising AI infrastructure costs, premium valuation, declining earnings expectations and heavy reliance on seat expansion create meaningful risks.
With growth facing tougher comparisons and visibility around AI monetization still evolving, the risk-reward profile appears unfavorable at current levels. Investors may be better served waiting for a more attractive entry point or clearer evidence of sustained profitability before considering exposure to FIG stock. Considering these factors, we suggest that investors should stay away from this Zacks Rank #4 (Sell) stock right now.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.