The Figma IPO Is Coming — but Can It Justify Its Valuation?

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It’s been a profitable year for investors who’ve taken part in Initial Public Offerings (IPOs) such as CoreWeave, Circle Internet Group, and Chime Financial. Given this success, it’s not surprising that there’s much excitement surrounding the upcoming IPO of Figma. Positioned as the equivalent of Google Sheets in the design and user interface sector, Figma enables multiple individuals to work together on design projects. However, the company has expanded beyond just design collaboration; it now serves as a platform for businesses to transform ideas into software.

Figma, with its vision for artificial intelligence integration and crypto ownership, aims to go public for a valuation between $13.6 billion and $16.5 billion. The question remains whether the company’s promising business model warrants such a high evaluation.

A real game changer in design

In 2012, Dylan Field and Evan Wallace, both graduates of Brown University, embarked on a mission to enhance collaboration in the design process using technology. Their efforts culminated in the creation of Figma, a platform that enables multiple individuals to jointly work on design projects via the internet, while maintaining top-notch visual quality.

With technological progression, our platform evolved significantly, most notably with the introduction of Dev Mode in 2023. This feature enabled designers to convert their ideas into code without altering the design file, thereby fostering seamless collaboration between designers and coders. Such tools have become increasingly popular, and today, Figma boasts an impressive user base of 13 million unique monthly users, more than half of whom are not traditional designers. Remarkably, nearly two-thirds of Fortune 500 companies utilize Figma, underscoring its wide reach and independence from a small group of key customers.

Furthermore, Figma anticipates significant opportunities to incorporate advanced artificial intelligence (AI) capabilities into its operations. Figma Make, a feature they offer, enables users to swiftly convert conversational prompts into functional prototypes within minutes. The company envisions that the expansion of AI could favor them, as they foresee 1 billion new apps emerging globally by 2028, with many potentially turning to Figma for their branding and user interface needs.

Do the financials justify the valuation?

The main concern about these new IPOs is whether they are overvalued at their initial offering, or if their growth potential justifies such high valuations. For instance, Figma aims to raise $1 billion and price its shares between $25 and $28, which would give it a maximum valuation of $13.6 billion. However, according to Barron’s, the true valuation could be as much as $16.5 billion when all potential shares are taken into account.

In the year 2023, Figma announced earnings of $737.8 million in net profit, generated from $504.9 million in total revenue. Notably, this net income figure was inflated due to a $1 billion termination fee following Adobe’s unsuccessful attempt to purchase the company for a whopping $20 billion valuation, as regulatory obstacles arose. In 2024, Figma experienced substantial growth in revenue, reaching $749.0 million, but reported a loss of $732.1 million. This loss was primarily due to an increase in operating expenses, which nearly tripled to $1.54 billion for that year. The primary driver behind this surge in costs was a 356% rise in expenditure for research and development.

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For the past six months, Figma has seen a surge in revenue and moved into profitability. In the first quarter of 2025 alone, the company reported net income of $44.9 million on revenue of $228.2 million. Preliminary results for the second quarter show an anticipated operating income of up to $2.5 million, lower than the first quarter but still on a projected revenue of approximately $250 million. Given these figures, it seems likely that Figma could hit a billion dollars in annual revenue by the end of 2025.

Certainly, the competition in this area will be fierce given AI’s ability to create visual content and code. As a result, Figma might need to boost its operational costs to stay ahead in AI product development, which could potentially affect profitability. However, it’s worth noting that Figma has a robust financial position with approximately $330 million in debt and over $1.56 billion in cash, cash equivalents, and marketable securities on hand.

In simpler terms, when looking at Figma’s value compared to its sales and earnings, it appears overpriced. But in the AI industry, high valuations are common. Despite some concerns about overvaluation, Figma has promising revenue growth, signs of profitability, a healthy financial status, and great potential in AI. However, given recent IPO trends, there’s a possibility that Figma’s initial offering will be highly sought-after, causing the stock price to rise dramatically on its first day. This could potentially make the stock even more expensive for regular investors who can’t buy it right away.

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2025-07-24 18:31