Figma (NASDAQ: FIG) is preparing to make its grand entrance onto the stock market stage on July 30. It’s been a journey filled with more twists than a plot in an epic novel. The company was supposed to be acquired by Adobe (ADBE) for a hefty $20 billion back in 2023, but the deal was abruptly blocked by regulators, citing concerns that such a merger would stifle competition in the design software world. And just like that, Figma’s IPO became the next chapter in its saga.
In the aftermath of this regulatory hurdle, Figma didn’t just sit back and sulk. No, it doubled down. The company introduced a suite of new AI-powered features and kept the growth train chugging along. Now, as Figma prepares for its public debut, it seems stronger than ever. Fitting, considering its core business is all about helping designers make the world a more visually appealing place.
Figma is often lauded for its pioneering approach to user interface and user experience (UI/UX) design. Its clientele spans some of the most innovative companies on the planet, including Netflix, Uber Technologies, and even the colossal Alphabet, Google’s parent company. The secret to Figma’s rise? The software isn’t just another heavy desktop application. It’s web-based, accessible from anywhere, and that’s been its magic sauce in the recipe for success.
Adobe, of course, noticed Figma’s rise from a distance and, ever the opportunist, made a play to gobble it up. But when that failed, it found itself in the position of being Figma’s biggest competitor — a position that, frankly, has likely caused Adobe to lose more sleep than it cares to admit. So the question we find ourselves asking is: Can Figma, a much smaller company, really compete with the mammoth that is Adobe?
Figma’s IPO: The Moment of Truth
With a target valuation of $18.8 billion, Figma’s upcoming IPO is being greeted with cautious optimism. It’s a bit less than the sum Adobe was prepared to spend three years ago, but that’s hardly a cause for concern. In fact, it might just be the perfect valuation to pique investors’ interest.
Over the past four quarters, Figma has reported a revenue of $821 million, which puts it at a price-to-sales ratio of 23. Now, for those of you who don’t hang around financial reports all day, that may sound a bit high, but it’s worth noting that Figma’s growth has been nothing short of impressive. And the company is not only growing; it’s profitable. In fact, it’s profitable to the point where it could give many larger, older software companies a run for their money.
Figma’s revenue has increased by a stunning 46% year over year. It’s also operating at a GAAP (Generally Accepted Accounting Principles) margin of 17%, which is respectable in any industry, let alone the cutthroat world of design software. The company’s gross margin? A jaw-dropping 91%. And with a net dollar retention rate of 132%, it means that its existing customers are spending more, not less, on the platform. This is the financial equivalent of finding a rare bird in your backyard.
Meanwhile, Adobe, the Goliath of design software, recorded $21.5 billion in revenue for fiscal year 2024. It’s a massive company with massive resources, which, depending on how you look at it, either makes Figma’s task harder or makes its potential upside even more exciting. Adobe’s dominance indicates a huge market, which in turn means there’s plenty of room for a nimble player like Figma to make its mark.
Figma estimates its addressable market at a cool $33 billion. That gives it a vast playing field, provided it can carve out a piece of the pie from Adobe. Now that’s something to chew on.
The Battle of Design Software: Adobe vs. Figma
For those keeping score at home, Figma is up against Adobe XD, a tool that Adobe launched in an attempt to win back some of the market share Figma so swiftly grabbed. But despite Adobe’s best efforts, Figma has proven itself to be more than a worthy adversary.
In fact, a survey of comments from various corners of the internet — Reddit, naturally, being one of them — suggests that designers tend to prefer Figma over Adobe XD. It’s not a resounding endorsement, but it’s enough to suggest that Figma has captured the imagination of the design community in a way that Adobe may never have anticipated.
Figma’s growth has not just been about adding new customers. The company has evolved its product suite to cover nearly every stage of the design process, from brainstorming to final product launch. In fact, 76% of Figma’s customers now use at least two products from the company, indicating that Figma is doing something right when it comes to cross-selling and expanding its platform’s reach.
As a result, investors can expect Figma to continue to innovate, launching new products and services that will further chip away at Adobe’s lead in the space. The company is committed to evolving as the market does, and that’s a good sign for anyone who’s considering putting their money behind it.
Should You Buy Figma?
Let’s be clear: IPOs are notoriously volatile. There’s no crystal ball here, no magic potion that guarantees success. But if there’s one thing Figma has shown, it’s that it knows how to innovate, grow, and adapt. The valuation of $18.8 billion is a reasonable starting point, especially considering the prior interest from Adobe. And unlike some cloud software companies that have yet to turn a profit, Figma is already in the black — a rare feat in the startup world.
If Figma can continue to innovate, expand its product lineup, and maintain its impressive growth, there’s a solid chance that its IPO will be the start of something very promising. While it’s impossible to predict the market’s whims, Figma’s fundamentals suggest that, if you’re looking for a solid long-term bet, this could very well be it.
But as always, caveat emptor. Or, as they say in the design world, “Measure twice, cut once.” 📈
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2025-07-29 16:37