Figma (FIG) is starting to show why artificial intelligence (AI) could be a tailwind rather than a threat to the business. The digital design platform has been one of the more painful software stories in the market, with shares down about 80% over the past 12 months, badly lagging the S&P 500 (SPX), which gained roughly 25%. That kind of decline usually reflects either a broken story or a market that has become too pessimistic. In Figma’s case, I lean toward the latter.
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I am bullish on Figma because the latest results suggest that AI is not simply disrupting its design workflow. Instead, AI appears to be increasing engagement, expanding product usage, and creating a new monetization layer. The debate is not settled, but Figma’s first-quarter performance gave the bulls real evidence.
The Quarter Was Hard to Ignore
Figma’s Q1 numbers were strong across the board. Revenue grew 46% year-over-year to $333 million, beating consensus by about $17 million. That growth actually accelerated from 40% in the prior quarter, which is impressive for a company already operating at more than a $1.3 billion annualized revenue run rate.
Profitability also came in much better than expected. Non-GAAP operating income was $52 million, representing a 15.6% operating margin, well above the consensus operating income of roughly $29 million. Adjusted free cash flow was also strong at $89 million, beating expectations by about $66 million.
The key point is simple: this is not a company showing demand fatigue. It is growing fast, expanding its large-value customer base, and still generating meaningful cash flow, even while investing aggressively in AI.
AI Is Driving Usage, Not Destroying It
The bear case against Figma is easy to understand. If AI can generate interfaces, prototypes, and front-end code, maybe fewer designers and developers need traditional design tools. That risk is real, and I do not want to dismiss it.
However, the latest data points tell a more bullish story. Figma Make, MCP, and Figma Weave helped drive Q1 strength. More than 75% of organization-level and enterprise users who exceeded their AI credit limits continued using credits, and more than 95% of those users remained active on the platform. That matters because it suggests users are not treating AI as a novelty. They are using it enough to hit limits, then continuing to engage.
Figma also said Pro teams that purchased AI credit add-ons had more seats per team and roughly 3x the average ARR spend of teams without add-ons. That is exactly the kind of signal I want to see: AI usage is not just engagement; it is starting to look like monetization.
Customer Metrics Still Look Excellent
Figma’s customer trends were another highlight. Paid customers reached 690,000, up 54% year-over-year. Customers generating more than $10,000 in ARR rose to 15,218, up 37%, while customers above $100,000 in ARR increased 48% to 1,525.
Net revenue retention for customers spending more than $10,000 reached 139%, up 300 basis points sequentially and 700 basis points year-over-year. For a software company, that is a powerful number. It says existing customers are expanding meaningfully, not just renewing.
I also like the multi-product angle. Around 76% of customers use two or more Figma products, and two-thirds of users are non-designers. That broadening matters. Figma is no longer only a design-tool company. It is becoming a collaboration and product-development platform.
Guidance Suggests Momentum Can Continue
Management raised full-year 2026 revenue guidance to $1.422 billion to $1.428 billion, implying about 35% growth and coming in well above consensus. Non-GAAP operating income guidance was also raised to $125 million to $135 million.
Yes, guidance implies some deceleration from Q1. That is not surprising after such a strong quarter. The company is also facing tougher comparisons, fading pricing tailwinds, and higher AI infrastructure costs. Still, even previously, management has guided conservatively and then beat expectations. I would not be shocked if the same pattern repeats.
Valuation Is Expensive, but Not Absurd for the Growth
Figma is not cheap. Even after the massive stock decline, it trades at a price-to-sales ratio of roughly 10.5x, versus a software sector median near 4x. Its price-to-operating-cash-flow ratio of near 50x is also elevated relative to peers.
That said, traditional valuation metrics do not fully capture the quality of this business. Figma is growing revenue above 40%, has strong retention, high gross margins, and real free cash flow. Its non-GAAP PEG ratio of around 0.72, below the sector median of around 1, suggests the valuation appears more reasonable once growth is accounted for.
This is not a value stock. It is a premium growth stock that has already been punished severely. At this point, I think the market may be overly focused on AI disruption risk and not giving enough credit to AI monetization potential.
Wall Street’s View
According to TipRanks, Figma has a Moderate Buy consensus rating, with three Buy, seven Hold, and no Sell ratings. Based on 10 Wall Street analysts offering 12-month price targets, the average price target is $33.57, implying 47.83% upside from the recent price of $22.71.
Conclusion
Figma still has risks. AI could change design workflows, gross margins are under pressure from increased AI usage, and competition from AI-native tools will not disappear. However, the first-quarter results show that Figma is not standing still. It is embedding AI into the workflow, monetizing usage, and expanding beyond its core design base.
After about 80% drawdown, I think the market has become too pessimistic. Figma’s latest numbers show a company with strong growth, improving AI adoption, expanding customers, and a platform that remains deeply relevant. I am bullish on Figma.