Figma (FIG) Is a Strong Business, but Is the Stock Worth Buying Now?

Figma (FIG), a digital design and collaboration platform, is a strong business, but with the stock down more than 45% year-to-date, the question is not whether Figma is a good business. It is whether the current setup is attractive enough to warrant a bullish stance. For now, I am staying on the sidelines. The company continues to deliver solid growth, high retention, and expanding product capabilities across design, prototyping, and development workflows with artificial intelligence (AI) features.

However, an unresolved AI-driven competitive debate, a premium valuation relative to many software names, and my own fair value work pointing to only limited upside justify the neutral stance for now.

Figma’s Impressive Execution Continues

There is a lot to like about the business itself. Figma delivered a strong fourth quarter, with revenue of $303.8 million, up 40% year-over-year, ahead of expectations. Non-GAAP gross margin came in at 86.2%, while operating margin reached 14.5%, also better than expected. Those are impressive numbers for a company still investing aggressively in product expansion and AI.

Customer metrics were strong as well. Customers with more than $10,000 in annual recurring revenue (ARR) rose 32% year-over-year to 13,861. Customers above $100,000 ARR increased 46%, and the number of customers above $1 million ARR reached 67. Perhaps most importantly, net dollar retention for the over $10,000 ARR cohort climbed to 136%, up from 131% the prior quarter. That tells me Figma is not just winning logos; it is expanding successfully inside accounts.

The broader product story also looks encouraging. Management said 76% of customers use two or more Figma products, and roughly two-thirds of its 13 million monthly active users (MAUs) are non-designers. That matters because it shows the platform is growing beyond its original design niche and becoming more relevant to developers, product managers, marketers, and other stakeholders. In software, that kind of expansion usually supports better long-term monetization.

The Bull Case Is Easy to Understand

Figma’s appeal starts with the size of the opportunity. The company’s total addressable market (TAM) is around $33 billion, and the business is still less than 4% penetrated against that TAM. That helps explain why bulls remain excited even after the stock’s volatility.

The company also has real product advantages. Its browser-based architecture, real-time collaboration, growing ecosystem, and embedded AI workflows have all helped it build a loyal user base and strong brand in digital design. In many ways, Figma looks like the standard platform for modern collaborative design work. 

On top of this, AI could become a meaningful revenue driver. Management noted that about 75% of paid customers with more than $10,000 in ARR are now consuming AI credits weekly. Figma Make adoption also appears strong, with weekly active users up more than 70% quarter-over-quarter and more than 80% of full-seat Make users also using Figma Design. 

Yet the AI Risk Is Real, and I Can’t Get Bullish

This is the heart of the debate. Figma is clearly leaning into AI, but AI is also the biggest long-term risk to its moat. The bear case is not hard to see. If generative AI makes it easier to create interfaces, automate workflows, or reduce the number of people needed in design and front-end development, then seat growth could slow. That matters because Figma’s model is still heavily tied to seats and expansion. If AI lets smaller teams do more, the platform could remain valuable while monetization growth becomes less impressive.

There is also the competitive angle. Figma’s core layer is powerful, but it remains a relatively lightweight software layer compared with some mission-critical back-office systems. If large language model vendors, AI-native tools, or even broad platforms like Google (GOOGL) push deeper into design generation and product creation, Figma may have to fight harder to defend pricing and growth. 

That is why I think the stock deserves caution even after the drawdown. The business is performing well, but the long-term shape of the market may be changing faster than many investors want to admit.

Valuation Keeps Me from Turning Positive

This is another reason I remain neutral. I calculated fair value using 12 methods, including price-to-sales, EV/EBITDA, and discounted cash flow (DCF), and arrived at roughly $20/share, implying about 6% upside from the last price of $18.92. That is not a huge red flag, but it does suggest the stock is not obviously cheap even after a sharp fall.

Wall Street’s View

According to TipRanks, the average rating on FIG is Moderate Buy, with three Buy, eight Hold, and no Sell ratings. Based on 11 Wall Street analysts offering 12-month price targets for Figma, the average target is $40.25, which implies roughly 112.74% upside from the last price of $18.92.

Conclusion

I am neutral on Figma because both sides of the story are compelling.

On one hand, this is a best-in-class product with strong execution, excellent customer metrics, expanding product adoption, and a large market still ahead of it. On the other hand, AI is not just an opportunity here; it is also the main strategic threat. The risks around seat growth, competitive intensity, and long-term moat durability are still largely unresolved for me to get comfortable chasing the stock.

So while I can easily see why long-term bulls remain interested, I think the right stance today is to stay on the sidelines. Figma is executing well, but the AI debate is only beginning, and I would rather wait for more clarity before turning bullish.