Image Source: CNBC
In a dramatic turn of events, Figma stock saw a significant plunge of 13% in extended trading on September 3, following the release of its first earnings report as a public company. Despite surpassing revenue expectations for the second quarter of the fiscal year, investor sentiments seemed to sway negatively.
Figma’s First Earnings Report: Key Highlights
In its debut earnings report, Figma disclosed earnings per share that broke even, alongside revenue figures reaching $249.6 million, which outpaced analyst expectations of $248.8 million. This represented an impressive year-over-year growth of 41%, up from $177.2 million reported in the same quarter last year.
Interestingly, although Figma reported a net income of $846,000 in this quarter, it had previously faced a staggering loss of $827.9 million in Q2 2024. Additionally, the company’s adjusted operating income came in at $11.5 million, exceeding prior forecasts.
Outlook for Future Growth
Looking ahead, Figma has provided optimistic guidance estimates. For the third quarter, the company forecasts revenues between $263 million and $265 million. This growth rate represents an approximate 33% increase at mid-range estimates, higher than the consensus of $256.8 million.
Figma projects adjusted operating income in the range of $88 million to $98 million for the full year, targeting revenues that exceed $1.02 billion. This estimate indicates around 37% growth, significantly above the expected $1.01 billion.
Innovative Products Driving Growth
One factor contributing to this growth is Figma’s introduction of innovative features such as Figma Make, an AI-powered tool that generates website designs based on user descriptions, and Figma Sites, which transforms designs into working websites. Additionally, the company recently acquired vector graphics startup Modyfi and content management system startup Payload, aiming to enhance its technology portfolio further.
According to Dylan Field, co-founder and CEO of Figma, despite concerns across the software industry regarding the impact of AI on creativity and design, he believes that the demand for the human touch in design will continue to grow.
Lock-up Expiration and Future Challenges
Figma experienced a historical moment after its IPO, where shares surged up to 229%, but the company now faces challenges as a lock-up period for 25% of employees’ stock is set to expire after the close of the market on September 4. However, investors holding about 35% of outstanding Class A stock have agreed to an extended lock-up that will last until August 2026.
The company has reported a strong 129% net retention rate, reflecting an ongoing commitment from existing customers, although this metric has seen a slight dip from the previous quarter’s 132%.
Despite these positive indicators, Figma’s current stock price trajectory has raised questions among analysts and investors alike. On the day of the report, Figma’s stock closed at $68.13, significantly up from its IPO pricing of $33.
Looking Forward
As analysts digest the recent financial results and the outlook for Figma, executives will engage in a conference call to discuss the implications of the report later today. The company aims to provide clarity and insight regarding its future strategies and product innovations.
Frequently Asked Questions about Figma Stock
What caused Figma’s stock to drop sharply?
Despite surpassing revenue expectations in its earnings report, investor sentiment led to a 13% decline in Figma’s stock price.
What were Figma’s earnings for the second quarter?
Figma achieved breakeven earnings per share and reported revenues of $249.6 million, which was above analysts’ expectations.
What is Figma’s forecast for future growth?
Figma expects third-quarter revenues between $263 million and $265 million, indicating continued growth.
How does Figma plan to innovate?
Figma has launched new AI-driven products and made strategic acquisitions to enhance its design software offerings.
