Is Beaten-Down Figma Stock a Buy as Revenue Surges?
Key Points
Figma turned in another strong quarter with revenue growth accelerating.
The design software company is seeing nice momentum with its AI offerings.
Now, the question is whether it can gain the confidence of investors.
Shares of Figma (NYSE: FIG) jumped last Friday (May 15) after the collaborative design platform company reported that its first-quarter revenue surged. However, the stock is still down more than 35% on the year, as the company has been dragged down by the software-as-a-service (SaaS) sell-off.
Let's dig into the company's results and prospects to see if now is a good time to buy the stock.
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Strong revenue growth continues
It's hard to fault Figma for its struggling stock price following its initial public offering (IPO) last year, as operationally the company has been hitting it out of the park. This continued in the first quarter, as the company's revenue growth accelerated, rising 46% to $333.4 million, up from the 40% growth it saw in Q4 and 38% growth in Q3. Adjusted earnings per share (EPS) rose from $0.03 to $0.10.
The growth was driven by both seat expansion and the continued adoption of the company's artificial intelligence (AI) products. Meanwhile, the company began enforcing AI credit limits on all seats in mid-March. It said the change has been positive, with 95% of users who were over the limits still active on the platform and 75% continuing to use credits, with many purchasing additional ones.
Figma continues to see growth from both new and existing customers. Its number of paid customers climbed 54% year over year to 690,000. Meanwhile, its net revenue retention (NRR) rate for customers with more than $10,000 in annual recurring revenue came in at an impressive 139%, its highest level in two years. This metric measures how much additional money, after any churn, existing customers of one year or longer spend.
Figma upped its full-year revenue forecast, predicting that its 2026 revenue would come in between $1.422 billion and $1.428 billion, representing about 35% year-over-year growth at the midpoint of its guidance. That's up from a prior outlook of between $1.366 billion and $1.374 billion. For Q2, it is looking for revenue between $348 million and $350 million, representing 40% year-over-year growth at the midpoint.
Image source: The Motley Fool.
Is the stock a buy?
Figma turned in an exceptional quarter of strong revenue growth. And while there remains a narrative that it will be an AI loser, it continues to demonstrate that AI is driving growth.
With its sell-off this year, the stock now trades at a forward price-to-sales (P/S) ratio of around 8.5 times 2026 analyst estimates and 7.2 times the 2027 consensus. That's attractive for a growth stock increasing its revenue at a 35%-plus clip. As such, I think investors can add shares of the stock at these levels.
Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Figma. The Motley Fool has a disclosure policy.