Figma in the AI Era:
Long term winner, or legacy incumbent in the making?

Before we dive deep into Figma, let’s get into the tech industry as a whole, specifically SaaS businesses. As everyone who has used the internet in the past three years knows, AI is the only thing the industry cares about right now. Predictions on where this leads have been varied, to say the least. However, one narrative I believe is real is the impact AI will have on the B2B SaaS business model.

The problem for these products is that AI makes it exponentially easier to build software. If a company sees its costs for SaaS tools rise, there will be a tipping point where it becomes cheaper (and I’d argue eventually better, due to customization) to build an in-house solution using tools like Claude Code, Cursor, and the Gemini CLI, or to utilize open source software. I’ve seen this firsthand while building this very website. Things I could never have built on my own in the past now take a weekend and a few well-phrased prompts. Because AI is inherently rules-based, it is only going to get better at coding.

So, what does this mean for Figma? Is it screwed because it’s a SaaS business?

Well, yes and no, but more no than yes. Its current business model, charging per seat/license, will likely not be tenable in the long term as AI agents start doing the heavy lifting. In the future, Figma will be constrained on pricing power as that “build vs. buy” tipping point continually shifts downward. As AI costs and agentic coding abilities follow their own version of Moore’s Law, the rent for software becomes harder to justify.

However, a big advantage for Figma is the Jevons paradox. For the non-econ nerds, Jevons paradox occurs when a resource becomes more efficient to use, leading to more total consumption of that resource, not less. We’ll likely see significantly more people doing design work in the future. As the time needed to actually write code shrinks, the premium shifts entirely to the creative work and the architecture. If you can vibe code an entire app in a weekend, you’re going to spend a lot more time in Figma making sure that vibe is actually good.

Another buoy to Figma is that its users seem to genuinely love the product. Love for a productivity tool is rare, but when it happens, it builds great businesses. Think back to the early days of Salesforce or Excel. These weren’t just tools, they became the bedrock of their respective industries because they solved a fundamental problem so elegantly that the users became the marketing department.

Compare that to Adobe , where there’s less love and more lock-in and inertia. I believe Adobe initially grew because their products were loved, but enshittification seems to be the law of entropy for most software. Today, people use Creative Cloud because they have to, not always because they want to. Figma is still in that magical phase where growth is driven by genuine utility and a superior workflow rather than hostage-taking. This gives them a massive head start in the AI transition where users most likely prefer Figma to win because they actually like using it.

The Business

Let’s take a look at the actual business. Today, Figma is almost purely a seat-based subscription play. They have a free tier to hook the hobbyists, but the real money comes from the Professional, Organization, and Enterprise tiers. Like most SaaS businesses prior to the AI mania, it was a high-margin, predictable cash machine growing like wildfire. Now that we’re in the middle of the AI transformation however, things are looking a bit…different. Let’s dive into some numbers.

• Revenue and Growth: Figma is putting up solid revenue numbers, having just crossed the $1 billion ARR mark per their latest Q3 2025 filing. Their annual growth rate from 2024 to 2025 was roughly 40%. This is a deceleration from their historical hyper-growth standards, but not alarmingly so given the law of large numbers. Their P/S ratio, based on these revenues and today’s market price of ~$26, sits at approximately 12.8x (we’ll touch on this more later).
• Net Dollar Retention (NDR): One very interesting metric is their NDR for large customers (>$10k spend), which sits at 131%. This confirms that once a company adopts Figma, they deepen their usage over time. However, this metric will be the one to watch as they hit the “Saturation Wall.” Figma has effectively conquered the pro designer market. To maintain this retention and expansion, they must successfully cross the chasm to non-design roles (e.g., product managers, developers).
• New Product Offerings: To fuel that next leg of growth, Figma is aggressively expanding its portfolio. In 2025 alone, they launched four new products: Figma Sites (publishing), Figma Make (AI prototyping), Figma Buzz (marketing assets), and Figma Draw (vector editing). These standalone bets are designed to widen the funnel beyond the core UX designer. Success here depends on their ability to continue making products that their users love (which I think they can do).
• Operating Margins: Historically, Figma operated with 90%+ gross margins, fairly standard for SaaS. However, in the first nine months of 2025, that number compressed to the 83-86% range. We’re seeing the real impact of AI here. Running generative models for tools like Figma Make requires heavy compute and inference spend, fundamentally altering the unit economics of the business compared to the pre-AI era.
• The Dilution Dilemma: The most immediate pressure on the stock price is supply. The IPO lock-up period expired on January 27, 2026, flooding the market with roughly 37 million shares. But we aren’t done yet. Per their filings, another 20% of lock-up shares will be released after the 2025 annual earnings report, followed by another 27.5% after Q1 2026 earnings. This scheduled supply glut will likely keep a lid on price appreciation in the short to medium term (more on this later).

The Opportunity

Now that we’ve established the baselines, let’s talk about where I think Figma is going.

As mentioned earlier, Figma currently trades at a P/S ratio of roughly ~13x. To put that in perspective, let’s look at other big-name SaaS companies in their moderate-to-high growth phase. Historically, Datadog has traded in the ~14-16x range, Snowflake hovered around ~14-18x, and Cloudflare , typically a premium asset, often commands multiples north of ~20x.

At ~13x, Figma is entering territory that looks enticing for a company growing at 40% with best-in-class retention. However, it’s not trading at a valuation discount by accident. Everyone in the SaaS space is seeing their margins compress as they scramble to integrate AI. Either they are spending more on third-party AI services or shelling out for the raw infrastructure to build their own. Figma falls squarely in the latter bucket, and that capital intensity is acting as a drag on its multiple; investors fear that their recent margins will be their forever margins.

Beyond the balance sheet, there is the existential fear that AI-native tools like Flora, V0, or even ChatGPT will make the platform moot. If you can simply prompt a design into existence, you don’t need a Figma seat.

But I think the opposite is true. To understand why, let’s look at another company that went through a similar fear cycle, Google .

Remember when ChatGPT launched, and the narrative shifted overnight to “Google is dead”? The logic was that LLMs would replace search engines, and Google’s ad business would crumble. But then the narrative shifted again. As Google rolled out its own AI offerings while growing its core Ads business, the market realized that Google was actually in a prime position. Why? Data and distribution. Google sits on top of what is probably the richest trove of data needed to build super-intelligent AI, from across its product suite. It is THE key differentiator between it and the other big AI players and why so many people now think Google is on top in the AI race. Coupled with their distribution reach given their billions of users, Google has seen its stock jump from ~$88/share when ChatGPT was announced to over $338/share today (~284% growth).

Well, you know what Figma has? Data and distribution.

We’ve already established Figma is the #1 tool for designers globally. This gives them a huge distribution moat. Just like Google can instantly put AI in front of billions, Figma can deploy AI agents directly into the workflows of millions of professional designers without requiring them to switch tools.

They also sit on a goldmine of proprietary design data that no other company can access. Here is the key nuance: it’s not just about the final pixels. Any crawler can scrape a live website and see the final result. Figma can see the whole process that led to the creation of those designs.

Figma sees the 50 rejected iterations. They see the comments between the developer and the designer explaining why a button should be blue and not red. They see the diffs and the zany ideas that didn’t make it to market. This is process data, and it is exponentially more valuable for training an AI agent that is actually useful. If you want to train a model to think like a designer, you need to show it how a designer works, not just what they finished.

If Figma can execute on training models using this process data, they won’t just stay relevant; they can become the operating system for the entire creative process. That should entrench their dominance, but the market is currently acting like they’re a legacy tool. I suspect we won’t see AI replacing Figma, but we’ll see people using Figma as the default AI engine for design.

The Threats

Of course, Figma isn’t the only player making moves in this space. It’s worth looking at what the competitive landscape looks like.

• Flora: They just announced a $42M Series A, pitching themselves as a sort of AI-Native Figma. The argument is simple: Figma was built for vector manipulation while Flora was built for generative orchestration. Investors are betting that you can’t retrofit an old tool to be AI-first and that you have to rebuild it from the ground up. This is the Innovator’s Dilemma in action. Can Figma navigate the new paradigm without breaking the workflow that millions of users rely on? If not, Flora is positioned to step in.
• Adobe: They’re the 800lb gorilla in the room. Their Firefly models are integrated into everything from Photoshop to Premiere. If they decide to bundle a good-enough UI tool with the Creative Cloud subscription, Figma’s pricing power gets tested. However, Adobe’s attention is stretched across a wide array of products, and I don’t have faith that they’ll be able to build a product users genuinely love.
• V0 & Cursor: While not direct competitors, tools like Vercel’s V0 and Cursor allow developers to prompt UI directly into code. If the handoff between UX and Dev disappears because the code is generated instantly, does the design phase shrink? Figma’s seat count depends on design being a distinct, heavy phase of the lifecycle. If we move to a world where developers just vibe code the frontend without a mock-up, Figma could find itself bypassed entirely for simple applications.

The Interesting

Before we wrap up, there are two distinct factors that make Figma a fascinating stock to watch.

First, Adobe’s $20 Billion offer. We can’t forget that Adobe was willing to pay $20 billion for this company back in 2022. Yes, regulators killed the deal, but it served as a moment of price discovery. It proved the strategic value of Figma’s platform. If the stock price drifts too low, Figma becomes an acquisition target again—perhaps not for Adobe, but for other AI giants. If you are a model builder wanting to own the “creative process layer,” Figma becomes an interesting data acquisition play.

Second, the “Extended Lock-Up” Calendar. As mentioned earlier, the short-term supply dynamics are brutal. Approximately 54% of Figma’s Class A common stock is held by Extended Lock-Up Holders, subject to a tiered release schedule that will keep pressure on the stock through 2026.

Here are the key dates:

1. Post-2025 Annual Earnings (Feb 18th): ~44.4 million shares (20% of the locked-up total) will become eligible for sale on the second trading day after Figma announces earnings for the year ending December 31, 2025.
2. Post-Q1 2026 Earnings (some time in May probably): Another ~61.1 million shares (27.5%) will hit the market on the second trading day after earnings are announced for the quarter ending March 31, 2026.
3. Post-Q2 2026 Earnings (or Aug 31): The Remainder (~77.7 million shares) will be released on the earlier of (i) the second trading day after earnings for the quarter ending June 30, 2026, or (ii) August 31, 2026.

As millions of shares become eligible for sale for the first time, we are likely to see sustained downward pressure.

Final Verdict

So, where do we land?

Fundamentally, I believe Figma is a rock-solid product. They have that rare combination of utility and genuine user love. I believe in their ability to build products people actually want to use, and I think they are uniquely positioned to thrive in the AI era by leveraging their twin engines of process data and massive distribution.

From a valuation standpoint, we are getting close. A P/S ratio of ~13x for a company growing at ~40% is starting to flash “Buy.” The fundamentals are green, the product is green, and the growth is green.

But I’m still holding at Yellow for now.

There is too much downward pressure on the horizon. The entire SaaS sector is likely to see further multiple compression as weaker companies feel the AI pinch, dragging the sector down with them. More importantly, the supply glut isn’t over. We just absorbed the IPO lock-up expiry, but the next tranche of stock releases is right around the corner.

I’m staying on the sidelines for another quarter. I want to see how the market absorbs that supply and, more critically, what guidance management gives in the Q4 2025 earnings report. If they can show that AI monetization is real and not just a margin-eater, and if the stock price survives the next dilution event, that yellow light might turn green very quickly.