Cathie Wood’s Ark Invest purchased over 108,000 shares of Figma (FIG) through its ARK Next Generation Internet ETF (ARKW) after the design software company’s stock plummeted nearly 20% following its disappointing first earnings report as a public company.
The dramatic fall came after an equally spectacular rise. FIG stock more than tripled on its NYSE debut, opening at $85 and briefly touching $112 before closing at $115.50 for a 250% gain. Earlier this year, it raised $1.2 billion in its IPO, pricing shares at $33 after initially targeting a range of $25 to $28. However, Figma’s Q2 results and forward guidance fell short of Wall Street expectations, triggering the sharp selloff that caught Wood’s attention.
Wood’s contrarian investment approach has historically focused on disruptive technology companies, though her track record remains mixed. Figma’s fundamentals appear solid, with over 13 million monthly users and more than 1,000 clients paying upwards of $100,000 annually, including major customers such as Alphabet (GOOG)(GOOGL), Microsoft (MSFT), Netflix (NFLX), and Uber (UBER).
The company’s journey has been notable. Adobe (ADBE) attempted to acquire Figma for $20 billion in 2022, but the deal collapsed in 2023 after U.K. regulators raised concerns about competition.
In Q2 2025, Figma reported record revenue of $250 million, representing a 41% year-over-year (YoY) increase. Moreover, its adjusted operating margin stood at 5%, while its adjusted free cash flow margin was significantly higher at 24%.
The design platform giant has demonstrated innovation velocity, doubling its product portfolio by launching four new products at its Config conference. The standout launch was Figma Make, an AI-powered prompt-to-code product that enables users to create functional prototypes and web applications using natural language or existing designs.
This indicates an expansion beyond traditional design tools into the development workflow. Figma also introduced Draw for enhanced visual expression, Sites for publishing designs directly to the web, and Buzz for creating brand assets at scale.
Customer adoption metrics remain robust, with over 80% of customers using two or more products and two-thirds using three or more products. The company’s net dollar retention rate of 129% was driven by seat expansion and renewals under new pricing models implemented in March. Figma now serves over 11,900 customers spending more than $10,000 annually, with over 1,100 paying above $100,000.
However, management warned about narrowing profit margins as Figma heavily invests in expanding its AI capabilities. CEO Dylan Field emphasized plans for “big swings” and deeper near-term investments to capitalize on what he views as a massive opportunity in an AI-driven software landscape, where “design is the differentiator.”
At the midpoint estimate, Figma forecasts Q3 revenue at $264 million. It expects the top line to grow by more than 30% YoY to $1.023 billion in 2025. Analysts tracking the tech stock forecast sales to rise to $1.93 billion in 2029. Moreover, its free cash flow is forecast to improve from $215 million in 2025 to $367 million in 2029.
Today, FIG stock is priced at more than 150x forward earnings, which makes it quite expensive. Out of the 10 analysts covering FIG stock, two recommend “Strong Buy” and eight recommend “Hold.” The average FIG stock price target is $68, indicating an upside potential of over 30% from current levels.
While Figma’s innovation pace and market position remain strong, investors should expect continued investment spending and margin pressure as the company pursues its ambitious AI-first transformation strategy.
For individual investors, Figma represents both opportunity and risk. At the same time, the company’s collaborative design platform addresses a growing market need; the stock’s extreme volatility and high valuation following its IPO debut warrant careful consideration. Investors should evaluate their risk tolerance and conduct thorough research before following Wood’s lead.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com