Figma (NYSE:FIG) is bracing for a potentially volatile trading session as a significant lock-up period expires, releasing millions of shares into the market. The expiration, set for Friday, comes on the heels of a sharp earnings-driven selloff that erased recent gains and left investors questioning the company's near-term valuation.
Lock-Up Expiry Details
Approximately 77.7 million Class A shares of Figma will become eligible for sale or transfer when markets open on Friday, according to a filing with the Securities and Exchange Commission (SEC). This block, valued at roughly $1.86 billion based on Thursday's closing price of $23.97, represents about 17.1% of the company's total outstanding Class A shares and 38.9% of its declared public float.
It's important to note that this eligibility does not guarantee sales. Many holders may choose to retain their positions, and any disposals would still be subject to Rule 144 restrictions. However, the sheer size of the unlock—equivalent to 117.6% of current short interest—adds a layer of uncertainty to the stock's near-term trajectory.
Earnings-Driven Decline
The lock-up expiry follows a turbulent week for Figma. On Thursday, the stock tumbled 14.9% to $23.97, erasing a 15.7% gain accumulated over the previous three sessions. The decline came despite the company reporting better-than-expected revenue for the second quarter of 2026.
Revenue surged 48% year-over-year to $370.1 million, beating the consensus estimate of $351.6 million from London Stock Exchange Group (LSEG). Management also raised its full-year revenue midpoint by $40 million to $1.465 billion. However, investors focused on margin pressures: free cash flow fell 12.2% to $53.2 million, with the free-cash-flow margin contracting to 14% from 24% a year earlier. GAAP gross margin also declined by 5.2 percentage points to 83.7%, while research and development expenses more than doubled to $167.3 million.
Management attributed the margin squeeze to heavy investments in new AI products, including covering inference costs for beta offerings. Chief Financial Officer Praveer Melwani told Reuters that the company is "really investing on the new product side," a strategy that may delay profitability improvements.
Analyst Reactions Mixed
Wall Street's response was split. A poll of 10 analysts revealed five buy ratings and five hold ratings, with no sell recommendations. The average price target stands at $30.33, representing a 26.5% premium to Thursday's close.
Notable adjustments included Wells Fargo reducing its target from $36 to $34 (still a Buy), and Morgan Stanley cutting its target from $38 to $33 (Hold). Bank of America, Stifel, Piper Sandler, and RBC maintained their ratings and targets, indicating that while valuation concerns are rising, earnings estimates remain largely intact.
Market Context and Outlook
Figma's recent price action has been volatile. After a 15.2% gain in the week ending July 31, the stock surged another 15.7% from Monday to Wednesday before Thursday's drop. As of Thursday, Figma was down 1.4% for the current week, with premarket trading on Friday showing a further 0.7% decline to $23.81.
Trading volume on Thursday reached 53.2 million shares, more than double the stock's recent average, indicating heightened investor activity. The upcoming session will be closely watched to see if buyers can absorb the newly eligible shares, with key support potentially near Thursday's low of $22.14.
While the lock-up expiry presents a near-term overhang, some analysts note that if holders refrain from selling, the impact could be less severe than feared. Conversely, accelerated monetization of AI credits could help restore margins in the coming quarters. The coming days will likely provide clarity on whether Figma's growth story can withstand the supply pressure.
