Figma, Inc. (NYSE:FIG) experienced a sharp selloff in premarket trading on Thursday, with shares plunging 15.1% to $23.90. The decline came despite the company reporting robust revenue growth, as investors focused on escalating artificial intelligence-related expenses that are weighing on profitability.
Strong Top-Line Growth, But Costs Soar
The design software company posted second-quarter revenue of $370.1 million, a 48% increase from $249.6 million in the same period last year, comfortably surpassing the LSEG consensus estimate of $351.6 million. However, the cost of revenue ballooned by 117% to $60.5 million, far outpacing the revenue growth. This resulted in gross profit of $309.6 million, up 40% year-over-year, while GAAP gross margin contracted by 5 percentage points to 84%.
The company attributed the cost surge primarily to AI infrastructure and hosting expenses, which accounted for $27.1 million of the $32.6 million increase in costs—representing 83% of the total rise. For every new dollar of revenue, Figma generated approximately 73 cents in additional gross profit, a metric that highlights the margin pressure.
AI Investments Weigh on Margins
Research and development expenses also climbed sharply, rising 101% to $167.3 million. Free cash flow margin fell to 14% from 24% a year ago, reflecting the heavy investment phase. Chief Financial Officer Praveer Melwani described the quarter as the "first full quarter of AI credit monetization," noting that the company aims to "create durable modes of growth over the long term."
Despite the margin compression, Figma raised its full-year revenue guidance midpoint by $40 million to a range of $1.463–$1.467 billion. However, non-GAAP operating income guidance remained unchanged at $125–$135 million, implying a decline in the midpoint margin from 9.12% to 8.87%—a drop of 25 basis points.
Customer Metrics Remain Strong
Customer engagement indicators stayed healthy. Net dollar retention reached 136%, and over 80% of large paying customers used AI credits on a weekly basis. By July 31, more than half of these customers were utilizing Figma's AI agent weekly, suggesting early traction for its monetization strategy.
Wall Street Divided, Upcoming Share Unlock
Prior to the earnings release, Wall Street was split on Figma's outlook, with nine Holds and six Buys among 15 ratings. The average analyst price target stood at $30.44, implying a potential upside of about 27% from the premarket price. However, no widespread estimate changes have been made following the results.
Adding to the uncertainty, approximately 77.7 million previously restricted Class A shares—about 39% of the public float—will become eligible for trading on Friday. This lock-up expiration could introduce additional volatility, especially given that short interest was already elevated at 33.16% of float as of July 15.
Figma's stock had rallied 18.5% over the five sessions preceding the earnings report, closing Wednesday at $28.15. The premarket drop wipes out nearly all of those gains. Year-to-date, shares remain down 24.7%.
The market's reaction underscores a critical question for investors: can AI-credit sales eventually outpace the infrastructure and hosting costs required to support them? Figma's unchanged profit guidance suggests that meaningful returns from AI investments are still some way off, leaving the stock vulnerable to continued margin fluctuations as monetization matures.
