Figma, the cloud-based design platform, recently reported its fourth-quarter 2025 earnings, revealing a complex picture for investors still reeling from an over 80% stock decline since its initial public offering. Despite a challenging market landscape that has seen roughly $1 trillion in valuations disappear from the software-as-a-service sector, the company showcased significant operational momentum, leading to a notable 15% jump in after-hours trading following the announcement. This rebound suggests a renewed investor confidence, perhaps signaling a potential shift in sentiment for a company that had previously seen its stock plummet from over $140 to approximately $23.
The financial results for the fourth quarter highlighted several areas of strength. Revenue reached $303.8 million, marking a 40% increase year-over-year, an acceleration from the 38% growth observed in the third quarter. Furthermore, Figma achieved a 136% net dollar retention rate, a metric indicating how much existing customers are expanding their spending, which represents its highest point in ten quarters. The company also crossed a significant milestone, surpassing $1 billion in annual revenue for the first time, concluding 2025 with approximately $1.1 billion. Praveer Melwani, Figma’s chief financial officer, emphasized this trajectory, noting the considerable momentum throughout the past year and the accelerated growth from the third to the fourth quarter.
A critical aspect of Figma’s strategy, and one that resonates with current market trends, is its integration of artificial intelligence. CEO Dylan Field underscored this during a call with analysts, stating that as AI technology advances, Figma’s capabilities improve, allowing for faster product development. He pointed to the expansion from four to eight products and the launch of over 200 features in 2025, many of which include new AI-native functionalities. Field also articulated a vision where the increasing ease of code creation, alongside the growing role of AI agents, will heighten the demand for human-centric design, creating more opportunities for designers within the software ecosystem.
However, the company’s financial health presented a mixed bag when viewed through the lens of profitability metrics. The adjusted free cash flow margin, a key indicator for investors, experienced a decline throughout 2025, falling from 41% in the first quarter to 13% in the fourth. Similarly, the gross margin saw a reduction from approximately 92% earlier in the year to 86% in the fourth quarter. Melwani attributed this decrease to substantial investments in infrastructure and AI, changes in vendor payment timing, and a one-time $25 million IP transfer tax linked to the acquisition of AI-imaging startup Weavy, now rebranded as Figma Weave. Despite these figures, Melwani expressed confidence in the business’s long-term cash-generating potential, noting the stabilization of gross margins over the past two quarters and improvements in infrastructure optimization.
A significant test for Figma’s AI strategy will arrive next month with the implementation of consumption-based pricing per seat, designed to monetize AI usage. The company has allowed customers to explore its AI offerings, with the expectation that this trial period will translate into revenue once limits are enforced. Melwani outlined a two-pronged approach: embedded credits across all seat types, including free users, to encourage engagement, followed by add-on packs for users exceeding consumption limits. He cited promising internal data, indicating that 75% of paid customers with over $10,000 in annual recurring revenue are utilizing AI credits weekly, and over half of those with more than $100,000 in ARR use Figma Make every week.
Figma’s strategic partnerships with leading AI firms like Anthropic and OpenAI also played a role in reassuring investors. The company announced a collaboration with Claude Code in February and integrates with OpenAI through its ChatGPT and FigJam offerings. These alliances are crucial in a market where firms demonstrating collaborative rather than competitive relationships with marquee AI entities are viewed favorably. Field addressed analyst concerns about these partnerships, emphasizing the potential for platform differentiation through the unification of various AI surfaces and the importance of round-tripping between code and design. The company also highlighted its growing enterprise footprint, concluding the fourth quarter with 67 customers spending over $1 million annually, a 68% increase year-over-year, which Melwani believes underscores the scalability of their offerings for larger organizations.
