To The Moon

$Figma(FIG)$ 's stock surged 250% after its IPO on Thursday and continued to rise in pre-market trading on Friday, bringing its market capitalization to over $61 billion. This makes it the largest software company IPO since 2024.

Live look at figma employees today.

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Some netizens compared the situation to $Adobe(ADBE)$ , which once failed to acquire Figma with a $20 billion offer, and now faces a formidable competitor.

As of press time, $Figma(FIG)$ 's pre-market market capitalization may exceed $61 billion, while Adobe's is around $150 billion. However, in terms of revenue, Adobe's revenue is still 26 times that of Figma.

In short: Figma, with approximately 1/26 of Adobe's revenue, has achieved four times Adobe's growth rate and a higher net revenue retention rate, explaining why the capital market is willing to assign it a significant premium.

I. Why did Adobe fail to acquire Figma in 2022?

The core reason Adobe ultimately failed to complete its acquisition of Figma was a single: the joint rejection of global antitrust regulators. This can be broken down into three main themes:

European and American regulators unanimously rejected the deal.

• The European Commission, the UK Competition and Markets Authority (CMA), and the US Department of Justice all determined that if Adobe (which owns Photoshop, Illustrator, and XD) were to acquire Figma, it would "significantly lessen competition in the global digital design/interactive prototyping software market," constituting a "strangling merger."

• The CMA even proposed a remedy: "either divest Adobe XD or Figma." Adobe rejected the offer, arguing that any divestment would weaken the transaction value, and thus voluntarily abandoned the deal.

Regulatory resistance was so severe that "no viable path forward was visible." In December 2023, the two companies acknowledged in a joint statement that even if they spent another 18 months litigating, they "could not see a clear path to regulatory approval," and thus jointly terminated the agreement.

$1 Billion "Breakup Fee" and Strategic Reassessment: According to the original merger terms, Adobe was required to pay a $1 billion reverse termination fee—equivalent to three times Figma's total VC funding. Furthermore, AI is reshaping the interaction design process, and some believe Adobe is beginning to question the long-term value of acquiring traditional UI tools at such a high price.

$Figma(FIG)$ alone returned 10X the ENTIRE FUND for not one, not two, but three VC funds:

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II. Is Figma overvalued compared to its peers?

1. Key Observations

• Multiplier Gap: Figma's 2025E PS is approximately 75x, compared to Adobe's 11x and the 6-7x average for comparable SaaS companies.

• Source of the Premium: The market values Figma as a "collaborative operating system for the AI era," rather than a traditional tool; if growth falls below 30%, the 75x PS will lose its support.

• Historical Reference: Adobe's $20 billion acquisition offer in 2022 corresponded to approximately 25x PS, already considered a "sky-high price." Now, on its first day of IPO, the price has soared to 3x.

2. Risk Triggers:

• Slowing growth (if Q2 guidance falls below 40%, valuations will rapidly compress).

• ROI from AI features falls short of expectations, with gross margins eroded by call costs.

• Macro interest rates rise again, leading to a comprehensive revaluation of high-multiple assets.

3. How to Understand "Overvaluation"

• Optimistic Scenario: If revenue CAGR can continue to maintain 35%+ from 2026 to 2029, reaching $2.5 billion in 2029, the company would trade at a 20x PS, with a market capitalization of $50 billion, barely justifying today's price – a very low margin of error.

• Neutral Scenario: If growth slows to 25%, the market will only prioritize 10–12x PS, resulting in a market capitalization of $15–18 billion, leaving the stock price with 70% downside potential.

Therefore, at its current market capitalization of $56.3 billion, Figma is clearly out of its peers' valuation range and is considered "overpriced." Short-term capital speculation is prevalent, so long-term investors should wait for a falsification of growth or a valuation correction before investing.

III. What will support Figma’s valuation in the future?

Figma's high valuation will no longer be solely about its "cloud-based UI design tool" appeal. It will be supported by the following four new trends—any failure in any of them will trigger a valuation reassessment.

1. AI-driven market expansion for "everyone designing"

• New features like Make, Buzz, and Draw transform a prompt into an interactive prototype, aiming to empower non-designers like product managers and operations staff to become paying customers. If penetration reaches 10%, the TAM could expand from the current $33 billion to $70-90 billion.

• Risk: If AI only increases the efficiency of existing designers by 3-5 times, companies may end up reducing staff and negatively impacting revenue.

2. From "design files" to "digital product operating systems"

• Dev Mode, Figma Slides, and FigJam AI extend collaboration to front-end code, presentations, whiteboards, and project management. Each new module represents a cross-sell opportunity for existing customers, resulting in a 132% or higher NDR for eight consecutive quarters.

• If the ARPU per customer can be increased from the current $6,100 to $15,000, revenue growth of 30%+ can be maintained even with slower user growth.

3. Enterprise-Level Globalization and Pricing Power

• 95% of the Fortune 500 are already customers, of which only 1,031 pay $100,000 or more annually, and international revenue accounts for less than 20%.

• By replicating the US-style "PLG → Direct Enterprise" strategy in EMEA and APAC, the revenue pool could theoretically double, assuming local sales and service investments keep pace.

4. Web3 / Potential Options for On-Chain Creative Infrastructure

• The code layer already provides interfaces for on-chain ownership confirmation and DAO collaborative governance. Once demand for digital assets and on-chain collaboration explodes, Figma can enter the market at zero marginal cost, becoming the default platform for "design as an asset"—a call option with the greatest valuation elasticity and the most difficult to quantify "belief premium."

To sum it up in one sentence: Figma's high valuation relies on "AI to expand the user base + module cross-selling + international price increases + Web3 options" running simultaneously; if any one of them fails, the castle in the air of 20× PS will lose its fulcrum.

IV. Key Conclusions

• Valuation – Figma's 70+ times P/S ratio is significantly higher than that of traditional design software leaders, reflecting the market's extreme optimism about its "collaborative + AI-native" narrative.

• Growth – 46% revenue growth and 132% net dollar retention, significantly higher than Adobe/Autodesk's 10-12%, explain the high valuation premium.

• Potential – Market Size: Figma estimates its TAM at $33 billion. If its market share increases from its current <3% to 10% over the next five years, its revenue compound growth rate could still maintain around 30%.

• Risks – Low valuation margin; Adobe is accelerating its integration of AI features and offering price cuts; Canva is also expanding into UI/UX, potentially intensifying competition.

V. In short:

$Figma(FIG)$ has broken through its high valuation ceiling with its "collaboration + browser native + AI" strategy, but its market capitalization already implies the dual expectations of "sustained high growth + sustained high profit margins." Whether this can be achieved will depend on whether it can continue to erode Adobe's high-end market share and extend its product line from UI design to a broader "product life cycle" platform.

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