Mature business vs. elite club member: what the Figma vs. Adobe comparison reveals

Figma's recent IPO shook up the market - on the first day of trading, its stock price rose to three and a half times the IPO price. This is the largest jump on the first day of trading among U.S. offerings of this size in the U.S. in more than 30 years. Three years ago Adobe tried to buy Figma for $20 billion, now the capitalization of the latter is 70% higher. The comparison between the two competitors cannot be avoided: which of the companies looks more attractive to investors, argues independent analyst Mikhail Zavaraev.

A post-IPO share price increase is by no means an extraordinary event, but Figma's case stands out. The price of its shares at the IPO was $33, trading on July 31 started at $85 and ended at $115.5. The next day the company's quotes reached $142.92.

Since then, however, Figma's stock has already dropped significantly - it closed at just above $70 on Aug. 26.

Earlier IPOs of this year, such as Circle Internet Group and CoreWeave, boast more significant growth of quotations compared to the offering price. However, Figma reached its peak price on the second day of trading, and it took them noticeably longer. And two of the seven companies, which held the largest IPOs in the U.S. in 2025, are trading below the offering price.

Such a rapid growth of Figma quotations after the IPO can be explained quite simply. Firstly, after several years of neglect, the US IPO market has seen a noticeable revival. In 2025 to date, companies have already completed 222 IPOs, compared to 225 for all of 2024 and 154 for 2023.

Second, Figma boasts not only a fast-growing, but already profitable business, which is a pretty rare event for tech companies, especially at the IPO stage.

Thirdly, the company placed only 36.9 mln out of 474 mln issued shares, i.e. less than 8%. As a result, the volume of bids during the IPO exceeded the volume of placed shares almost 40 times. It is not surprising that in the first days of trading there was still a high demand for Figma shares.

Expectedly, with so much interest in the company under fire of criticism were the organizers of this IPO, who, according to Business Insider, intentionally or not, underestimated the appetite of the market and underestimated the valuation of Figma shares in the offering. By doing so, they effectively deprived retail investors of a significant profit from the growth of the stock.

Indeed, the company and current shareholders could have potentially raised noticeably more than the $1.2 billion that was actually raised in the IPO.

But the first serious conclusions can be made in about half a year, when the period of sales ban for the main part of shareholders will be over. The question of where the company's price will be by then is still open.

Now the interest in Figma shares is gradually decreasing: the average daily trading volumes after the placement amounted to 16.7 mln, while for the last 10 days - only 6 mln. The company will present two quarterly reports before the end of the year, which may further cool down the ardor of investors. The second quarter report will be released on September 3.

Although for the majority of the company's shareholders all the current ups and downs of the quotations are still only theoretical. Thus, on paper they have become almost twice as poor as they were at the peak in early August, but their profits are still more than twice as high as if they had sold their shares during the IPO.

On the other hand, almost three years ago, in September 2022, Adobe announced the purchase of Figma for $20 billion (by the way, during the IPO the company was valued at $19.34 billion).

A year later, the deal fell apart due to pressure from European and British regulators. Adobe was forced to pay Figma $1 billion in penalties under the terms of the agreement. For comparison, by the time the deal fell apart, Figma had attracted a total of only $333 million in private investment over all previous rounds.

Not surprisingly, immediately after such a billion-dollar "gift", which, among other things, the company used for further business development, Figma co-founder and head ofFigmaDylan Field stated quite optimistically on the company's blog that "Figma's best and most innovative days are ahead."

Naturally, after such a statement, there is no escape from trying to answer the questions of how right he turned out to be and who benefited more from what happened.

A direct comparison of the participants of the failed transaction is unlikely to be fully correct at least due to the completely different stages of the life cycle of the companies.

They are competitors, but only in certain segments. And the choice of one or another product of these companies depends primarily on the individual needs and preferences of their customers. However, it is possible to find a basis for comparison.

- Let's say, if we judge by the dynamics of capitalization, then, of course, Figma is the clear winner at the moment. Now Figma's capitalization is 70% higher than the purchase price once offered by Adobe. The share price of the latter, in turn, has fallen by about 40% since then.

- But now it is much more interesting to understand where the quotes of these companies will be in a conditional year. For example, Adobe's target price, according to data compiled by Yahoo Finance, is $480.64. That implies a potential upside of about 35% on a one-year horizon from the closing price on Aug. 26. Figma has an average target price of $76.29, which implies an upside of about 8.8%.

- That said, Adobe's five-year PEG ratio (the ratio indicates how fair the stock price is given its earnings growth rate) is now at 1.04, which, among other things, implies that the company is plus or minus fairly valued.

Figma does not have these statistics yet due to a very short period of public trading. Based on the figures available for correct calculation, we can conclude that even after a serious correction from its highs, Figma is trading at very high multiples. Whether it is expensive or cheap depends on how long the indexes can grow rapidly.

- Figma's P/S multiple of 38.29 suggests that the market expects very rapid revenue growth over a long period of time. Otherwise, the company could be considered overvalued. Adobe trades at a P/S of 7. The P/S of the S&P 500 Index is 3.27, which, among other things, is also due to the higher growth rate of technology companies and their low-asset business model. The P/S multiples of most technology companies are in the 10-20x range.

- For its part, Figma is trading at 32.84 on a P/B basis (a ratio that shows how many times a stock's market price exceeds its book value), while Adobe is only at 13.46.

- Adobe's P/E multiple - which measures how many times the stock price exceeds the company's earnings per share - is 23.27 based on the previous 12 months' earnings or 15.65 based on expected earnings. That's below the current ratios for the S&P 500(29.6 and 22.9, respectively). That is, investors are valuing the company lower than the market as a whole.

For Figma, the GAAP earnings for the last 12 months are negative, but if we extrapolate the last quarter's earnings for the year (which is not very correct), the P/E is around 188. The P/E for the next 12 months (based on two analysts' estimates) is at 290. This is certainly very expensive.

But, as we said, the key issue in this case is the growth rate, which can justify even very high multiples.

Adobe's growth performance, despite the maturity of its business, is still at a relatively high level. For example, over the past three years, the company's average annual revenue growth rate has been at 10.2% (assuming $23.6 billionin revenue in fiscal 2025).

Naturally, Figma's business growth numbers are all significantly higher. In 2024, according to the prospectus, the company earned $749 mln in revenue, which is plus 48% year-on-year. The average annualized growth rate for the last four years was 53% at the end of 2024. At the end of the first quarter of 2025, it fell to 46%.

There is nothing surprising in the slowdown of revenue growth rates, and at the moment it does not look critical. The whole question is how long this growth will remain at a high level, and most importantly, at what level. Both 40% per year and 30% are very high growth rates, but in five years the difference in revenue in these two scenarios will differ by 45%, not to mention that the "fair" multiples will have to differ even more significantly.

According to Figma's prospectus, 95% of Forbes 500 companies and 78% of Forbes 2000 companies already use Figma products. The company currently has 13 million active users (by the way, two thirds of them are not designers), and 76% of customers already use at least two Figma products. Logic suggests that these figures do not imply high growth rates at the expense of large clients. The company doesn't have many of them - the 10 largest clients of the company still account for less than 10% of revenue, and at the end of the first quarter of 2025, only 40 clients were generating more than $1 million in annual recurring revenue (ARR) per year each.

The basis of revenue is clients who bring in more than $100 thousand a year - Figma has 1031 of them. And the number of users in this category increased in annual terms by 47%.

In turn, the dollar retention rate has remained at over 130% for the last four quarters. This indicates that Figma continues to increase revenue from existing customers.

But the spoonful of tar is the fact that Figma's average annual ARR growth is gradually slowing down - at the end of the first quarter of 2020, 2021 and 2022 it was 46%, 31% and 22% respectively.

Figma itself, citing IDC, estimates its potential market at $33 billion a year, forgetting, however, to specify what percentage of this pie they are counting on, and how much should be taken by competitors - Adobe, Canva, Sketch, Invision, and so on. The question remains open as to what extent the development of AI for Figma is an opportunity and what extent is a threat.

- Figma has an adjusted operating margin of 17% for 2024, an adjusted net cash flow margin of 31% for 2024 and 41.4% for the first quarter of 2025.

Adobe has an operating margin of 36% over the last 12 months.

Adobe looks more efficient by this parameter, but Figma has every opportunity to increase this indicator in the future. However, this is usually accompanied by a drop in revenue growth rates for technology companies.

Everyone decides which of these two companies to add to his portfolio. In my opinion, there is no clear winner among them. On the one hand, Adobe is a stable and mature company with still double-digit growth rates and high potential for growth, but with inexplicable price dynamics in recent years, still no dividends and growing pressure from younger competitors.

Figma is a fast-growing company that is almost in the Rule of 60 "elite club" and could easily be in the Rule of 40 club for at least a few more years. These are financial benchmarks for subscription model businesses - they refer to a group of companies whose revenue and operating margin growth rates exceed 40% or 60% per year.

That said, Figma is currently trading at very high multiples and its growth rate will inevitably slow down.

In other words, for buying Figma shares at current levels to be justified, a lot of conditions have to coincide. And relying on overly optimistic forecasts can be fraught. For example, according to one of them, made in 2022, Figma's revenue could reach $16.5 billion by 2025, although in reality it is unlikely to exceed $1 billion.

This article was AI-translated and verified by a human editor