TLDR
- Figma shares plunged nearly 10% despite an expected Russell 3000 inclusion.
- Heavy trading volume suggests investors remain cautious ahead of rebalancing.
- Analysts remain divided as valuation concerns overshadow strong revenue growth.
- Persistent losses and stock compensation expenses continue to pressure sentiment.
Figma Inc. (NYSE: FIG) shares fell sharply on Thursday, declining nearly 10% as investors weighed the implications of the upcoming Russell index reconstitution against mounting concerns surrounding the company’s valuation and profitability.
The stock closed at $16.84, down 9.8% on the session, bringing shares close to their 52-week low of $16.60. Trading activity was notably elevated, with approximately 24.8 million shares changing hands, about 32% above the stock’s average daily volume over the past three months.
The decline comes just days before FTSE Russell’s annual index rebalancing, an event that often triggers significant institutional trading activity.
Russell Inclusion Draws Attention
Figma is currently listed among the preliminary additions to the Russell 3000 Index, with the reconstitution scheduled to take effect after U.S. markets close on June 26. The updated index composition will begin trading on June 29.
The Russell rebalancing process is closely followed by institutional investors because trillions of dollars are benchmarked against Russell indexes. According to data from LSEG, roughly $12.2 trillion in assets either track or are linked to Russell U.S. indexes.
Market participants expect this year’s reconstitution to generate substantial trading flows. Reuters recently estimated that approximately $150 billion worth of securities could be traded as fund managers adjust their portfolios to align with the new index structure.
For a relatively newly public company such as Figma, index inclusion could increase visibility and liquidity. However, investors appear reluctant to embrace the stock despite the potential boost from passive fund demand.
Valuation Debate Intensifies
While index inclusion often serves as a positive catalyst, Figma’s valuation remains a contentious issue on Wall Street.
The company finished Thursday with a market capitalization of approximately $8.82 billion. After accounting for roughly $1.64 billion in cash, cash equivalents, and marketable securities reported at the end of the first quarter, Figma’s enterprise value stands near $7.18 billion.
Based on management’s full-year 2026 revenue guidance of between $1.422 billion and $1.428 billion, the stock currently trades at roughly five times expected annual sales.
Although that multiple is considerably lower than many high-growth software companies commanded during previous market cycles, some investors believe additional downside remains possible given the company’s ongoing losses and uncertain path toward sustained profitability.
Figma’s shares have now declined roughly 49% from their initial public offering price of $33 and sit approximately 88% below their 52-week high of $142.92.
The current valuation also stands well below the $20 billion acquisition proposal previously offered by Adobe Inc. (NASDAQ: ADBE), which was ultimately abandoned after regulatory scrutiny.
Revenue Growth Remains Strong
Despite the stock’s weakness, Figma continues to post robust operational growth.
During the first quarter, revenue climbed 46% year-over-year to $333.4 million. Management also raised its full-year revenue outlook by $55 million, signaling continued momentum across its product portfolio.
The company reported a net dollar retention rate of 139%, highlighting strong expansion among existing customers. Meanwhile, the number of customers generating more than $100,000 in annual recurring revenue surged 48% from a year earlier to 1,525.
Management has also pointed to artificial intelligence as a potential long-term growth driver.
Chief Executive Officer Dylan Field recently emphasized the strategic importance of design in an AI-driven world, stating that as coding becomes increasingly commoditized, design capabilities could emerge as a key competitive differentiator.
Chief Financial Officer Praveer Melwani additionally noted that Figma is seeing encouraging early signs from its AI monetization initiatives following improvements to both revenue and operating income guidance.
Profitability Questions Persist
Even as revenue growth remains impressive, profitability concerns continue to weigh on investor sentiment.
Figma reported a GAAP operating loss of $137.4 million during the latest quarter. The company’s cash flow statement also reflected $169 million in stock-based compensation expenses, an amount representing nearly half of quarterly revenue.
Analyst sentiment remains mixed. Oppenheimer maintained a “Perform” rating following Figma’s inaugural analyst day, citing limited financial disclosures. RBC Capital Markets lowered its price target to $22 from $28 while retaining a “Sector Perform” rating.
By contrast, Piper Sandler reiterated its “Overweight” recommendation and maintained a $30 price target, reflecting confidence in Figma’s long-term growth prospects.
As Russell rebalancing approaches, investors will be watching closely to determine whether index-related buying can stabilize the stock or whether ongoing valuation concerns will continue to pressure shares.
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