How Low Can Figma Go? Post-IPO Performance and AI Investment Challenges

Figma's stock has declined 80% since its July 2025 IPO despite maintaining the second-highest revenue growth (41% LTM) among public software companies, primarily due to weakening growth endurance and rapidly deteriorating free cash flow margins. The company's rising Net Dollar Retention (driven by AI features and price increases) masks slowing new customer acquisition, while aggressive investments in AI infrastructure have compressed gross margins from 92% to 86% and pushed FCF margins from 41% to a projected 8% in FY26. The core question for investors is whether Figma's AI product investments will generate sufficient incremental value to justify the unit economics pressure and whether management can stabilize FCF without a layoff.