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The first earnings report as a public company is always a landmark event, but that's especially the case for a highly touted IPO such as Figma (FIG), a leading collaborative design software company. After the close yesterday, FIG reported Q2 results that landed at the upper end of the guidance range outlined in the IPO prospectus -- revenue of $249.6 mln, up 41% yr/yr, against the $247-$250 mln range, and adjusted operating margin of 5% versus the 4-5% outlook. However, the market's reaction has been punishing with shares cratering to post-IPO lows and now trading 35% below the $85 IPO opening price from July 31.

The core of the disappointment appears rooted in FIG's forward-looking guidance, which, while technically ahead of consensus estimates, signals a deceleration that high-growth investors find unpalatable.

• For Q3, management projected revenue of $263-$265 mln, modestly surpassing the street expectation but implying a midpoint growth rate of just 33% yr/yr  -- down from the 41% delivered in Q2. This softening trajectory raises questions about sustained momentum in a competitive landscape where Adobe (ADBE) and emerging AI-native tools are nipping at the heels of FIG's UI/UX dominance.
• Compounding this, the FY25 revenue outlook of $1.021-$1.025 bln merely aligns with analyst forecasts, offering no upside surprise for a stock that commands a forward P/S multiple north of 25x. In the SaaS realm, where multiples can compress for anything short of 50%+ growth, this in-line guidance feels like a red flag, especially post-IPO when the bar for outperformance is sky-high.
• A key factor dragging on Q3 growth is the lingering impact of FIG's 2024 decision to aggressively sell access to Dev Mode, its developer handoff tool that bridges design and code implementation. Last year, this initiative provided a meaningful revenue tailwind as teams upgraded seats to integrate developers into the workflow, boosting adoption and monetization in a way that juiced 2Q24 results. However, with much of that low-hanging fruit now harvested -- many enterprise customers have already provisioned Dev Mode seats -- the yr/yr comp becomes tougher, as 3Q24 benefited from that surge while the current quarter lacks a comparable catalyst.
• Today's share lockup expiration adds another layer of selling pressure, as approximately 25% of eligible employee-held stock becomes tradable after market close, injecting fresh supply into an already volatile float. This early release, triggered by the stock's post-IPO performance exceeding the 25% threshold over a qualifying period, aligns with the standard 180-day lockup but accelerates liquidity for rank-and-file holders eager to realize gains after a turbulent debut.
• That said, the lockup structure provides some guardrails: investors controlling over 50% of outstanding shares, including major VCs like Index Ventures and Sequoia, have committed to an extended lockup, with the final 35% tranche not unlocking until August 2026. This staggered approach mitigates a full flood of supply, offering a buffer for long-term holders.
• On a brighter note, FIG's Q2 execution was solid, underpinned by the rollout of four innovative products -- Figma Make for AI-powered prototyping from prompts, Figma Draw for advanced vector illustration, Figma Sites for seamless design-to-live-website publishing, and Figma Buzz for scalable brand asset creation -- which have broadened the platform's appeal beyond core UI/UX into full-spectrum product development.
• These launches not only drove the quarter's revenue beat but also contributed to a robust 129% net dollar retention rate, evidencing deepening adoption as customers expand seat counts and workflows across teams. This metric, while slightly off Q1's 132%, remains elite for SaaS, reflecting FIG's sticky ecosystem where 80% of users engage with multiple products.
• Notably, the company isn't yet fully monetizing its AI suite -- features like Make and Buzz are in beta with usage-based credits included in seats -- but management signaled plans to introduce purchasable AI credits later in 2025, which could unlock a new high-margin revenue stream as adoption scales.

FIG's Q2 beat at the high end of guidance underscores a resilient business with proven product-market fit and AI tailwinds, yet the tepid Q3/FY25 outlook and impending lockup dynamics are tempering enthusiasm, propelling shares to post-IPO troughs.