Business
Figma Stock Plunges 18% Despite 48% Revenue Growth as Cautious Q3 Outlook Spooks Investors Once Again
Shares of Figma tumbled Thursday, falling 17.64%, or $4.97, to $23.18, after the design software company’s second-quarter earnings report showed accelerating revenue growth and a raised full-year outlook, but a more cautious forecast for the current quarter proved enough to send investors heading for the exits.
The decline extends a brutal stretch for Figma’s stock since its blockbuster initial public offering last year, with shares now trading well below their post-IPO highs as investors continue to weigh the company’s strong underlying growth against persistent concerns about competition from AI-native design tools and questions about the sustainability of its premium valuation.
Strong Quarter, Muted Reaction
Figma reported second-quarter revenue of $370.08 million, up 48% from the same period a year earlier and comfortably ahead of the $351.56 million analysts had expected. Adjusted earnings came in at 8 cents per share, doubling the 4-cent consensus estimate. The quarter marked Figma’s third consecutive period of accelerating revenue growth, and the company generated $60.9 million in net cash from operations and $53.2 million in free cash flow during the period.
Figma Chief Executive Dylan Field framed the results as validation of the company’s broader strategic direction, saying in a statement that the second quarter marked Figma’s third straight quarter of accelerated revenue growth, and that as code gets commoditized and value moves up the stack, the opportunity ahead of the company has only grown.
Guidance Fails to Match the Enthusiasm
Despite the strong headline numbers, Figma’s forecast for the third quarter fell short of what investors needed to see to sustain the stock’s momentum. The company’s guidance implies roughly 36% year-over-year revenue growth at the midpoint for the current quarter, a meaningful deceleration from the 48% growth rate posted in the second quarter. That sequential slowdown in projected growth, even alongside an increase to full-year guidance, was enough to trigger a sharp selloff in after-hours and premarket trading.
Following the results, Figma raised its full-year 2026 revenue guidance by $40 million to approximately $1.47 billion, reflecting continued confidence in the company’s underlying demand trends. However, analysts noted that Figma’s lofty valuation, trading at multiples well above the broader software sector even after months of declines, left little room for anything short of an unambiguous beat-and-raise across every metric, and the company’s more conservative sequential outlook was interpreted by some investors as an early signal that its recent acceleration could be leveling off.
Margin Pressure Adds to the Concerns
Beyond the guidance itself, analysts flagged softer GAAP profit margins and a substantial stock-based compensation burden as additional factors weighing on sentiment. Figma’s operating cash flow was reported as nearly flat year over year, with its margin contracting even as overall revenue continued to expand, a dynamic that some analysts said raises important questions about the company’s ability to convert its rapid top-line growth into durable profitability over time.
Analysts covering the stock also pressed company executives during the earnings call on competitive differentiation and the trajectory of gross margins going forward, questions that drew confident responses from Field and Chief Financial Officer Praveer Melwani, who pointed to Figma’s professional-grade design canvas and its expanding suite of AI-powered creative tools as evidence the company remains well positioned as the broader design software market consolidates.
An Insider Lockup Adds to the Pressure
Adding further uncertainty to the stock’s near-term trajectory is a significant insider share lockup expiration scheduled for August 2026, which is expected to release more than $6 billion worth of low-cost-basis shares onto the market. That looming supply overhang has been cited by analysts as a persistent risk factor for the stock independent of the company’s underlying operating performance, since a wave of newly tradable shares from early investors and employees can weigh on a stock’s price even when the company’s fundamentals remain strong.
A Volatile Year Already
Thursday’s decline extends what has already been an extraordinarily turbulent year for Figma’s stock. Shares fell 44% during the first half of 2026 even as the company’s core business continued growing rapidly, driven largely by investor fears surrounding AI-native design competitors, including Anthropic’s Claude Design, which have raised questions about whether traditional collaborative design software could eventually be displaced by generative AI tools capable of producing design work directly from prompts. Figma’s stock fell more than 20% in June alone amid that competitive anxiety, even after a strong first-quarter report in May that initially sent shares higher.
At various points earlier this year, Figma shares traded as low as $16.60, down roughly 80% from their 52-week high of $142.92, before staging a partial recovery in recent months that has now been interrupted by Thursday’s post-earnings decline.
AI Monetization Remains an Early-Stage Story
Much of the market’s ongoing skepticism toward Figma centers on how quickly the company can turn growing customer adoption of its AI-powered tools into durable, monetized revenue. Company executives have said usage of Figma’s AI credit system is broad among its larger customers, but the second quarter represented only the first full quarter in which that monetization effort was fully underway, leaving investors with limited data to judge whether the trend can be sustained at scale.
Wall Street sentiment toward the stock has remained relatively mixed even before Thursday’s decline, with analyst ratings split between buy and hold recommendations rather than showing broad conviction in either direction, reflecting the market’s ongoing uncertainty about how the competitive landscape for AI-assisted design tools will ultimately evolve.
With Figma’s stock now trading well below its earlier highs despite continued strong revenue growth, investors are likely to focus closely on the pace of AI-driven monetization in coming quarters, along with any further developments tied to the looming insider lockup expiration, as key factors that will determine whether the stock can stabilize. The company’s ability to demonstrate that its more conservative third-quarter guidance reflects prudent caution rather than a genuine slowdown in demand is expected to remain the central question shaping investor sentiment toward the stock in the weeks ahead.
Lanxess falls 3% as weak Q3 outlook overshadows Q2 EBITDA beat
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Shares of Ronan, Mt.-based innovator AirJoule were aloft like vapor Wednesday as the company’s recent deal with GE Vernova worked through the stock market ether. The company develops products that harvest water from the air in order to cool AI data-center servers. AirJoule (AIRJ), a joint-venture partner with data center gas turbine supplier GE Vernova (GEV) since March 2024, has…
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Australia’s share market has taken a breather after multiple records, with equities in a holding pattern until the next major catalyst emerges.
The benchmark S&P/ASX200 fell eight points on Friday, down 0.09 per cent to 9,263.6, after a five-day winning streak and all-time highs in the previous two sessions.
The broader All Ordinaries eased by 6.9 points, or 0.07 per cent, to 9,445.1.
Energy stocks rose in line with oil prices after Iran and Oman’s plan to reopen the Strait of Hormuz while barring US and Israeli ships dashed hopes of an imminent peace deal.
“Iran feels it ‘holds the cards’ given it can still effectively block ship traffic through the Strait of Hormuz (and to a degree the Red Sea) and all of America’s bombing can’t seem to shake the regime,” Betashares chief economist David Bassanese said.
“A deal between Iran and Oman would block US and Israeli ships crossing the Strait – but this must surely be an ambit claim as the US could never agree to that.”
However, raw materials stocks continued to rally as gold, lithium and rare earths miners soared on lower inflation expectations and upswings in underlying commodity prices.
Gold is trading at seven-week highs of $US4,297 ($A6,109) an ounce, after easing global inflation fears softened the US interest rate outlook, helping non-yielding assets rebound.
Shares in Australia’s largest company BHP gained 4.5 per cent since Monday to trade at $62.97, its heightened copper exposure paying off as AI-related demand for the base metal soars.
Financials continued their hot streak, trading near record highs and clocking gains in eight of the past nine weeks as the major banks recovered from a second quarter slump.
Consumer-facing stocks also improved in recent weeks, buoyed by softer-than-expected June inflation and resilient household spending.
Looking ahead, all eyes will be on the Reserve Bank’s Tuesday meeting for signs of Australia’s interest rate path ahead.
“The RBA will likely revise down their inflation forecast next week and hold rates unchanged, but don’t expect this to be the end of the hiking cycle,” AMP economist My Bui said.
The central bank would retain a hawkish bias, and AMP expected another rate hike in November if core inflation remained sticky, Ms Bui added.
In company news, Coles confirmed it will offshore hundreds of back office jobs in a multi-year deal with Accenture.
Earnings season continued to deliver a mixed bag, as James Hardie shares soaring on a strong first quarter update, Nick Scali dipped on a dim retail and supply chain outlook, while ResMed tumbled seven per cent after flagging “very modest” prices increases.
The Australian dollar is buying 70.33 US cents, down from 70.42 US cents on Thursday at 5pm.
ON THE ASX:
* The S&P/ASX200 fell by eight points, or 0.09 per cent, to 9,263.6
* The broader All Ordinaries lost 46.6 points, or 0.07 per cent, to 9,445.1
One Australian dollar trades for:
* 70.33 US cents, from 70.42 US cents at 5pm AEST on Thursday
* 111.37 Japanese yen, from 111.13 Japanese yen
* 61.04 euro cents, from 61.00 euro cents
* 52.28 British pence, from 52.32 pence
* 119.90 NZ cents, from 119.92 NZ cents
Kratos Defense rocketed higher Wednesday as the defense contractor and drone maker won an upgrade after clearing Q2 views. KTOS stock, a significant holding among ARK Invest’s ETFs, jumped back above its 50-day moving average. Kratos Defense (KTOS) reported a 91% increase in earnings to 21 cents per share adjusted, beating expectations for 14 cents per share. Revenue jumped 30.5%…
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Barclays cuts Onterris stock rating on weak results, guidance cut
Eli Lilly (LLY) stock charged into a buy zone Wednesday helped by “another exceptional quarter” that featured strength from its tirzepatide-based drugs for type 2 diabetes and weight loss. Mounjaro, the diabetes treatment that uses tirzepatide, brought in $9.94 billion in sales, more than $1 billion ahead of forecasts for $8.93 billion. Obesity treatment Zepbound generated $4.93 billion in sales,…
Copyright ©2026 Investor’s Business Daily, LLC. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8
KeyBanc upgrades Quanta Services stock rating on execution strength
The company had posted a consolidated net profit of Rs 430 crore in the corresponding quarter last year. Revenue from operations grew 18% YoY to Rs 5,755 crore during the quarter. Compared with the March quarter, Trent’s consolidated net profit rose 25% from Rs 413 crore, while revenue from operations increased 14% from Rs 5,028 crore.
Buy, sell or hold Trent shares?
Morgan Stanley maintained its ‘Overweight’ rating on Trent and raised its target price to Rs 3,406 from Rs 3,151, implying an upside of around 10%.
The brokerage said Q1FY27 EBITDA margin came in well ahead of expectations, supported by year-on-year (YoY) gross margin expansion, while EBITDA growth remained strong despite higher depreciation weighing on profit before tax.
Morgan Stanley also reaffirmed its preference for the company-operated expansion model, raised its EBITDA margin assumptions following the strong quarterly performance, and flagged the Middle East conflict as a near-term risk to consumer sentiment.
Also read: Tata Sons faces continued listing uncertainty after RBI classification
Motilal Oswal maintained its ‘Buy’ rating on Trent with a target price of Rs 3,775, implying an upside of around 21%. The brokerage said the retailer continues to prioritise cluster-level revenue growth and expanding its market share across key micro-markets, rather than focusing on store-level like-for-like (LFL) growth.It noted that Trent remains focused on deepening Zudio’s penetration while accelerating store additions for Westside. Despite rising raw material costs and supply chain risks, the brokerage highlighted the company’s strong margin expansion during the quarter and said management expects supply chain initiatives, closer supplier engagement and calibrated pricing to help sustain margins.
Macquarie maintained its ‘Outperform’ rating on Trent with a target price of Rs 3,600, implying an upside of around 16%. The brokerage said the company delivered a strong Q1 earnings beat, reflecting healthy demand. It attributed the gross margin outperformance to the rising contribution of higher-margin Westside sales. Macquarie also said management’s clarification on FY27 store additions and its constructive commentary on demand reinforced its confidence in sales growth. It added that Trent has multiple levers to manage input cost pressures and sufficient lead time to implement changes, limiting the impact on margins.
Bernstein reiterated its ‘Outperform’ rating on Trent with a target price of Rs 3,500, implying an upside of around 13%. The brokerage said the company once again exceeded profitability expectations while continuing to execute on its growth strategy. It highlighted that Trent has delivered on its store addition plans, sustained growth and consistently improved margins. Bernstein believes the retailer can maintain steady-state growth of 18%-20%, although it remains cautious about near-term macroeconomic headwinds.
Read more: ET Exclusive: Tata Sons reported a 22% increase in annual profit for the year ended March 26
HSBC maintained its ‘Buy’ rating on Trent with a target price of Rs 3,390, implying an upside of around 12%. The brokerage said Q1 EBITDA exceeded its estimates by around 10%, driven by stronger gross margins, which it believes reflected the lagged benefit of lower raw material costs. It noted that the fashion business reported low single-digit like-for-like (LFL) growth, while management’s commentary was mixed but marginally more positive than in Q4FY26. HSBC added that a pickup in growth remains the key catalyst for the stock.
Jefferies remains bearish on Trent
Jefferies maintained its ‘Hold’ rating on Trent and raised its target price to Rs 3,435 from Rs 3,110, implying an upside of around 13%.
The brokerage said strong earnings growth in the first quarter was driven by margin expansion and continued store additions, particularly at Zudio. It noted that like-for-like growth remained in the low single digits, partly due to store densification. Jefferies added that management’s commentary remained cautious on near-term demand amid geopolitical uncertainty, which could push up commodity prices and affect both demand and supply chains, with the company already witnessing cost inflation.
HPE, Stock Of The Day, Tests Buy Point As AI Networking, Juniper Deal Drive Growth
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