SaaS-pocalypse. SaaS-mageddon. Those are just a few of the clever software-as-a-service portmanteaus being tossed around as investors debate a massive selloff in the sector that has vaporized roughly $1 trillion in valuations from recent highs, with more than $285 billion in market value wiped out in February alone.
On Wednesday, it was cloud-based design platform Figma’s turn to announce its fourth-quarter 2025 earnings results to a market primed to search for signs of a continuing SaaS-nado. Investors were ready to pummel the stock after Figma saw a more than 80% tumble since an IPO last year that saw its price surge above $140 before sinking to about $23. The Q4 headline numbers told a positive story with revenue of $303.8 million, up 40% year over year and an acceleration from the 38% posted in the third quarter. Net dollar retention rate—a measure of how much existing clients are spending—hit 136%, the highest it’s been in 10 quarters. Plus, the $12 billion design company crossed the $1 billion annual revenue threshold for the first time ever, wrapping up 2025 with roughly $1.1 billion. The fourth quarter saw Figma’s best performance ever of net new revenue.
“2025 was a massive year for us,” said Figma chief financial officer Praveer Melwani in an interview before the announcement. “There’s a lot of momentum, and if you zero in on the quarter specifically, growth accelerated from Q3 to Q4.”
In after-hours trading following the earnings release, the stock traded up 15%.
“Our growth and momentum show that our strategy is working,” said CEO Dylan Field during a call with analysts. “As AI gets better, Figma gets better—and we’re shipping faster than ever. In 2025 we expanded from four to eight products and launched over 200 features, including new AI-native functionality.”
In addition, as code becomes easier for people and draws in additional users, there will be an even greater focus on design, said Field. It inherently requires a human in the loop.
“I think the case is that humans will continue to use software, and increasingly agents will, too,” he continued. “I think this creates more surface for designers to work with and designers to think through.”
Quarter-over-quarter acceleration—versus deceleration—will be a key sticking point for the market in Figma’s numbers and the story it tells about them. Giants such as Intuit, Microsoft, Oracle, and Salesforce have tumbled, and in recent weeks Amazon, Alphabet, Meta, and Microsoft have all announced significant increases in capital expenditures that have served to crush free cash flow numbers and bog down expected growth.
Figma’s adjusted free cash flow margin, which investors use to gauge how much of each revenue dollar can eventually flow to profit, fell from 41% in the first quarter to 24% in Q2, to 18% in Q3, to 13% in Q4. Gross margin slid from roughly 92% earlier this year to 86% in Q4, with the shrink attributed to the cost of running AI inference at scale.
In prepared remarks, Melwani attributed the Q4 free cash flow decline to “continued investment in infrastructure and AI, changes in the timing of vendor payments, and a one-time $25 million IP transfer tax.” The latter is tied to Figma’s $200 million acquisition of AI-imaging startup Weavy, which has since been rebranded to Figma Weave.
Melwani said the company “remains confident in the long-term cash generating profile of the business” and pointed to stabilization in gross margins over the past two quarters. Q3 held at 86%, which was the same in Q4, although weekly active users of Figma’s prototyping tool, Figma Make, rose 70%. “Improvements in infrastructure optimization reduced our cost to serve each user,” he said.
Another critical pressure test will come next month when Figma plans to switch on its consumption-based pricing per seat, which is how it is planning to monetize AI usage. Figma has allowed customers to try out its offerings to get individual users and teams acquainted, and investors are watching closely to ensure AI investments are translating into revenue growth.
In an interview, Melwani laid out a two-pronged approach. First, embedded credits across all seat types, including starter and free users, will get them started on the AI offerings—and Figma hopes they’ll engage deeply with the tools. Second, once March rolls around and the consumption limits kick in, users on the platform that exceed the limits will have to purchase an add-on pack, said Melwani.
He said the right signals are all there. Some 75% of paid customers with more than $10,000 in annual recurring revenue (ARR) are now bingeing AI credits on a weekly basis. More than half of Figma’s paid customers above $100,000 in ARR are using Figma Make every week, he said. Figma is betting that usage will convert into revenue that offsets the infrastructure costs.
“We’ll slowly start to transition to include some consumption and as you do that, you’ll start to see an offset,” said Melwani.
Figma will still need to convince investors that even though its profitability seems to be creeping in the wrong direction, it will eventually catch up with its top line.
Another bright spot comes from the company partnering—and explaining those partnerships—with Anthropic and OpenAI at a time when investors want to understand how firms are working with marquee AI firms rather than against them. Figma announced a partnership with Claude Code on Feb. 17, and works with OpenAI through a ChatGPT and FigJam integration.
However, during the earnings call, Field was asked about investor concern about the work with Anthropic and OpenAI potentially allowing the “fox into the hen house,” according to an analyst, and where the dividing lines are between Figma and the AI labs. Field said Figma is “excited to lean in” more to unite the work between Anthropic and Figma.
“I think there’s so much more we can do here, and a big part of the platform differentiation we’ll have will come from the unification of the surfaces,” said Field. “I also think it’s really important to remember that the round tripping between code and design can really set us apart here and I am very bulllish on the opportunities that couldn’t exist without the round trip.”
Figma wrapped up Q4 with 67 customers spending more than $1 million annually, up 68% year over year, which is a cohort Melwani said the company doesn’t often flag.
“We’ve done a lot of work to make sure what we’ve built is scalable for enterprise,” he said. “That’s translated into accelerated growth.”
