AI is Killing Figma: A Capital Structure Story
How Adobe’s and Microsoft’s balance sheets are winning the AI design war
When Adobe offered $20 billion to acquire Figma in September 22, many saw the offer as an attempt to eliminate a competitive threat. The deal collapsed under regulatory scrutiny in December 2023, and Figma went public in July 2025 at $33 per share. On the first day of trading, the stock popped 250%, and valued the company at nearly $68 billion. Six months later, Figma trades around $30, down 81% from its August peak and roughly flat to its IPO price.
The popular narrative frames this as a typical post-IPO hangover: lock-up expirations, insider selling, and the inevitable return to Earth after a frothy debut. But that story misses the real dynamic at play. Figma is being squeezed by a capital structure problem that existed long before its IPO, which AI is now accelerating.
This is a story about balance sheets.
The Numbers That Matter
Let’s start with a simple comparison. Here’s what each company can afford to spend on AI over the next four years:
These aren’t speculative figures. Adobe’s Firefly has already generated $400 million in direct revenue and contributed 11% of Creative Cloud’s new ARR in FY2024. Microsoft announced it will spend $80 billion on AI data centers in fiscal 2025 alone. Meanwhile, Figma ended Q32025 with $1.6 billion in cash. That sounds like a lot until you realize their annual R&D spend is already $834 million and they’re burning through cash to fund AI inference costs that they haven’t yet figured out how to monetize.
The implication is straightforward: Adobe can outspend Figma on AI development by a factor of 17. Microsoft, which bundles its AI-powered Designer tool into Microsoft 365, can outspend Figma by more than 350x. In the infrastructure-intensive world of AI, capital is capability.
What Happened to the Stock
Figma’s post-IPO journey tells the story in stark terms:
The July 31, 2025 IPO was structured to create maximum pop. The company floated just 6% of shares outstanding at $33, and Wall Street’s allocation games did the rest. The stock opened at $85 and briefly touched $143. But as lock-ups expired and insiders began selling, reality set in. CEO Dylan Field filed a 10b5-1 plan to sell up to 3 million shares.
By January 2026, Figma had lost 81% of its peak value. The stock now trades at roughly 13x trailing revenue. This is still a premium to Adobe’s 5.8x, but it is no longer pricing in the hypergrowth that justified its IPO valuation. The question isn’t whether the premium is deserved. It’s whether Figma can sustain growth when the incumbents are embedding AI into products that already have massive distribution.
The AI Design Market Today
Adobe Firefly launched in March 2023 and has since generated over 24 billion AI assets. It commands 29% of the AI design tool market, which is more than Midjourney, Canva AI, or DALL-E. Figma Make, which launched in July 2025, holds approximately 2% market share.
Firefly is embedded directly into Photoshop, Illustrator, Premiere, and the broader Creative Cloud suite. When 32.5 million Creative Cloud subscribers open their tools, Firefly is already there. No separate purchase, no new workflow to learn. Adobe’s credit-based consumption model means users start generating AI content within their existing subscriptions, then upgrade to premium tiers as usage grows.
Microsoft’s approach is similar. Designer ships as part of Microsoft 365, which has over 400 million paid seats. Copilot integration means that Word, PowerPoint, and Outlook users can generate images and designs without leaving their document. The AI capability isn’t a separate product to be discovered and purchased. Rather, it’s a feature that shows up automatically in software people already use.
Figma Make, by contrast, is a standalone product that requires users to actively adopt a new tool. The company reported that 30% of customers spending $100,000+ in ARR were using Make weekly by Q32025, which is an impressive adoption rate among enterprise customers. But Figma has 540,000 total paid teams. Adobe has 32.5 million Creative Cloud subscribers. Microsoft has 400 million Microsoft 365 users. The distribution math is simply different.
The Capital Structure Problem
Figma’s core challenge isn’t product quality. Designers genuinely love the platform. They extol its browser-based collaboration features, the real-time multi-user editing, the developer handoff workflows. These features are why 95% of Fortune 500 companies use Figma products. The problem is that a great product alone isn’t enough when you’re fighting incumbents with orders of magnitude more capital.
Consider the cost structure of AI. Figma’s CFO Praveer Melwani noted on the Q3 earnings call that they’re “not enforcing the credit limits on our full seats or charging for a consumption add-on” for Figma Make. Translation: they’re subsidizing AI inference costs to drive adoption, hoping to monetize later. But AI compute is expensive, and the bill is showing up in gross margins. Q3 margin was 86%, down from prior quarters due to AI serving costs. (I have previously written about how AI-related expenses affect SaaS margins.)
Adobe, by contrast, already monetizes Firefly through its credit system and enterprise contracts. The company generated $400 million in direct Firefly revenue in 2024-25, with 61% coming from enterprise deals. Microsoft doesn’t even need to directly monetize Designer, as it’s a feature that drives Microsoft 365 retention and Copilot Pro upgrades.
Figma is attempting to build a consumption-based AI business from scratch while simultaneously competing with companies that can afford to give AI features away as bundled value. This is the classic innovator’s dilemma in reverse: the startups made the product, but the incumbents have the capital to commoditize it.
Three Scenarios for Figma’s Future
I had Opus 4.5 build a financial model showing three scenarios for Figma’s revenue through 2030.
Bull Case ($5.6 billion revenue by 2030): Figma maintains 40% annual growth, Figma Make achieves meaningful penetration, and the company successfully monetizes AI consumption. This requires either Adobe and Microsoft stumbling, or Figma finding a niche where capital intensity matters less than product quality.
Base Case ($3.2 billion revenue by 2030): Growth decelerates to 15-20% annually as AI tools from Adobe and Microsoft capture marginal design spending. Figma remains the tool of choice for dedicated design teams, but loses share among casual creators and developers who increasingly use AI-integrated tools in their existing workflows.
Bear Case ($1.5 billion revenue by 2030): AI fundamentally disrupts the design workflow, reducing the value of human-centered design tools. Adobe and Microsoft’s massive distribution advantages allow them to capture AI design spending, while Figma’s lack of capital constrains its ability to keep pace with model development.
At current valuation multiples, the Bull Case implies a market cap approaching $56 billion, about 4x today’s value. The Bear Case implies a market cap around $15 billion, roughly flat from here, but with years of disappointment along the way.
The Adobe Acquisition Thesis, Revisited
When Adobe offered $20 billion for Figma in 2022, critics called the price outrageous. It was nearly 50x revenue for a company that hadn’t yet proven it could monetize at scale. With hindsight, the offer looks prescient.
Adobe wasn’t paying for Figma’s current revenue. It was paying to eliminate a competitor before AI changed the competitive landscape. By acquiring Figma, Adobe would have gained collaborative design capabilities it lacked while preventing Figma from evolving into an AI platform that could threaten Creative Cloud.
The deal’s collapse left Figma independent but exposed. The company now has to build AI capabilities on its own dime, competing against Adobe’s $3.8 billion AI investment portfolio and Microsoft’s planet-scale infrastructure. The $20 billion Adobe offered would have given Figma’s investors liquidity at a premium that may never be seen again.
This isn’t to say Figma is doomed. The company has $1.6 billion in cash, no debt, a 131% net dollar retention rate, and genuine product-market fit among professional design teams. But sustainable competitive advantage in AI requires either differentiated technology or structural capital advantages. Figma has neither.
What Figma does have is optionality. The company could raise additional capital, though doing so would dilute shareholders at today’s depressed valuation. It could seek a strategic acquirer, though regulators already blocked Adobe. It could pivot toward a more defensible niche where AI competition matters less. Each path has tradeoffs.
Conclusion: Balance Sheet Beats Products
The story of Figma’s post-IPO decline isn’t really about lock-up expirations or market sentiment. And it’s certainly not about having the best product that Silicon Valley early adopters thrive on. It’s about the structural reality that AI development requires massive, sustained capital investment, and Figma simply can’t match what Adobe and Microsoft can spend.
This dynamic extends beyond design tools. Across the software industry, companies that built great products in the pre-AI era are discovering that product quality alone won’t win the AI era. The winners will be companies with the balance sheet strength to fund AI R&D, the distribution to embed AI into existing workflows, and the data moats to train differentiated models.
Figma’s collaborative design tools remain excellent. Designers still prefer them. But in a world where Adobe Firefly generates 24 billion assets per year and Microsoft Designer ships free with every Office subscription, “designers prefer us” may not be enough.
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Thoroughly enjoyed this analysis - thank you
But won’t the partnership Figma has with Anthropic help with AI advancement?