Figma shares declined in after-hours trading on Wednesday following the release of third-quarter financial results. The stock dropped by approximately 6% as investors focused on the significant costs associated with the company's rapid expansion into artificial intelligence. While the design platform reported figures that exceeded analyst expectations, the price tag for delivering these new AI capabilities raised concerns among market participants.
The company posted revenue of $391.4 million, representing a 43% increase compared to the same period last year. This figure surpassed the $377 million estimated by Wall Street analysts. Adjusted earnings per share stood at 10 cents, which also beat the consensus forecast of 5 cents. These results indicate that Figma's strategy of integrating proprietary AI tools is gaining traction with users.
Dylan Field, Figma's CEO and co-founder, emphasized the strategic importance of these developments in the earnings release. He described the company's full-stack design solutions as being increasingly powered by their first-party model. Field stated that this integration is native to how teams design and build with AI, marking a key opportunity for the next phase of the company's growth.
Usage of Figma's AI agent has surged since the tool became generally available in early October. Praveer Melwani, the company's CFO, noted that credit consumption has increased significantly. He highlighted that 65% of accounts generating over $10,000 in annual recurring revenue now use the automated agent on a weekly basis. Furthermore, more than 80% of these active accounts are actively consuming AI credits, showing a high level of engagement with the new features.
However, the heavy usage has led to higher direct costs. Adjusted gross margins for the quarter fell to 82%, down from 85% in the previous quarter. This decline reflects the reduced profitability after accounting for the direct costs of producing the product. Additionally, the free-cash-flow margin decreased to 11% from 14% in the prior quarter, indicating that the business retains less cash from each dollar of sales due to these investments.
Despite the margin compression, management remains optimistic about the long-term benefits of the spending. For the fourth quarter, the company projected revenue between $402.0 million and $404.0 million. The midpoint of this range suggests 33% growth, which is higher than the $391 million consensus estimate tracked by FactSet. This forward-looking guidance demonstrates confidence in continued demand for the platform's capabilities.
Figma has also raised its full-year revenue outlook to approximately $1.5 billion. The company cites strong product momentum and improvements in AI cost efficiencies as the primary drivers for this upward revision. Management views the current elevated spending levels as a necessary investment to secure the long-term health and competitive position of the business.
To manage costs, Figma is increasingly relying on its own developed AI models rather than relying solely on external providers. The company aims to deliver fast and affordable results through this approach. Melwani explained that the models being developed are much smaller in nature, which allows for greater operational efficiency. This shift has already yielded results, with the share of work powered by Figma's own model more than doubling between July and the end of October.
