Stock-Split Watch: Is Figma Next?

Figma (NYSE: FIG), a collaborative design platform, attracted massive interest when it went public on July 31. The share price more than quadrupled within a day after its initial public offering (IPO), but over the next few months, it gave up most of those gains.

Companies that experience large price movements sometimes find themselves in stock-split or reverse-stock-split territory. Given Figma's volatility so far, let's examine the likelihood of a stock split and assess how this tech company looks as an investment opportunity.

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How stock splits work

In a traditional stock split, a company issues new shares to all the holders of its existing shares, with the result that each one now represents a smaller portion of the business. Say, for example, that a company with a high-flying stock announces a 10-to-1 split. On the day prior to the split, the stock is trading at $1,000 per share. For every share you held before the split, you'd have 10 shares post-split, each one worth $100.

The total value, both of your holdings and the company itself, doesn't change due to that stock split. The only difference is the number of shares.

Stock splits are most commonly performed when a company's share price has become high enough to make it harder for retail investors to buy them. Some investors, especially novice investors on tight budgets, avoid stocks trading at high prices because they don't want to spend too much per share.

At its current share price (under $40 as of Jan. 12), Figma doesn't have that issue. It also doesn't appear to be a candidate for a reverse stock split, where a company consolidates its number of shares. The major stock markets have set minimum levels for stocks -- if a company's shares sink below them for an extended period, they risk being delisted. So companies trading below $5 sometimes execute reverse splits to increase their share price. But Figma doesn't need to do that.

Figma could be poised for a comeback in 2026

As with many IPO stocks, Figma's value quickly declined after the initial hype wore off. However, the stock is now looking much more reasonably priced, and there's still a lot to like about this company.

Figma provides businesses and individuals with a web-based collaborative design architecture. With its real-time interface, a company's entire design team can use Figma to build websites, mobile apps, and other digital products.

It's a leader in its space, holding a 40.65% market share in the design software industry, according to SQ Magazine. Rival Adobe (which tried to buy Figma for $20 billion in 2022 before the deal was terminated due to regulatory issues) is second with a 13.50% market share.

The company's leading market position has its pros and cons. Once a business uses Figma, it's likely to stick with it, in part due to the difficulty of switching to a new platform. The company's financial results support that notion. In the third quarter of 2025, Figma reported a net dollar retention rate of 131% for customers with annual recurring revenue (ARR) of $10,000 or more. So these customers are not only sticking with it, they're also increasing their spending.

The downside is that once a company has captured a significant share of its total market opportunity, further growth becomes more challenging. To its credit, Figma is consistently expanding its offerings. It's investing in artificial intelligence (AI) tools, and it launched over 150 new features and products in 2025. One notable example is Figma Make, a prompt-to-app AI prototyping tool. In October, it acquired AI design company Weavy and integrated it as Figma Weave. Moves like these should help it continue growing its customer base and generate more revenue from existing customers.

What's next for Figma stock

Figma has delivered strong financial results in its short time as a public company. In Q3, its revenue grew 38% year over year to $274.2 million, and it surpassed an annual run rate of $1 billion. It's projecting between revenue of between $1.044 billion and $1.046 billion for the year, which would be a 40% increase.

The stock is somewhat expensive, trading at 19 times trailing sales. Adobe, for comparison, trades at 6 times trailing sales. Figma has been growing quickly, though, and if that growth continues, its current stock price could look like a bargain in retrospect.

We can almost certainly rule out a Figma stock split, considering its current share price and the fact that it only recently went public. But if you're looking for underappreciated AI stocks, you may want to pick up some shares for your portfolio.

Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe and Figma. The Motley Fool recommends the following options: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.