Figma Soars 40%, But AI Anxiety Still Haunts Software

40% growth should make investors happy. So why the lukewarm response?

Figma delivered a knockout quarter. Revenue jumped 40% year-over-year to $303.8 million, crushing expectations. The design software company guided Q1 revenue to $315-317 million, well above the $292 million analysts expected. By any measure, it was a stellar performance.

Yet the stock's initial 15% post-earnings surge quickly fizzled. The next day, gains had largely evaporated. What gives?

The AI Software Panic

The answer lies in a broader market fear: artificial intelligence is coming for software companies. The iShares software sector ETF has plummeted over 20% this year as investors worry that generative AI will make traditional software obsolete.

Figma seems particularly vulnerable. If AI can create logos in seconds and design websites from simple prompts, who needs professional design software? It's a reasonable concern that's weighing on the entire sector.

But Figma CEO Dylan Field pushes back on this narrative. "If you look at software, not only is it not going away, there's going to be way more of it than ever before," he said. The market is "potentially increasingly competitive," but that doesn't mean extinction.

Fighting Fire with Fire

Figma's strategy? Embrace the enemy. The company announced a partnership with AI startup Anthropic on Tuesday, signaling its intent to integrate rather than compete with AI. Usage of Figma's AI-powered tools is rising, and partnerships with AI companies are expanding.

Morgan Stanley analysts see this as smart positioning. They believe Figma "is a strong participant in the AI innovation cycle, and not a company at risk of disruption." With shares having "pulled back considerably," they see "a much more attractive risk/reward" opportunity.

Bank of America takes a more cautious view. While Figma's "AI monetization timetable is certainly on track," they warn that shares "could remain under pressure until a tangible revenue disclosure, given the bearish sentiment on apps generally."

The Bigger Question

This isn't just about Figma. It's about which software companies will thrive in an AI-first world and which will become casualties. The winners likely won't be those that ignore AI, but those that figure out how to make it work for their users rather than against them.

Figma's bet is that designers will always need sophisticated tools—they'll just be AI-enhanced. Whether that's wishful thinking or strategic foresight remains to be seen.