Why Wall Street Is Underestimating Figma in 2026

The market’s fear of artificial intelligence reshaping software has created significant headwinds across the entire sector. Figma, which went public in the summer of 2025, has become a prime victim of this pessimism, with shares down more than 75% from their all-time high. Yet this dramatic sell-off might represent the market’s most glaring miscalculation right now—one that savvy investors are underestimating the correction opportunity within.

When a successful company’s stock plummets this sharply, it often signals not weakness but market overreaction. The question worth asking is whether investors are unfairly underestimating Figma’s true value.

The Software Sector Under Siege

Figma’s troubles aren’t unique. Nearly every software company is facing similar headwinds as Wall Street grapples with concerns that artificial intelligence could render many traditional software applications obsolete. The narrative has become pervasive: AI will disrupt, replace, and fundamentally alter the software landscape.

However, history suggests this anxiety may be premature. During the internet bubble of the late 1990s, similar doomsday predictions circulated—yet established technology infrastructure didn’t disappear overnight. Current market sentiment typically runs years ahead of a technology’s actual real-world impact. Software companies with entrenched user bases tend to persist longer than fear-driven markets assume.

Figma’s position further challenges this disruption thesis. The platform itself is AI-integrated, allowing users to leverage third-party applications like OpenAI’s ChatGPT within its ecosystem. Rather than being threatened by AI, Figma is evolving as an AI-native tool, enabling designers and product teams to collaborate on digital interfaces with unprecedented efficiency through its multiplayer technology. The company isn’t fighting technological disruption—it’s actively embracing it.

Examining the Fundamentals Behind the Valuation

Strip away the market sentiment, and Figma’s financial trajectory tells a compelling story. The company is approaching $1 billion in trailing twelve-month revenue and analysts project progression to nearly $1.3 billion in 2026, followed by over $1.5 billion in 2027. This represents roughly 50% revenue growth over a two-year period.

Perhaps most impressive is Figma’s revenue retention rate of 131%, demonstrating that existing customers consistently increase spending over time. This metric indicates genuine stickiness—users aren’t just adopting Figma, they’re deepening engagement. Additionally, the company already converts over 25% of sales into free cash flow, proving profitability alongside growth.

The stock’s decline has compressed valuations dramatically. At a price-to-sales ratio of 14, Figma trades at an attractive multiple for a business achieving 50% growth and generating substantial free cash flow. Meeting Wall Street’s growth estimates over the next two years, while maintaining current valuation multiples, would likely deliver returns exceeding the broader market index.

But there’s additional upside embedded. If—or rather when—market sentiment shifts away from blanket software stock pessimism, Figma’s valuation multiples could expand significantly. The combination of growth delivery and sentiment recovery could create outsized returns from current levels.

The Real Risk of Underestimating Growth

The core mistake many investors make is underestimating how quickly perceptions can reverse once growth becomes undeniable. Figma’s near-term path is relatively clear: deliver the projected revenue growth while the market remains distracted by AI anxiety. When those numbers land, and the company continues demonstrating resilience, investor focus will likely shift.

Consider historical precedent: investors who initially positioned in Netflix or Nvidia during periods of intense skepticism—December 2004 and April 2005 respectively—would have realized thousand-fold returns if they maintained conviction through market cycles. The common thread wasn’t that these companies were perfect; it was that the market was underestimating their trajectories.

Figma may not deliver Netflix-level returns, but the ingredients for significant outperformance are present: a defensible market position, predictable growth, improving unit economics, and—most critically—depressed market valuation. The pain of recent declines has created opportunity, yet many investors continue underestimating what this moment represents.

Looking Ahead to 2026 and Beyond

As 2026 unfolds, the software sector’s fate may hinge on whether the AI disruption narrative evolves or persists. Figma’s own performance will serve as a test case. If the company delivers on growth projections while maintaining profitability, it challenges the market’s bearish thesis. That could trigger broader re-evaluation of software valuations and sentiment.

The case for not underestimating Figma rests on straightforward logic: the company has the fundamentals, growth rate, and valuation alignment that historically precedes significant stock moves. Whether the market recognizes this opportunity in 2026 remains uncertain, but being on the right side of this inflection could prove rewarding for patient investors.