Figma, Inc. (FIG) Earnings

Management highlights

### Overall Business Momentum - Q1 2026 marked the second consecutive quarter of accelerating year-over-year revenue growth, reaching 46% after 40% in Q4 2025 and 38% in Q3 2025. - Net dollar retention (NDR) reached 139%, up 3 percentage points from the prior quarter and hitting the highest level in over two years, driven by seat expansion and growth in non-seat AI add-on offerings. - The company ended the quarter with $1.6 billion in cash, cash equivalents, and marketable securities. Cash flow was impacted by a one-time $56 million payout for the newly introduced annual corporate bonus program, which will recur in Q1 annually going forward. ### Product Development & AI Innovation - The company frames the AI shift as creating a competitive advantage for Figma: as software execution and code become cheaper and more abundant, high-quality design and creativity have become the key competitive edge for product companies, which aligns with Figma's core mission. - Major product updates shipped in Q1 include enhanced context and control features for Figma Make, new MCP capabilities that allow AI agents to read/write directly to Figma files, and a timeline editor for AI-generated video in Figma Weave. - Additional AI capabilities, including the AI Assistant (currently in alpha), are poised to expand AI usage surface area on the platform, and are expected to draw on AI credits in the near future. MCP is currently in free beta, with plans to transition to a usage-based offering. ### Customer Adoption & Use Cases - Large enterprise customers are deepening usage and expanding seats across organizations: Google doubled down on Figma as an end-to-end single source of truth for building AI-native agentic Gemini experiences; Lufthansa used Figma Make to prototype a fully functional flight navigation app before writing production code; Rocket Mortgage embedded its enterprise design system into Figma Make to drive company-wide adoption beyond core design teams; global architecture firm NBBJ uses Figma Weave to generate in-house client pitch renderings, cutting turnaround time and increasing creative control, with expected tripling of adoption in the next three months. - Notable large Q1 customer wins include a 35,000-seat enterprise agreement with a major global hyperscaler (one of the largest deals in Figma history), a full company-wide rollout at a top global media and entertainment company, the largest ever regional deal in India with a top IT services firm, and a doubling of seats at a major European industrial automation firm where engineers now outnumber designers on the platform. - Over 80% of weekly Figma Make users continue to use Figma Design alongside it for visual editing and exploration, demonstrating complementary adoption of the two tools.

Guidance

- For Q2 2026, management guides revenue in the range of $348 million to $350 million, representing 40% year-over-year growth at the midpoint. Q2 non-GAAP operating income and free cash flow are expected to be negatively impacted by costs for Config, Figma's annual user conference, consistent with historical trends. - For full year 2026, management raised revenue guidance to a range of $1.422 billion to $1.428 billion, representing 35% year-over-year growth at the midpoint, an increase of $55 million from the prior guidance range. The upward revision is driven by higher paid conversion, sustained broad-based seat expansion across all customer tiers, and better-than-expected AI credit utilization, retention, and add-on purchases since credit limits went into effect. - Full year 2026 non-GAAP operating income guidance was raised by $25 million to a range of $125 million to $135 million, representing a 9% non-GAAP operating margin at the midpoint. The upward revision reflects higher expected revenue, operational efficiencies, and ongoing optimizations to AI inference costs. - Management's guidance philosophy incorporates only sustained observed trends, and does not include unproven future benefits until visibility is high.

Segment performance

Figma does not break out formal separate product segments in this earnings call, but reports overall and feature-specific performance: Total Q1 2026 revenue was $333 million, growing 46% year-over-year, with 48% year-over-year growth in international revenue contributing to the overall results. Non-GAAP gross profit was $275 million for an 82% gross margin; non-GAAP operating income was $52 million for a 16% operating margin; free cash flow was $89 million for a 27% free cash flow margin. As of Q1 end, total paid customers grew 54% year-over-year to ~690,000. Paid customers with >$10,000 ARR grew 37% YoY (5pp acceleration from Q4 2025), while paid customers with >$100,000 ARR grew 48% YoY (2pp acceleration from Q4 2025). Approximately 60% of enterprise customers with >$100,000 ARR use Figma Make weekly, up from over 50% in Q4 2025. Pro team new conversions to paid grew over 150% YoY, driven by AI feature adoption. Early AI credit monetization (launched March 18, 2026) shows that pro teams purchasing AI credit add-ons have 3x higher average annual spend than non-purchasing teams. MCP weekly active users grew 5x quarter-over-quarter, and enterprise customers using MCP grew full seats 70% faster quarter-over-quarter than non-MCP customers.

Risks & headwinds

- AI adoption increases inference costs, which could pressure gross margins in the near term as the company prioritizes growth and product ubiquity over maintaining a specific gross margin floor. - Increasing competition from large LLM providers and cloud hyperscalers that have announced competing design and AI-native product development tools could pressure market share and growth. - Actual results may differ materially from forward-looking statements due to unforeseen changes in customer adoption of AI features, AI monetization trajectories, and inference cost optimization efforts, with additional risk factors detailed in the company's SEC filings. - Early AI monetization is still in its initial stages, and long-term customer behavior around credit purchases versus seat upgrades is not yet fully predictable.

Analyst Q&A

• Q: It has only been ~6-8 weeks since AI credit monetization launched. How should we expect this to ramp in Q2 and the second half of 2026? /

  A: AI credit adoption is currently ahead of management expectations, which gave the company confidence to raise full-year guidance. Early data shows that over 75% of organization/enterprise users who exceeded credit limits before enforcement continued consuming credits in April, and pro teams that purchase AI credits have 3x higher average ARR than non-purchasing teams. Upcoming new AI features will expand the usage surface for AI credits, and credit monetization is expected to act as a sustained tailwind for revenue while also driving additional seat upgrades through the year.

• Q: It has been almost a year since Figma Make launched in GA. How has customer usage evolved, and how are new capabilities like MCP resonating? /

  A: Customer usage and expectations have continued to evolve over the past year, with users already stretching Figma Make to build everything from prototypes to full shipped websites and software. Early technical constraints have been corrected, and the product is now significantly better than it was at launch, with additional major improvements coming in the next few months. New capabilities that add deeper product context, user control, and MCP agent integration have resonated strongly with ambitious enterprise customers that want to leverage AI alongside existing Figma workflows.

• Q: How is the pricing model evolving to capture AI value, and what is the outlook for gross margins as AI usage grows? /

  A: Management prioritizes providing clear customer value first, and is already seeing customers become more disciplined about AI token spend, so Figma is adding governance controls, flexible contracting, and pay-as-you-go options to meet this demand. While it is hard to predict the final long-term gross margin level, the company has multiple levers to optimize inference costs: routing queries across multiple models based on task complexity, leveraging a model-agnostic architecture to negotiate better pricing with providers, and developing first-party custom models trained on Figma's design corpus to reduce costs and improve performance. Now that credit limits are live, growing AI usage directly translates to incremental revenue that offsets higher inference costs.

• Q: New design tools from major LLM and cloud providers have recently launched. How does Figma differentiate against these new competitors, and is there any impact on Q2 growth trends? /

  A: Most new tools from large providers are either complementary to Figma and can be integrated into the Figma ecosystem, or represent direct competition that Figma is well positioned to defend against. Key Figma differentiators that competitors have not replicated are: a high-performance enterprise-grade multiplayer canvas that requires years of deep expertise to build correctly, deep product context from years of serving design and product teams, and the ability to seamlessly combine AI, manual design editing, and code workflows all in one platform. Management confirmed that there has been no material impact on customer adoption or growth from new competitor offerings, and reaffirmed confidence in the published Q2 revenue guidance.

• Q: For customers who exceed their AI credit limits, what is the split between purchasing additional credits versus upgrading to a full seat, and how will this mix evolve? /

  A: It is still too early to confirm a long-term stable mix, and management expects customers to use both options as needed. The company's monetization model prioritizes supporting adoption rather than constraining usage, so it will maintain a flexible model that meets customer needs. Early data confirms strong ongoing usage after credit limit enforcement, with 75% of over-limit enterprise users continuing to consume credits, and management expects both add-on credit purchases and seat upgrades to act as growth drivers for the full year.