Morgan Stanley Cuts Figma Price Target Despite 46% Revenue Growth: Is AI Competition the Risk?

Morgan Stanley lowered its price target on Figma (NYSE:FIG) to $38 from $44, maintaining an Equal Weight rating following the design software maker’s first-quarter results. The price target cut arrives despite a second straight quarter of accelerating revenue growth to 46% year over year, highlighting an unusual tension in the analyst community.

Piper Sandler analyst Billy Fitzsimmons also trimmed his target to $30 from $35 while keeping an Overweight rating. For investors in Figma stock, the message is nuanced: growth is excellent, yet the AI competition debate is compressing the multiple Wall Street will pay for it.

The Analyst’s Case

Morgan Stanley credited the accelerating top line to seat expansion, paid customer conversion, and new credit monetization. The firm noted that while investor debates on competition and gross margins persist, the Q1 2026 results “provide a strong case for Figma’s positioning in AI.”

Piper Sandler’s data points were similarly strong: Figma’s 6% revenue beat, net dollar retention of 139%, and a Q2 revenue growth guidance midpoint of 40% year over year, a sizable nine points ahead of consensus. Management also raised the FY26 revenue growth midpoint to 35% year over year.

Company Snapshot

Figma operates a collaborative design platform used by product teams across enterprises. The company carries a market capitalization of roughly $9.98 billion and generated trailing revenue of $1.06 billion, with gross margins around 85%.

FIG shares last traded at $23, well below the 52-week high of $142.92. The consensus analyst target sits at $40.25, with ratings skewing toward Hold.

Why the Move Matters Now

The valuation reset reflects a structural concern about category disruption rather than any execution miss in the quarter. So-called “vibe coding” platforms and AI-generated user interface tools are increasingly capable of producing design assets without traditional workflows. That has investors questioning whether the design tool category itself faces disruption.

Figma’s defense is its enterprise footprint and AI feature velocity, evidenced by that 139% net dollar retention figure. Even so, Figma stock trades at a price-to-sales ratio of 9x, leaving little room for multiple compression if growth ever slows.

What It Means for Your Portfolio

For prudent investors, the analyst downgrade signals less about Figma’s near-term fundamentals and more about the AI overhang on the entire design software category. A 46% growth rate at this scale remains rare, and management’s raised full-year outlook suggests momentum is durable.

Yet the bear case deserves weight. If AI-native tools commoditize design output, even exceptional results may not drive multiple expansion. Position sizing should reflect that asymmetric risk while leaving room to participate if the AI competition fear proves overstated.