Figma CFO says design platform willing to put margins on the line to boost AI demand

Figma's finance chief Praveer Melwani revealed on Thursday that the design software company is unsure if it will return to its previous gross margin levels while increasing its AI spending. However, he stated that the investments will aid in attracting users and better competing with advanced tools from labs like OpenAI and Anthropic.

The firm has heavily invested in AI features, such as its Figma design assistant and tools capable of generating prototypes and web applications using text prompts, which have fueled revenue growth but have negatively impacted margins.

Melwani, speaking at the Reuters Global Markets Forum during Figma's Config user conference in Bengaluru, India, was asked if the company would return to low-90s gross margin percentages. He admitted that he was uncertain about this but emphasized that margin concerns are not his top priority. Instead, he believes that focusing on boosting AI adoption, even if it means sacrificing margins, will help expand the user base in an era when advanced AI models could disrupt demand for traditional software.

The company recently switched to a usage-based pricing model for AI credits on its platform, aiming to deliver stronger earnings in future quarters through monetization efforts. However, investors have been closely watching the shrinking margins and free cash flow at tech companies as they evaluate the returns on their AI investments.

Figma's stock has dropped around 43% this year due to concerns over shrinking margins and potential AI-driven disruptions, coupled with investor scrutiny. Melwani stated that he would be willing to endure margin losses, similar to what they faced last year, if it means expanding the total addressable market.