Figma shares plummeted over 15% in after-hours trading on Wednesday, reversing sharp gains accumulated earlier in the week. The stock had rallied 5.63% on Monday and 5.14% on Tuesday, driven by AI application software sector strength and bullish sentiment ahead of the earnings release, setting the stage for a sell-the-news reaction despite better-than-expected quarterly results.

The design software company reported second-quarter revenue of $370.1 million, up 48% year-over-year and beating the $351.6 million analyst consensus. Adjusted earnings per share of $0.08 doubled the $0.04 estimate. Figma also raised its full-year revenue guidance to $1.463-$1.467 billion, implying approximately 39% growth, above prior projections. However, a GAAP net loss of $112.2 million—driven by a near-doubling of operating expenses to $426.9 million, including surging stock-based compensation and AI-related investment—sparked concerns over margin pressure. The company left its full-year operating income forecast unchanged, and its adjusted operating margin slid sequentially to 10% from 16%.

Investor anxiety centered on the rising cost of AI monetization, even as early adoption metrics showed promise. Over 80% of larger paid customers were consuming AI credits weekly, and the new Figma agent was being used by more than half of those customers. The company’s CFO noted that newer products were still in beta and not yet generating credit revenue, while inference spending and conference costs weighed on free cash flow. The combination of lofty pre-earnings expectations, a GAAP earnings miss, and uncertainty over the pace of AI-related margin recovery triggered aggressive profit-taking, sending shares sharply lower in after-hours trading.