Adobe shares plunge on deal to acquire design platform Figma for $20 billion

Technology

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Shantanu Narayen, CEO of Adobe Systems Inc.
David Paul Morris | Bloomberg | Getty Images

Adobe announced Thursday that it will acquire design software firm Figma in a deal worth about $20 billion in cash and stock. Shares of Adobe sank 17%, their biggest plunge since 2010.

Figma, founded in 2012, creates cloud-based design software that allows teams to collaborate in real time. It competes head-to-head with Adobe’s XD program.

The company was valued at $10 billion in its last funding round in 2021.

Figma, whose backers include the likes of Index Ventures, Greylock Partners and Kleiner Perkins, is expected to generate more than $400 million in annual recurring revenue this year, sources familiar with the company’s financials previously told CNBC. Adobe confirmed Figma’s ARR will surpass $400 million exiting 2022.

That means Adobe is paying in the neighborhood of 50 times revenue at a time when sales multiples for cloud software are contracting dramatically from their record highs reached last year. For the top cloud companies in the BVP Nasdaq Emerging Cloud Index, forward multiples have fallen to just over 9 times revenue from about 25 in February 2021.

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Adobe said it will integrate some of the features from its other products, such as illustration, photography and video technology, into Figma’s platform. Adobe sells a range of software services for photo and video professionals, like Photoshop, Illustrator, Premiere Pro and more.

“Adobe’s greatness has been rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions,” said Adobe CEO Shantanu Narayen. “The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity.”

Once the deal closes, Figma co-founder and CEO Dylan Field will continue to run the company. He’ll report to David Wadhwani, president of Adobe’s digital media business.

Adobe also announced fiscal third-quarter results. It reported earnings of $3.40 per share, adjusted, topping Refinitiv estimates of $3.33 per share. It posted $4.43 billion in revenue, which matched analyst expectations of $4.43 billion.

The company issued mixed guidance for the fiscal fourth quarter. Adobe said revenue in the quarter will be $4.52 billion, compared with consensus estimates of $4.6 billion, according to StreetAccount. It expects to report earnings of $3.50 per share, adjusted, above a StreetAccount forecast of $3.47 per share.

Correction: This article has been updated to correct Adobe’s third-quarter results.

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