Valuation compression is the narrowing of price-to-sales, price-to-earnings, or other market multiples when investors expect slower growth, higher rates, or tighter financing. In plain terms, companies can still be profitable and still trade at lower valuations if the market becomes less willing to pay for future growth.
In cyber security, this matters because many vendors, startups, and managed service providers depend on investor funding or acquisition premiums. When multiples compress, security firms may cut hiring, delay product development, or merge to survive. Defenders should watch for side effects such as weaker vendor support, delayed patch cycles, or reduced spending on tools and staff. Attackers do not cause valuation compression directly, but they can benefit when budget pressure leads to thinner security operations, faster procurement of cheaper tools, or riskier third-party dependencies.