SaaS valuation in 2025: public market outlook
The SaaS sector in 2025 presents a more realistic valuation outlook, albeit cautiously optimistic. Following the spectacular highs of 2021 and the sharp correction of 2022, valuations of publicly traded SaaS companies have stabilized. Today, the market rewards sustainable growth and efficiency over aggressive expansion, marking a new era in how these companies are valued.
What will SaaS valuations look like in 2025?
Public valuations of SaaS companies have recovered from their lows in 2022, but remain well below the euphoric peaks of 2021. The current median EV/NTM Revenue multiple stands at around 5 times, while the EV/ARR multiple is around 7 times. This stabilization reflects a return to long-term historical norms, now backed by greater profitability and operational discipline.
Well-known publicly traded SaaS companies illustrate this new equilibrium. For example, Datadog and CrowdStrike, which combine high growth with expanding margins, continue to have double-digit revenue multiples. In contrast, slower-growing companies, such as Zendesk or Smartsheet, have stabilized in the range of 3x-5x.
Key multiples that justify it
- EV/NTM revenue (average ~5.0x): it is used as a benchmark for future growth. Leading high-growth companies can continue to achieve values above 10x, while slow-growth companies tend to trade below 4x.
- EV/ARR (average ~7,0x): It is useful for obtaining real-time snapshots of recurring revenue value. It reflects investors' strong preference for predictable revenue streams.
- EV/EBITDA (average ~30-40x among profitable SaaS companies): EBITDA multiples remain high, especially for mid- and large-cap companies with strong cash flow potential.
- Rule of 40: is a key performance indicator. Companies with a combined growth + margin score of over 40% receive valuation premiums of 2 times or more on revenue multiples. ServiceNow and HubSpot, for example, consistently exceed this indicator and receive the corresponding reward.
Why geography matters
Valuation multiples differ significantly by region:
- North America: Leads with the highest multiples, due to scale, investor appetite, and liquidity. Median EV/Revenue ~5.5x to 6.5x.
- Europe: Valuations lag behind those in the US, often due to smaller company sizes and slower growth. Median EV/Revenue ~3.0x to 4.0x. For example, TeamViewer trades at lower multiples despite its strong fundamentals, reflecting the geographical discount.
- Asia-Pacific: Mixed outlook, with outliers in Australia and China reaching higher valuations, but many companies remain private or undervalued.
Size and growth define value
Valuations vary considerably depending on the size and growth of the company:
- High-capitalisation SaaS (>$10 billion): are usually priced at around 9 times EV/revenue.
- Medium capitalisation (between $2 billion and $10 billion): average between 4.5 and 5.5 times.
- Small capitalisation (<$1 billion): often below 3 times, sometimes below 1 times for microcapitalisations.
Segmentation by growth reveals similar differences:
- Year-on-year growth >30%: EV/revenue 10x+ usual
- Growth of 15-30%: 6-8 times
- Growth <15%: 2-4 times
The 40% rule is a key filter: those that exceed 40% consistently receive higher ratings.
Trends that will shape the valuation outlook in 2025
- Efficiency is the most important thing: Profitability indicators, such as EBITDA margins, free cash flow, and the 40% rule, are more important than ever.
- Growth remains strong, but with discipline: The market continues to reward growth, but only if it is accompanied by operational leverage.
- AI and cybersecurity lead the premium segments: companies such as Palantir and Zscaler tend to trade at the highest multiples.
- Differences in valuation between regions and sizes persist: However, there is some convergence taking place, especially as global investors seek value in undervalued markets.
Application of public multiples to private SaaS companies
When using public references to value private SaaS companies, it is essential to apply the appropriate adjustments to reflect:
- Liquidity discount: Private shares are not negotiable and carry a higher risk.
- Size discount: A smaller revenue base and limited scale affect the valuation.
- Growth and margin profile: adjust differences in trajectory and profitability.
- Governance and reporting standards: Public companies face stricter controls, which increases confidence and valuation.
As a general rule, a 20-40% discount public multiples to arrive at a realistic valuation of the private market.
The limitations of the multiple method
Although widely used, the multiple method has its limitations, especially in the SaaS environment, where the dispersion is high. Two companies with similar ARR may have very different valuations due to factors such as:
- Net income retention
- Gross margin profile
- Sales efficiency and CAC recovery
- Customer concentration
Public markets may value Company A at 10 times ARR and Company B at 3 times, even if both have $30 million in ARR. Without deeper analysis, multiples alone risk oversimplifying the true drivers of value.
How should a healthy SaaS company operate?
Gone are the days of widespread high multiples. In 2025, investors are selective. They favour companies that offer a balance between growth and margin, scalability and market leadership. For both founders and M&A advisors, this environment requires a clear articulation of the factors that drive value, particularly the strength of recurring revenue, the predictability of growth and efficiency.
As a reference, a healthy SaaS company in today's market should aspire to:
- Grow by more than 20% annually
- Maintain gross margins above 70%
- Follow the 40 rule
- Keep expenditure under control or achieve positive EBITDA
Such a profile can realistically achieve revenue multiples of between 6 and 10 times, depending on the sector and scale.
Conclusion on the situation of the SaaS sector in 2025
The SaaS valuation market in 2025 is rational, stable, and rich in opportunities for companies that demonstrate both growth and financial discipline. For both tech founders and investors, understanding these public benchmarks, while applying the appropriate adjustments, is essential to forming a credible valuation narrative.
If you are interested in comparing your SaaS company with other similar publicly traded companies, please contact our specialized M&A advisors from the technology sector and will provide you with a personalised assessment.