Executive Summary / Key Takeaways

• Tenable is spearheading a fundamental shift in cybersecurity from reactive "firefighting" to proactive "fireproofing" through its AI-powered Exposure Management platform, Tenable One. This strategic evolution is driven by the increasing sophistication of AI-powered attacks and the convergence of IT and OT environments.
• The company demonstrates robust financial performance, exceeding Q3 2025 guidance with 11% year-over-year revenue growth and a 23% operating margin, alongside strong free cash flow generation and a commitment to shareholder returns through an expanded share repurchase program.
• Tenable One, now representing approximately 40% of new business sales, is a key growth catalyst, driving significantly higher average selling prices (ASPs) and longer-term customer commitments by unifying visibility, insight, and action across diverse asset types and integrating third-party security data.
• Technological differentiation, particularly through AI-driven enhancements to its Vulnerability Priority Rating (VPR) and strategic acquisitions like Vulcan Cyber and Apex Security, positions Tenable as a leader in anticipating and remediating threats across the expanding AI attack surface.
• While facing macroeconomic uncertainties and cautious spending in the U.S. federal sector, Tenable's balanced growth strategy, strong channel partnerships, and continuous innovation in exposure management are expected to drive sustained profitability and market leadership.

The Dawn of Proactive Security: Tenable's Strategic Evolution

The cybersecurity landscape is undergoing a profound transformation, moving away from a reactive "detect and respond" paradigm to a proactive "preemptive security" approach. Tenable Holdings, Inc. (NASDAQ:TENB), founded in 2002, has strategically positioned itself at the forefront of this shift, evolving from its foundational strength in vulnerability management (VM) to become a leader in cyber exposure management. This evolution is critical as AI dramatically reshapes the threat landscape, making attacks faster, more automated, and more sophisticated, thereby exposing the limitations of traditional reactive defenses. Currently, over 95% of cybersecurity spending is on post-breach technologies, but this mix is expected to change significantly, with a disproportionate amount of future investment flowing into proactive security.

Tenable's overarching strategy centers on its AI-powered Tenable One platform, designed to unify security visibility, insight, and action across the entire attack surface—from IT infrastructure to cloud environments and critical operational technology (OT). This platform approach is a direct response to the growing complexity of hybrid IT/OT environments and the pervasive challenge of vendor sprawl, where organizations seek to consolidate fragmented security tools into a cohesive risk management strategy. The company's deep roots in vulnerability management, coupled with over two decades of accumulated exposure data, provide a formidable foundation and competitive advantage in this rapidly expanding market.

Technological Edge: AI-Powered Exposure Management

Tenable's core technological differentiation lies in its Tenable One platform, which provides unified visibility, insight, and action across the modern attack surface. This platform goes beyond simply identifying vulnerabilities; it contextualizes and prioritizes risks by correlating them with real-world threat intelligence and asset criticality. A key component of this is the enhanced Vulnerability Priority Rating (VPR), which leverages AI-driven analytics to deliver sharper precision in risk prioritization. While static Common Vulnerability Scoring System (CVSS) broadly flags 60% of vulnerabilities as high or critical, Tenable VPR has narrowed this to a focused 3% at its 2019 launch, and with recent AI-driven enhancements, it now pinpoints a critical 1.6% of vulnerabilities representing actual business risk. This increased precision translates directly into faster mean-time-to-remediation and optimized security resource allocation for customers.

Strategic acquisitions have further bolstered Tenable's technological moat. The acquisition of Vulcan Cyber in Q1 2025 was aimed at enhancing data aggregation capabilities, allowing Tenable One to integrate findings and metadata from over 100 third-party security products, including endpoint, cloud, and application security tools. This expands the unified cyber risk data set, enabling more comprehensive insights and accelerating automated remediation workflows. Similarly, the June 2025 acquisition of Apex Security, Inc. expanded Tenable's AI capabilities, leading to the launch of Tenable AI Exposure in Q3 2025. This solution provides CISOs with visibility into and control over generative AI risks, including discovering AI usage (both internal and "shadow AI"), assessing AI-related vulnerabilities, and enforcing policy at the prompt level. Tenable's R&D investments, up over 20% year-to-date, are heavily focused on these areas, aiming to leverage AI for contextualized risk, autonomous remediation agents, and continuous learning to anticipate threats, effectively transforming Tenable One from a system of record into a system of action.

Business Momentum and Strategic Execution

Tenable's business model is primarily subscription-based, with recurring revenue representing 95% of total revenue in Q3 2025. The company utilizes a two-tiered channel model, selling through distributors and resellers, which comprised 94% of revenue in the nine months ended September 30, 2025. This model provides significant leverage and market reach.

The shift to exposure management is clearly resonating with customers. Tenable One represented approximately 40% of new business sales in Q3 2025, Q2 2025, and Q4 2024, and notably over 30% in Q1 2025. This platform adoption is driving significantly larger deal sizes, with average selling prices (ASPs) for Tenable One deals being 50% to 90% higher than standalone VM offerings. Furthermore, 70% of all multiyear deals with annual commitments are now coming from the Tenable One platform, indicating deeper and longer customer relationships. In Q3 2025, Tenable added 437 new enterprise platform customers, a 13% increase year-over-year, with half of these landing directly with exposure solutions.

Customer successes underscore the platform's value. A global commercial real estate firm displaced a top cloud security provider and an incumbent VM player by consolidating onto Tenable One, citing superior technical capabilities and unified data. A national electric utility in EMEA selected Tenable to integrate IT and OT security, addressing the growing convergence of these environments and protecting critical infrastructure. In Q1 2025, a Fortune 100 customer chose Tenable as their "North Star for exposure management," replacing multiple vendor solutions due to Tenable's ability to inject third-party data with first-party assessments. These examples highlight Tenable's ability to drive vendor consolidation, cost savings, and operational efficiency for its customers.

Financial Performance and Outlook

Tenable has consistently demonstrated strong financial performance and a commitment to profitability. For Q3 2025, the company exceeded all guided metrics, reporting revenue of $252.4 million, an 11% year-over-year increase. Non-GAAP operating income reached $58.9 million, translating to a 23.3% operating margin, a significant increase from 19.8% in Q3 2024. This reflects continued operating leverage despite substantial investments in R&D, which grew over 18% year-over-year. The non-GAAP gross margin also showed a steady increase, reaching 81.6% in Q3 2025.

Calculated Current Billings (CCB) for Q3 2025 grew 7.7% year-over-year to $267.5 million, driven by strong Tenable One adoption. Current Remaining Performance Obligations (RPO) grew 12.9% in Q3 2025, outpacing CCB growth and indicating increasing multiyear customer commitments. The company's unlevered free cash flow generation remains robust, with year-to-date unlevered free cash flow reaching $189.6 million, a 24.7% year-over-year increase. Tenable's balance sheet remains solid, with $383.6 million in cash and short-term investments at the end of Q3 2025. The company actively returns capital to shareholders, having repurchased 8.3 million shares for $300 million since November 2023, with an additional $250 million authorization remaining.

For the full year 2025, Tenable has raised its guidance, reflecting incremental optimism. The company now expects CCB in the range of $1.040 billion to $1.048 billion, representing a 7.7% year-over-year increase at the midpoint. Revenue is projected to be between $988 million and $992 million, a 10.0% increase at the midpoint. Non-GAAP operating income is guided to $211 million to $215 million, or 21.5% of revenue at the midpoint, representing a 100 basis point improvement over 2024. Non-GAAP diluted earnings per share are expected to be $1.51 to $1.54, an 18.2% year-over-year growth at the midpoint. These figures underscore Tenable's commitment to balancing top-line growth with steady profitability expansion.

Competitive Landscape and Positioning

Tenable operates in a highly competitive cybersecurity market, facing both direct and indirect rivals. Direct competitors include established players in vulnerability management like Qualys (QLYS), as well as broader cybersecurity firms such as CrowdStrike (CRWD), Palo Alto Networks (PANW), and Fortinet (FTNT), which offer overlapping solutions in endpoint, network, and cloud security.

Tenable's competitive edge is its comprehensive, unified approach to exposure management across hybrid environments. While CrowdStrike excels in AI-driven endpoint protection and Palo Alto Networks in network security, Tenable One's strength lies in its ability to provide a holistic view of risk across IT, cloud, OT, web applications, and identity systems. This is particularly critical for organizations with complex, multi-cloud, and on-premise infrastructures. Tenable's historically high win rates against traditional VM players and its ability to displace top cloud security providers in competitive bake-offs demonstrate the efficacy of its platform strategy.

The company's leadership in exposure management has been recognized by industry analysts, with Tenable named a leader in the Forrester Wave for Unified Vulnerability Management solutions and the IDC MarketScape for exposure management platforms in Q3 2025, also ranking #1 in IDC's latest market share report. The acquisition of Wiz by Google (GOOGL) is viewed as a "net positive" for Tenable, as it creates uncertainty for customers seeking dual-vendor strategies and avoiding vendor lock-in, leading to increased inbound inquiries and RFP participation for Tenable.

Tenable's technological advantages, such as its AI-powered VPR and the ability to ingest third-party data via Vulcan Cyber, provide a unique competitive moat. While competitors like Qualys offer cloud-based VM, Tenable's broader integration across IT and OT environments offers a more comprehensive risk assessment. Financially, Tenable's gross profit margin of 77.93% (TTM) is competitive within the sector. While its operating profit margin of -0.52% (TTM) and net profit margin of -3.44% (TTM) are currently negative, the company's consistent expansion of non-GAAP operating margins (doubling from 10% in 2022 to 20% in 2024) and strong free cash flow generation (FCF per share of 2.08 TTM) indicate a clear path to sustained profitability.

Key Risks and Challenges

Despite its strong positioning, Tenable faces several risks. The reliance on channel partners is significant, with Ingram Micro accounting for 32% of revenue in the nine months ended September 30, 2025. Any disruption to these partnerships or a shift in partner focus towards competitors could impact revenue.

The U.S. federal public sector, which accounts for approximately 15% of total sales, presents ongoing challenges. Budgetary cycles, funding authorizations, and disruptions from personnel changes (e.g., Department of Government Efficiency actions) can lead to longer procurement cycles and reduced demand. While Tenable has demonstrated resilience in these environments, management has adopted a cautious outlook for this segment, anticipating lower contributions in certain periods.

The rapid evolution of AI technology also introduces risks. While Tenable is leveraging AI for its solutions, the technology is new and may generate inaccurate or flawed outputs, or fail to achieve widespread market acceptance. The emerging regulatory environment around AI (e.g., EU AI Act) and potential legal consequences for data usage could require significant resources to ensure compliance. Furthermore, macroeconomic conditions, including high inflation, interest rate fluctuations, and global trade barriers, could increase operating costs, reduce customer budgets, and lengthen sales cycles, potentially impacting financial performance.

Conclusion

Tenable Holdings, Inc. is strategically positioned at the vanguard of the cybersecurity industry's shift towards proactive exposure management. Its AI-powered Tenable One platform, bolstered by continuous innovation and strategic acquisitions like Vulcan Cyber and Apex Security, offers a compelling solution for organizations grappling with an increasingly complex and AI-driven threat landscape. The company's ability to unify visibility, insight, and action across diverse attack surfaces, coupled with its strong channel partnerships and consistent financial discipline, underpins a robust investment thesis.

While macroeconomic headwinds and specific challenges in the U.S. federal sector warrant careful monitoring, Tenable's proven track record of exceeding guidance, expanding profitability, and generating strong free cash flow demonstrates its operational effectiveness. The company's technological leadership in AI-driven risk prioritization and comprehensive attack surface coverage provides a durable competitive advantage, paving the way for sustained growth and superior returns as the world moves towards a "fireproofed" digital future.