The important part is export control - i.e. deciding who can buy the stuff: https://en.wikipedia.org/wiki/NSO_Group

If they are dumb and get caught during audit for selling to Sudan or something then sure, Israeli government will probably tell them they're bad. (And what, shut them down? Lol.)

It's more like they leverage it for diplomacy. The auditing means nothing really, it's being given to authoritarian government like Saudi Arabia as long as they are OK with Israel existing. The bar to get access to NSO tools is too low...

They don't really leverage it for diplomacy. Israeli arms exports policy consistently prioritizes getting better R&D economies of scale over actually affecting foreign states' behavior.

Definitely part of diplomacy effort of netanyahu with the despots if the world. NSO CEO travelled with him to Saudi t among other places. It's software there's economics of scale by default.

Economies of scale only apply if you have scale, ie lots of (paying) users. If you're making this fancy thing for only the Israeli security services you won't be able to pay your developers.

Economy of scale is actually inverted with 0 days. The more you use it the higher the risk it's detected and fixed so value and scale are inversely proportional.