SoundHound AI Stock (SOUN) Hits the High Notes, But Can It Stay in Tune?

Business Insider

3 days ago

SoundHound AI (SOUN) just reported a jaw-dropping 151% jump in quarterly revenue, helping to send the stock up roughly 8.5% in the past month, and over 100% in the past year. Yet, the company finds itself in a familiar spot for many tech-centric growth companies, caught between impressive revenue numbers and stubborn losses. The voice AI specialist has shown tremendous growth potential in an exploding market, but questions persist about when (or if) the company can turn a profit.
Confident Investing Starts Here:
With the voice AI market projected to reach over $30 billion within the next few years, SoundHound's positioning looks promising. But execution risks and competition from tech giants make this anything but a sure bet. I am neutral on the stock for now and prefer to hold off until a clearer path to profitability emerges.
The Numbers Tell a Growth Story
SoundHound's recent financial performance appears to be a dream for growth investors. The company's first quarter revenue of $29.1 million is more than double the same period last year. Furthermore, management is projecting full-year revenue between $157 million and $177 million, representing approximately 85-109% growth for 2025.
Strategic acquisitions of SYNQ3 and Amelia have broadened SoundHound's capabilities while adding new customers. The company has also diversified across automotive, restaurants, and enterprise sectors, with no single customer representing more than 10% of revenue (a healthy sign).
Meanwhile, the market opportunity here is genuinely massive. Voice AI technology is experiencing explosive growth, with industry projections showing the market expanding at nearly 30% annually toward $143 billion by 2033. That's not just hype. Companies across many industries are integrating voice technology into everything from drive-thru windows to car dashboards.
Well-Positioned with Enterprise Clients
Soundhound's platform is built from the ground up for complex, contextual conversations rather than simple command-and-response interactions. This matters in real-world business applications, where customers may have complex requests or require assistance in navigating multiple options.
Rather than competing directly with Amazon's (AMZN) Alexa or Alphabet's (GOOGL) Assistant for consumer attention, the company focuses on providing enterprise solutions. It's building custom voice experiences for brands like Burger King (QSR), partnering with automakers like Hyundai (HYMTF), and creating specialized solutions that big tech companies don't typically offer.
The Profitability Problem
Here's where SoundHound's story gets complicated. Despite impressive revenue growth, the company is burning through cash at a concerning rate. The first quarter showed an adjusted EBITDA loss of $22.2 million, and gross margins are actually shrinking as the company invests in acquisitions and scales its operations.
What's most concerning is the lack of clear guidance on when profitability might arrive. Management hasn't provided a concrete timeline for reaching breakeven, leaving investors to wonder whether the current growth is sustainable or merely a byproduct of expensive customer acquisition that won't pay off in the long term.
Despite its current differentiated position in the market, the company operates in a space where it's competing with some of the world's most well-funded technology companies. Amazon, Google, and Apple (AAPL) all have voice AI capabilities and the resources to undercut smaller competitors on price or build competing features into their existing platforms.
Should these large tech firms decide to target larger enterprise clients (and why wouldn't they at some point), SoundHound's premium pricing and customization advantages could evaporate quickly. For a company struggling to turn a profit, the music could come to a sudden halt.
Watching for Inflection Points
Market participants are on the lookout for changes in key metrics, including customer retention rates, organic revenue growth separate from acquisitions, and any concrete guidance toward profitability.
The stock is highly shorted, with over 30% of shares held in short interest. Positive news among these key metrics could catalyze a further increase in shares, potentially leading to a short squeeze and creating a positive feedback loop for ongoing momentum in the share price.
Is SoundHound AI a Good Stock to Buy?
SoundHound's stock currently sits below most analyst price targets, which range from $12 to $18. The consensus rating is a Moderate Buy, reflecting cautious optimism tempered by concerns about execution.
Piper Sandler's James Fish initiated coverage of SoundHound with an Overweight rating and set a $12 price target, highlighting the company's potential in the AI voice technology sector. He sees a potential total addressable market of $47 billion by 2027, which is still in its early stages of development.
Meanwhile, H.C. Wainwright's analyst Scott Buck has lowered the price target to $18 (from $26), while maintaining a Buy rating. He anticipates revenue growth for SoundHound in the latter half of 2025. Additionally, Wedbush's Daniel Ives has downgraded his price target to $15 (from $22), citing a lower valuation multiple, but retains an Outperform rating.
The Bottom Line for SoundHound AI
The voice AI market opportunity is real, and SoundHound has positioned itself in an interesting niche with genuine competitive advantages. However, this isn't a stock for investors who need steady returns or can't stomach the possibility of significant losses. The company is still proving its business model, and execution risks remain high.
The upcoming quarters will be critical in proving whether SoundHound can evolve from a high-potential growth story into a consistently profitable enterprise. Until that transformation takes shape, the stock remains a speculative play marked by significant volatility — one I'm choosing to stay on the sidelines for now.