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SoundHound AI (SOUN) has dropped over 53% in the year to date and is trading under $10. Further, shares of this voice artificial intelligence (AI) solutions provider are down about 64% from their 52-week high of $24.98. Several factors have contributed to this significant downturn, including macroeconomic uncertainties, the stock’s previously high valuation, and Nvidia’s (NVDA) recent divestment of its entire stake in SoundHound.
The stock’s massive rally in 2024 — an eye-popping 835.9% surge — was driven by Nvidia’s announcement of a stake in SoundHound, which bolstered investor confidence. Additionally, investors’ enthusiasm for AI-related stocks and the growing adoption of its voice AI technology across industries like hospitality, customer service, and automotive played a key role in pushing its valuation higher, leading to the recent correction.
Now, all eyes are on the company’s upcoming fourth-quarter earnings report, set for release on Thursday, Feb. 27. A strong financial performance and positive commentary from management on demand and growth opportunities could help stabilize the stock and rekindle investor confidence. However, any signs of slowing momentum or weaker-than-expected results could trigger further selling pressure, as the market remains highly sensitive to AI-related stocks.
SoundHound Could Deliver Solid Q4 Revenue
SoundHound’s growing scale and the rising adoption of its conversational AI technology across various industries have driven substantial top-line growth. This momentum will continue in Q4, potentially leading to record revenues.
In the first nine months of 2024, SoundHound generated total revenue of $50.15 million. For the full year, the company projects revenue between $82 million and $85 million, indicating that Q4 revenue could fall within the range of $31.85 million to $34.85 million. This reflects year-over-year growth of approximately 86% to 104%.
What’s Ahead for SoundHound?
SoundHound is poised to deliver solid growth. With expansion across key sectors such as automotive, AI-powered agents, and restaurants, SoundHound is scaling its business. Additionally, the company’s recent acquisitions are paying off, bringing in significant revenue synergies and opening up fresh opportunities for upselling and cross-selling across its portfolio.
Looking ahead to 2025, SoundHound has set its revenue forecast in the range of $155 million to $175 million. Moreover, the solid demand environment indicates that there’s even the possibility of an upward revision to this guidance during the upcoming Q4 earnings call, which could drive investor confidence and potentially push the stock price higher.
SoundHound’s cumulative subscriptions and bookings backlog remains solid, reflecting the strength of its business. As the company strengthens its relationships within the automotive sector and scales up its restaurant business, this metric continues to rise, positioning it well for long-term growth.
SoundHound is exploring new verticals, including energy and retail. The company is also expanding its footprint in financial services, banking, healthcare, and insurance, broadening its customer portfolio and strengthening its revenue base. Importantly, the diversification of its client base has reduced reliance on large one-time deals, mitigating customer concentration risk and enhancing revenue stability. SoundHound continues to sign new deals in the restaurant sector and is expanding its product offerings, ensuring sustained growth.
On the operational side, SoundHound is strategically optimizing costs while maintaining its growth trajectory. The company is focusing on efficiency improvements and streamlining its portfolio to maximize returns. With these measures in place, SoundHound could achieve adjusted EBITDA profitability by the end of 2025.
Is SoundHound Stock a Buy?
Wall Street currently has a “Moderate Buy” consensus rating on SOUN stock.
However, SoundHound is well-positioned for continued revenue expansion, supported by a growing customer base and an expanding addressable market. At the same time, the company’s focus on cost efficiency and profitability enhances its long-term outlook. With strong financials, significant growth opportunities, and a notable correction in its stock price, SoundHound presents an attractive buying opportunity ahead of its Q4 earnings report.
