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Artificial intelligence (AI) has reshaped countless industries, and speech recognition is no different, witnessing significant growth. In fact, this market is set to explode in the coming years, with projections estimating it will hit a staggering $85 billion globally by 2032, expanding at an impressive 23.7% compound annual growth rate (CAGR) from 2024 to 2032. Amid such robust growth prospects, SoundHound AI, Inc. (SOUN) appears to be carving out a dominant position.
Armed with an aggressive acquisition strategy, expanding customer base, and innovative AI solutions, the company is strategically poised to capture significant opportunities in the booming speech and voice recognition landscape. SoundHound’s immense potential has ignited massive investor enthusiasm.
The company grabbed headlines earlier this year when AI king Nvidia (NVDA) revealed an approximately $3.7 million stake in SoundHound through its inaugural 13F filing, signaling a vote of confidence in its potential from the chip giant. Another major milestone came during Q2 with SoundHound's acquisition of Amelia, an enterprise AI leader.
This strategic move supercharged its conversational AI capabilities while unlocking access to lucrative industries like healthcare, finance, telecommunications, and travel, which would have taken years to penetrate organically. Most recently, the Santa Clara-based company entered the spotlight again thanks to its freshly announced deal with Torchy's Tacos earlier this month and President-elect Donald Trump’s positive stance on the AI sector. With SoundHound generating such stellar returns this year, is it too late to hop on board this rising AI star now?
About SoundHound AI Stock
Founded in 2005, SoundHound AI, Inc. (SOUN) is at the forefront of revolutionizing conversational intelligence with its state-of-the-art voice AI technology. Offering ultra-fast and highly accurate multilingual solutions, SoundHound is transforming user experiences across diverse sectors like automotive, TV, and customer service. The company’s innovative tools, such as Smart Answering, Smart Ordering, and Dynamic Drive Thru, enhance seamless interactions, while SoundHound Chat AI takes it a step further by integrating generative AI for advanced voice assistance.
Valued at around $5.6 billion by market cap, shares of this sound recognition and voice assistant technology company have garnered massive attention from investors. Even after an 11.5% pullback from its peak of $16.07 on Dec. 9, shares of SoundHound have delivered a stunning return of 566% over the past year, crushing the broader S&P 500 Index’s ($SPX) 31.1% annual growth. In 2024 alone, the stock is up a remarkable 541%, dwarfing the SPX’s 27% return on a YTD basis.
Given SoundHound’s extraordinary price action, it's no surprise that the stock now trades at a hefty 121.39 times sales, reflecting a premium well above its sector median. This lofty valuation speaks volumes about the market's high expectations for the company's continued growth and its dominance in the voice recognition and AI space, positioning it as one of the hottest stocks now.
SoundHound Slides After Q3 Earnings
SoundHound's Q3 earnings report revealed on Nov. 12 failed to ignite much excitement. In fact, the company’s shares tumbled 17.1% in the following trading session, highlighting the market's tempered reaction to what was otherwise a promising financial update.
SoundHound’s Q3 performance revealed impressive growth, with revenue surging 89% year over year to $25.1 million and comfortably surpassing Wall Street’s forecast figure of $23 million. The company also made significant strides in diversifying its customer base, reducing dependence on its largest client from 72% to just 12% of total revenue.
Furthermore, SoundHound achieved a balanced industry diversification, with contributions from the automotive, restaurants, financial services, healthcare, and insurance sectors, each accounting for 5% to 25% of revenue. This shift marks a major transformation from the previous year, when over 90% of revenue came from automotive.
While the company remained unprofitable, reporting a loss of $0.06 per share during the quarter, it still managed to surpass analysts’ expectations of a $0.08 loss per share. Plus, this represents an improvement from last year’s $0.09 per share loss. As of Sept. 30, SoundHound AI reported $136 million in cash and cash equivalents, providing a solid financial cushion to continue pursuing strategic growth initiatives.
Yet, despite reporting strong revenue growth in Q3, SoundHound saw a noticeable decline in its gross margin, which fell to 48.6% from 72.9% in the same quarter last year. This drop highlights increased operational costs or pricing challenges, potentially affecting profitability as the company continues to scale its business.
Nevertheless, management remains optimistic. Reflecting on the Q3 performance, CEO Keyvan Mohajer said, “This is SoundHound’s largest quarter on record as the company takes its first steps into important new verticals. Our increased scale, combined with incredible market enthusiasm for conversational AI, is allowing us to execute on the company’s vision.”
Management has raised its revenue projections for 2024 and 2025. For fiscal 2024, the company anticipates total revenue to range between $82 million and $85 million. Looking ahead to fiscal 2025, SoundHound expects its revenue to range from $155 million to $175 million, reflecting significant growth as it continues to capitalize on opportunities in the AI space.
SoundHound Takes Off on Its Alliance With Torchy's Tacos
Shares of SoundHound soared more than 31% on Dec. 5 after the company teamed up with Torchy's Tacos to launch its cutting-edge AI Smart Ordering system at all 130 Torchy’s locations. This advanced voice AI ordering system handles all incoming calls.
Beyond just taking food orders, it answers common queries about menu items, specials, store hours, and allergens, allowing Torchy's team to focus on in-store services. James Hom, chief product officer at SoundHound, highlighted the transformative power of AI-powered restaurant solutions, emphasizing how they are reshaping customer engagement in the food industry.
In fact, SoundHound's AI technology is making waves in the restaurant industry and has already been deployed across more than 10,000 restaurant locations, offering solutions for phone, drive-thru, and kiosk platforms. The company's phone ordering has processed over 100 million customer interactions.
According to a recent consumer study by SoundHound, 80% of U.S. diners expect AI voice assistants to take over most food ordering within the next few years, highlighting the growing impact of AI in enhancing restaurant efficiency and customer experience.
What Do Analysts Expect for SoundHound Stock?
Overall, Wall Street is optimistic about SOUN stock, with a consensus of “Moderate Buy.” Of the six analysts offering recommendations, four advise a “Strong Buy,” and the remaining two suggest a “Hold.” The stock has not only blown past its average analyst price target of $7.92 but is also trading at a premium to Wedbush's Street-high target of $10, set just last month.
