What’s Next For SoundHound AI Stock?

SoundHound AI (NASDAQ:SOUN), a voice AI platform enabling businesses to deliver conversational AI experiences, saw its stock surge 31% in a single week. This rally was fueled by the company’s impressive quarterly performance, which saw revenue skyrocket 217% year-over-year to $42.7 million.

The main question for investors is whether the stock is still a good buy after such a significant run-up. The company’s current valuation appears high, and investing in it is a risky bet. However, the massive revenue growth helps explain why investors are willing to pay a premium for the stock.

A detailed analysis of SoundHound AI reveals only moderate operational results and financial stability. Our review looked at key areas like Growth, Profitability, Financial Stability, and Resilience during downturns. These factors collectively raise concerns about the stock’s attractiveness at its current price. That said, for investors with a high-risk tolerance, the stock could still be a rewarding investment, as discussed below.

However, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio, which has comfortably outperformed its benchmark — a combination of S&P 500, Russell, and S&P midcap index, and achieved returns exceeding 91% since its inception. Also see – Eli Lilly: 50% Upside For LLY Stock?

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How Does SOUN Stock’s Valuation Look vs. The S&P 500?

Looking at price relative to sales or profits, SOUN stock appears very expensive compared to the broader market.

• SoundHound AI has a price-to-sales (P/S) ratio of 40.7 versus 3.1 for the S&P 500
• However, this premium valuation is supported by its strong top-line growth.

How Have SoundHound AI’s Revenues Grown Over Recent Years?

SoundHound AI’s Revenues have expanded significantly in recent years.

• The company’s revenue has grown at an average annual rate of 60.0% over the last three years (compared to 5.5% for the S&P 500)
• Its quarterly revenues increased 217%, reaching $42.7 million in the most recent quarter from $13.5 million a year earlier (vs. 4.8% for the S&P 500)

How Profitable Is SoundHound AI?

SoundHound AI’s profitability metrics are substantially worse than most companies tracked by Trefis.

• Operating Income over the last four quarters stood at $-197 million, representing a very poor operating margin of -150%
• Operating Cash Flow (OCF) was $-112 million during this period, indicating a very poor OCF margin of -85% (vs. 14.9% for S&P 500)
• Net Income came in at $-228 million for the same timeframe—translating to a very poor net income margin of -174% (vs. 11.6% for the S&P 500)

Does SoundHound AI Look Financially Stable?

SoundHound AI’s financial condition appears very strong.

• SoundHound AI does not have any debt as of the latest quarter.
• Cash and equivalents totaled $230 million out of $588 million in total assets—resulting in a very strong Cash-to-Assets Ratio of 39%

How Resilient Is SOUN Stock During A Downturn?

SOUN stock has underperformed the S&P 500 during recent downturns. With hopes pinned on a soft landing for the U.S. economy, what happens if another recession hits? Our dashboard How Low Can Stocks Go During A Market Crash analyzes how key stocks fared during and after the past six market crashes.

Inflation Shock (2022)

• SOUN stock declined 93.6% from a high of $14.98 on May 5, 2022, to $0.97 on December 22, 2022, compared to a 25.4% decline for the S&P 500
• The stock fully recovered to its pre-crisis peak by December 6, 2024
• It later climbed to a high of $24.23 on December 26, 2024, and currently trades at approximately $14

U.S. Tariffs Imposition (2025)

• SOUN stock declined 62.5% from a high of $20.62 on January 3, 2025, to $7.50 on April 21, 2025, compared to a 19% decline for the S&P 500
• The stock is yet to recover to its pre-crisis peak.

Putting All The Pieces Together: What It Means For SOUN Stock

In conclusion, SoundHound AI’s performance across various metrics is summarized below:

• Growth: Extremely Strong
• Profitability: Extremely Weak
• Financial Stability: Extremely Strong
• Downturn Resilience: Extremely Weak
• Overall: Neutral

The Verdict

While SoundHound AI’s performance across various metrics is neutral, a closer look reveals a pattern common for a company at this stage: strong sales growth alongside cash burn. As sales continue to expand, the company will likely become profitable soon, at least on an adjusted EBITDA basis.

The company’s revenue is projected to more than double in the coming years, from $131 million in the last twelve months to over $250 million within the next three years. This high growth rate explains the company’s currently high price-to-sales (P/S) ratio.

Although the P/S ratio is expected to fall to more reasonable levels over time, this decline should be more than offset by the projected surge in revenue, which could ultimately drive SOUN stock higher. Several factors could accelerate this growth, as detailed in our separate analysis – Can SoundHound AI Stock Double From Here?

However, there are significant risks to consider. Investors may become unwilling to pay such a high premium for SOUN, especially given its history of underperforming the market. Other risks include a high cash burn rate, a rapidly changing technological landscape, and increasing competition.

Despite these risks, if you have a long-term investment horizon of 3–5 years and are comfortable with the possibility of the stock losing over 60% of its value, as it has seen in the past, SOUN could still be a worthwhile bet. See, there always remains a meaningful risk when investing in a single, or just a handful, of stocks. Consider Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

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