Investors wanted to hear more from SoundHound AI (SOUN 5.70%) on Friday after the company reported first-quarter results last night. Shares of the maker of technology for voice artificial intelligence (AI) solutions spiked after the report. The stock soared as much as 25% and was still trading higher by 14.3% as of 10:30 a.m. ET.
SoundHound's AI-driven products are increasingly being used for automotive, customer service, and Internet of things (IoT) applications. Revenue in the first quarter soared 73% compared to the prior-year period. The company also raised the bottom end of its full-year guidance range by $2 million to $65 million.
The market for AI products keeps expanding
The midpoint of 2024 revenue guidance is now $71 million. That would represent a 55% jump over 2023 revenue. While SoundHound AI still reported a net loss in the first quarter, it made notable advancements with customers using its AI interface.
SoundHound CEO Keyvan Mohajer commented:
Voice AI is fast becoming a must-have tool for customer service, and that's reflected in the demand we're seeing for subscriptions...Across automotive and customer service, global brands are increasingly looking to us to provide an exceptional experience.
The company grew its business with customers in the quick-service restaurant (QSR) segment during the quarterly period. SoundHound has agreements with several large QSR brands for customer service applications, including voice AI ordering and increasing drive-thru capacity.
It also has agreements with global automotive brands for its SoundHound Chat AI voice assistant, as well as a partnership with Nvidia that provides voice-enabled generative AI responses in vehicles using Nvidia's DRIVE platform.
Investors liked what they saw from SoundHound AI's latest update, but the company still isn't profitable, and the stock is trading at a very high valuation. Even with the increased revenue guidance, the company is being valued with a price-to-sales (P/S) ratio of about 24 based on this year's expected revenue. It will take much more growth in the business before the valuation could be considered reasonable.
