SoundHound AI (SOUN +1.86%) is one of the hottest stocks in the world, up roughly 800% over the past year thanks to surging demand and interest surrounding its conversational artificial intelligence (AI) technologies. These offerings are already being used at significant scale by customers in the automotive and restaurant industries, and the company is looking to expand its position in other categories, including healthcare and financial services.
NASDAQ: SOUN
Key Data Points
In last year's third quarter, the business saw its revenue increase 89% year over year to reach $25.1 million. The company also raised its full-year sales guidance for 2024 and 2025. It now expects sales for last year to come in between $82 million and $85 million, and it anticipates revenue between $155 million and $175 million in the current year.
So even though SoundHound projects annual revenue growth of roughly 82% in 2024, management actually expects that growth will accelerate and roughly double this year. But while sales growth will be a key factor in SoundHound AI's stock performance, there's another key metric investors need to keep an eye on.
Want to know where SoundHound AI stock is heading? Watch this metric.
SoundHound AI looks poised to enjoy more explosive sales growth in the near term, but investors should also closely monitor its gross profit margin performance and outlook. For reference, a company's gross profit margin is calculated by subtracting the cost to produce its goods from revenue and then dividing that number by the overall sales figure. Take a look at the chart, which tracks the AI specialist's gross margin trajectory.
SOUN Gross Profit Margin (Quarterly) data by YCharts
Despite sales exploding over the last year, SoundHound AI's gross margin has actually trended lower. The performance suggests that discounting and bundling may be playing significant roles in the business' incredible sales growth. That's not necessarily a worrying sign in the near term, and it should help build the company's sales base. But in order to deliver long-term wins, the company will likely need to boost its gross profit margins or slash operating expenses.
