SoundHound AI (SOUN 1.98%) has taken its investors on a wild ride over the past three years. The specialist in audio and speech recognition software went public by merging with a special purpose acquisition company on April 28, 2022. The shares opened at $8.72 and skyrocketed to an all-time high of $24.23 on Dec. 26, 2024.
But today, they trade at about $8.11. Let's see why the stock took a rollercoaster price ride over the past three years that puts it just below its debut price, and if it has a shot at revisiting its record high over the next three years.
Image source: Getty Images.
What happened to SoundHound AI over the past three years?
SoundHound's namesake app helps people identify songs through a few seconds of recorded audio or even a few hummed bars. Its developer-focused platform, Houndify, enables companies to create customized voice recognition tools.
Houndify faces competition from tech giants like Microsoft, Alphabet's Google, and Apple, which all integrate their own voice recognition services into their apps and services. However, Houndify is an appealing option for companies that want to build custom voice services without tethering themselves to a bigger tech ecosystem. Automakers like Hyundai, smart-TV makers like Walmart's Vizio, and fast-food chains like Church's Texas Chicken all use Houndify to power their AI services.
NASDAQ: SOUN
Key Data Points
Its revenue rose 47% in 2022, 47% in 2023, and 85% to $84.7 million in 2024. That trajectory is impressive, but management originally claimed the company could generate $255 million in revenue in 2024 during a pre-merger presentation in late 2021.
Moreover, a lot of SoundHound's growth in 2023 and 2024 was driven by acquisitions, including the restaurant AI company SYNQ3, the online food-ordering platform Allset, and the conversational AI company Amelia. These acquisitions expanded its ecosystem, but they also raise some concerns about the long-term organic growth of its core business. The acquisitions are also weighing down its margins as it integrates those new services.
Its margins under adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved from negative 361% in 2022 to negative 73% in 2024. But before it went public, it claimed its adjusted EBITDA margin would turn positive in 2024. It missed that goal even after it laid off nearly half of its workforce in 2023.
What will happen to SoundHound over the next three years?
The global market for speech and voice recognition could still have a compound annual growth rate (CAGR) of 27.6% from 2025 to 2030, according to Markets and Markets, driven by new automation, customer service, and security applications. SoundHound has been tossing more irons into the fire to capitalize from that secular expansion.
Its acquisitions of SYNQ3 and Allset should increase its presence in the restaurant industry, its integration of Amelia should complement its partnership with the AI chatbot maker Perplexity to upgrade its own in-house large language models (LLMs), and it's been integrating its own voice recognition tools into Nvidia's Drive platform for connected and autonomous vehicles. Nvidia once held 1.7 million shares of SoundHound AI, but it sold all those shares earlier this year.
From 2024 to 2026, analysts expect SoundHound's revenue to have a CAGR of 59% to reach $215 million. But with an enterprise value of $3.29 billion, it's already valued at 20 times this year's sales. It has also more than doubled its number of shares since its SPAC merger with its secondary offerings and high stock-based compensation expenses.
That frothy valuation and ongoing dilution could limit its upside, especially if fears of higher tariffs, sticky inflation, and elevated interest rates continue to drive investors away from speculative growth stocks in this wobbly market. SoundHound claims it can achieve a positive adjusted EBITDA margin by the end of 2025, but analysts still expect its annual adjusted EBITDA to remain negative this year and only turn slightly positive in 2026.
Where will SoundHound AI's stock be in three years?
Assuming SoundHound matches analysts' estimates, has a CAGR of 40% for its top line from 2026 to 2028, and still trades at 20 times forward sales, its stock could rise nearly 155% to around $21.63 per share by the beginning of 2028. But even in that best-case scenario, it probably won't revisit its all-time highs.
That might be why Nvidia liquidated its entire stake in SoundHound, and why its insiders didn't buy a single share as they sold a half-million shares over the past three months. So, in a less rosy scenario, the company's growth could cool off and its valuations could shrink over the next three years. If that happens, its stock price could get cut in half and still be expensive.
Therefore, I believe SoundHound AI stock could stagnate or slide lower over the next three years. It's still growing, but its valuations are too high, it's relying too much on acquisitions, and it hasn't proved its business model is sustainable yet.
