SoundHound Shares Jump as Voice AI Begins to Take Off. Can the Momentum Continue, Or Is It Too Late to Buy the Stock?

Shares of SoundHound AI (SOUN -1.19%) skyrocketed after the artificial intelligence (AI) voice company reported soaring revenue growth and upped its guidance. It's been a volatile past year for the stock, with it up 200% over the past year but down about 30% year to date, as of this writing.

With the stock climbing higher, let's take a look at its most recent results and future prospects to see if the momentum can continue, or if it's too late to buy the stock.

Image source: Getty Images.

Revenue soars higher

After seeing 151% revenue growth in the first quarter, SoundHound followed that up by growing its revenue by 217% to $42.7 million in the second quarter. That easily trounced the $32.9 million analyst consensus, as compiled by FactSet.

The company's adjusted net loss improved from $0.04 per share to $0.03 per share. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was a loss of $14.3 million, compared to a loss of $13.8 million a year ago.

It had an operating cash outflow of $25.5 million in the quarter and $43.7 million through the first half of the year.

Its gross margins remain under pressure, but it did see some nice sequential improvement. GAAP gross margins fell from 63% to 39% year over year, but were up from 36.5% in Q1. Adjusted gross margin dropped 810 basis points year over year to 58.4%, but that was a huge improvement from 50.8% in Q1.

Much of the GAAP gross margin decline comes from the non-cash amortization of purchase intangibles stemming from its Amelia acquisition, which is more of an accounting function than anything. However, Amelia's business also came with some lower-margin contracts, and SoundHound said that it is still evaluating them as they come up for renewal. It also said that inference costs on like-for-like models are declining rapidly.

Despite the initial negative effect on gross margins, SoundHound's acquisition of Amelia is a potential long-term game-changer. The deal gave SoundHound both access to additional verticals, and to Amelia's "conversational intelligence," which it can now pair with its "speech-to-meaning" and "deep meaning understanding" technology. Amelia also became the foundation for SoundHound's new voice-powered agentic AI technology with the launch of the Amelia 7 platform.

While it's still early, SoundHound said it is in the process of migrating 15 of its largest enterprise customers onto the Amelia 7 platform. The platform allows for low- to no-code development of AI agents. It also uses SoundHound's Polaris speech recognition engine, which the company says offers better accuracy, speed, and domain-specific capabilities.

The company has also added vision AI to its tech stack, bringing real-time visual capabilities into its conversational AI ecosystem. It said that the combination of voice AI and vision AI could exponentially increase the number of use cases it can address.

Meanwhile, SoundHound said that it is seeing strength across verticals. It had several notable wins in the restaurant space, including with chains such as IHOP (owned by Dine Brands Global), Red Lobster, and Peter Piper Pizza. It also secured a deal with a large automobile customer in China and expanded its relationship with Kia into India, while also noting strength in the financial services sector.

Looking ahead, management lifted its full-year forecast, calling for revenue between $160 million to $178 million, up from prior guidance of $157 million to $177 million. It said that the revised forecast was due to accelerating demand for its solutions and better close rates on major deals. It expects to reach adjusted EBITDA profitability by the end of 2025.

Is it too late to buy the stock?

SoundHound is in hypergrowth mode, with it seeing rapid revenue growth as its solutions continue to gain traction. However, the best may be yet to come. The potential of voice-powered agentic AI, and the addition of vision AI to its tech stack, open up a whole new world of potential growth possibilities.

From a valuation standpoint, SoundHound trades at a price-to-sales (P/S) multiple of about 34 times the consensus analyst estimate for 2025. Given that it just tripled its revenue last quarter, that's not unreasonable. Its gross margins need to continue improving, but they're starting to head in the right direction.

Overall, SoundHound AI is a high-risk, high-potential-reward stock. It's still in the very early stages of a potentially huge opportunity. As such, I don't think it's too late to buy the stock, but just realize that this is a very speculative investment at this point.