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Can SoundHound's Operating Leverage Redefine Its Growth Profile?
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Key Takeaways
SoundHound's non-GAAP gross margin rose to 58% in Q2, reflecting improved efficiency and cost discipline.
Polaris foundation model replaced third-party engines, lowering cloud costs and improving performance.
Expanding deployments and subscriptions are strengthening fixed-cost absorption and scalability.
SoundHound AI, Inc. (SOUN - Free Report) is entering a new phase of its growth story as operating leverage begins to take shape. In the second quarter of 2025, the voice-AI specialist delivered record revenue alongside improving cost efficiency, an early signal that scale and structural discipline may be converging. Management reported a non-GAAP gross margin of 58%, up sequentially, as revenues surged 217% year over year to $42.7 million.
The margin uplift was driven by structural efficiencies from SoundHound’s Polaris foundation model, which replaces third-party speech engines with in-house technology. This shift has improved accuracy and latency while sharply reducing cloud expenses. Management noted that inference costs are declining on a like-for-like basis and expects additional gains as recent acquisitions are fully migrated into the company’s proprietary stack.
At the same time, the scaling of SoundHound’s deployments across restaurants, automotive, and enterprise clients is enhancing fixed-cost absorption. The platform now processes more than 1 billion queries per month, each contributing to better utilization of its compute and data assets. As recurring licensing and subscription contracts expand, the company’s operating model is showing greater elasticity, supporting software economics.
For an AI platform spanning multiple verticals, even modest efficiency gains can compound meaningfully. Management highlighted future tailwinds from cloud consolidation and workforce optimization, which are expected to support continued non-GAAP margin expansion. The company expects to achieve adjusted EBITDA profitability by 2025-end, underscoring its confidence in the scalability of its cost base.
Looking forward, SoundHound expects near-term expenses to remain elevated as it invests in agentic and multimodal AI capabilities. Still, the company’s ability to translate volume growth into margin resilience provides a financial buffer against these R&D outlays. As integration efforts near completion and margin efficiency improves, SOUN is progressing from rapid expansion toward a more leverage-driven operating model, signaling greater balance between growth and cost scalability.
SOUN Price Performance, Valuation & Estimates
SoundHound’s shares have surged 43.5% in the past three months against the industry’s fall of 8.9%. In the same time frame, other industry players like TaskUs, Inc. (TASK - Free Report) , Vertiv Holdings Co (VRT - Free Report) and Draganfly Inc. (DPRO - Free Report) have gained 1.7%, 29.3% and 169.7%, respectively.
SOUN Three-Month Price Performance
Image Source: Zacks Investment Research
SOUN stock is currently trading at a premium. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 36.71, well above the industry average of 17.14. Then again, other industry players, such as TaskUs, Vertiv and Draganfly have P/S ratios of 1.19, 5.56 and 4.61, respectively.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SoundHound’s 2025 loss per share has narrowed from 16 cents to 13 cents in the past 60 days. This upward trend indicates strong analyst confidence in the stock’s near-term prospects.
Image Source: Zacks Investment Research
The company is likely to report solid earnings, with projections indicating a 87.5% rise in 2025. Conversely, industry players like TaskUs, Vertiv and Draganfly are likely to witness growth of 16.3%, 34.4% and 53%, respectively, year over year in 2025 earnings.
Image: Bigstock
Can SoundHound's Operating Leverage Redefine Its Growth Profile?
Key Takeaways
SoundHound AI, Inc. (SOUN - Free Report) is entering a new phase of its growth story as operating leverage begins to take shape. In the second quarter of 2025, the voice-AI specialist delivered record revenue alongside improving cost efficiency, an early signal that scale and structural discipline may be converging. Management reported a non-GAAP gross margin of 58%, up sequentially, as revenues surged 217% year over year to $42.7 million.
The margin uplift was driven by structural efficiencies from SoundHound’s Polaris foundation model, which replaces third-party speech engines with in-house technology. This shift has improved accuracy and latency while sharply reducing cloud expenses. Management noted that inference costs are declining on a like-for-like basis and expects additional gains as recent acquisitions are fully migrated into the company’s proprietary stack.
At the same time, the scaling of SoundHound’s deployments across restaurants, automotive, and enterprise clients is enhancing fixed-cost absorption. The platform now processes more than 1 billion queries per month, each contributing to better utilization of its compute and data assets. As recurring licensing and subscription contracts expand, the company’s operating model is showing greater elasticity, supporting software economics.
For an AI platform spanning multiple verticals, even modest efficiency gains can compound meaningfully. Management highlighted future tailwinds from cloud consolidation and workforce optimization, which are expected to support continued non-GAAP margin expansion. The company expects to achieve adjusted EBITDA profitability by 2025-end, underscoring its confidence in the scalability of its cost base.
Looking forward, SoundHound expects near-term expenses to remain elevated as it invests in agentic and multimodal AI capabilities. Still, the company’s ability to translate volume growth into margin resilience provides a financial buffer against these R&D outlays. As integration efforts near completion and margin efficiency improves, SOUN is progressing from rapid expansion toward a more leverage-driven operating model, signaling greater balance between growth and cost scalability.
SOUN Price Performance, Valuation & Estimates
SoundHound’s shares have surged 43.5% in the past three months against the industry’s fall of 8.9%. In the same time frame, other industry players like TaskUs, Inc. (TASK - Free Report) , Vertiv Holdings Co (VRT - Free Report) and Draganfly Inc. (DPRO - Free Report) have gained 1.7%, 29.3% and 169.7%, respectively.
SOUN Three-Month Price Performance
Image Source: Zacks Investment Research
SOUN stock is currently trading at a premium. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 36.71, well above the industry average of 17.14. Then again, other industry players, such as TaskUs, Vertiv and Draganfly have P/S ratios of 1.19, 5.56 and 4.61, respectively.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SoundHound’s 2025 loss per share has narrowed from 16 cents to 13 cents in the past 60 days. This upward trend indicates strong analyst confidence in the stock’s near-term prospects.
Image Source: Zacks Investment Research
The company is likely to report solid earnings, with projections indicating a 87.5% rise in 2025. Conversely, industry players like TaskUs, Vertiv and Draganfly are likely to witness growth of 16.3%, 34.4% and 53%, respectively, year over year in 2025 earnings.
SOUN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.