We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
SoundHound Trades at a Premium to the Industry: How to Play the Stock?
Read MoreHide Full Article
Key Takeaways
SoundHound trades above its industry's P/S average as investors weigh AI growth against risks.
SOUN posted 52% Q1 revenue growth, reaffirmed 2026 guidance and launched its OASYS platform.
SOUN's losses, weaker estimates and acquisition risks make its risk-reward profile unfavorable.
SoundHound AI (SOUN - Free Report) has emerged as one of the more prominent pure-play conversational AI companies, benefiting from growing enterprise adoption of voice and agentic AI solutions. However, while the company's growth prospects remain attractive, its valuation continues to spark debate among investors. SOUN stock currently trades at a forward 12-month price-to-sales (P/S) ratio of 12.6X, above the Zacks Computers - IT Services industry's average of 11.88X. Such a premium typically reflects expectations for stronger growth, expanding market opportunities and future profitability. The question is whether SoundHound's business momentum can justify paying more than the industry average.
SOUN Stock’s Valuation (P/S F12M)
Image Source: Zacks Investment Research
SoundHound continues to deliver strong revenue growth, launch new AI products and expand its enterprise customer base. At the same time, losses remain elevated, earnings estimates have moved lower, and the stock has plunged 26.2% year to date. Investors must therefore weigh the company's long-term AI opportunity against its near-term execution and profitability risks when deciding how to play the stock.
SOUN’s YTD Price Performance
Image Source: Zacks Investment Research
Strong Demand Supports Growth Story for SOUN Stock
SoundHound entered 2026 with solid operating momentum. First-quarter revenues increased 52% year over year to a record $44.2 million. Management highlighted that excluding acquisition-related contributions, revenues from its core automotive and IoT AI business jumped 88%, reflecting strong customer demand across its key markets.
The company continues to benefit from growing adoption of conversational AI across industries. During the first quarter, SoundHound signed new agreements and expanded existing relationships across automotive, financial services, healthcare, retail, telecommunications and energy markets. The company also reported strong traction in enterprise AI, which remained its largest revenue contributor.
Management reaffirmed its 2026 revenue guidance of $225-$260 million, signaling confidence that current demand trends will continue through the remainder of the year.
SoundHound’s OASYS Expands the AI Opportunity
One of SoundHound's biggest recent developments is the launch of OASYS, its self-learning agentic AI platform. The platform is designed to automate the creation, deployment and continuous improvement of AI agents. Unlike traditional AI solutions that require ongoing manual updates, OASYS can automatically evaluate performance, identify gaps and improve workflows over time. The company believes this approach can significantly reduce implementation time and lower operating costs for customers.
Another advantage is channel flexibility. Businesses can deploy AI agents across phones, websites, text messaging, drive-thrus, kiosks, vehicles and smart devices using a unified platform. This capability strengthens SoundHound's position as enterprises increasingly seek integrated AI solutions rather than standalone products.
Management views OASYS as a key step toward building a unified agentic AI ecosystem that combines technologies from its acquisitions and internal development efforts.
LivePerson Deal Could be Transformational for SOUN
Another major growth catalyst is SoundHound's planned acquisition of LivePerson. The transaction would combine SoundHound's voice AI and agentic AI capabilities with LivePerson's digital messaging and customer engagement platform. Together, the companies would serve enterprise customers in more than 30 countries, including many leading banks, airlines, automakers and telecommunications providers.
The acquisition broadens SoundHound's reach into digital customer engagement while creating opportunities to cross-sell voice AI solutions to LivePerson's customer base. Management expects the combined platform to offer one of the most comprehensive conversational AI ecosystems in the market.
The company believes the existing customer base alone could support a long-term revenue opportunity approaching $500 million, while the combined business is expected to generate annual revenues of at least $350-$400 million in 2027 after the transaction closes.
SOUN’s Customer Expansion Remains a Key Tailwind
SoundHound is not only winning new customers but also expanding relationships with existing ones. A recent example is Casey's General Stores, which expanded its partnership with SoundHound after the company's AI-powered ordering agents handled more than 21 million guest interactions across more than 2,600 locations. The success of such deployments demonstrates the practical value customers are receiving from SoundHound's technology.
The company also reported increased cross-selling activity among restaurant customers, stronger adoption of Voice Insights and growing deployment of voice commerce solutions across automotive and consumer electronics platforms. These trends support management's strategy of generating more revenue from existing customers while adding new ones.
Profitability Challenges Remain for SoundHound
Despite strong revenue growth, profitability continues to be SoundHound's biggest challenge. The company reported a first-quarter adjusted EBITDA loss of $26.7 million and a non-GAAP net loss of $26.6 million. Operating expenses increased as SoundHound continued investing in research and development, sales expansion and acquisition integration activities.
Management is also investing in proprietary AI foundation models that are expected to power OASYS and reduce long-term dependence on third-party AI models. While these investments may improve future margins, they are likely to keep near-term profitability under pressure.
On a positive note, SoundHound ended the quarter with $216 million in cash and no debt, providing financial flexibility to support growth initiatives and acquisitions.
SOUN Stock’s Estimate Revisions Raise Concerns
Investor sentiment has also been affected by deteriorating earnings expectations. Over the past 60 days, the Zacks Consensus Estimate for SoundHound's 2026 loss widened to 18 cents per share from 9 cents. The projected loss is also wider than the 13-cent loss reported in the previous year.
Although analysts expect revenues to grow 38% in 2026 and another 15.9% in 2027, earnings are still expected to remain in negative territory. The consensus estimate calls for a loss of 17 cents per share in 2027.
Negative estimate revisions often indicate that analysts expect profitability improvements to take longer than previously anticipated, which can weigh on stock performance.
SOUN Stock’s Estimate Revision
Image Source: Zacks Investment Research
AI Rivals Are Also Chasing Growth
SoundHound competes in a rapidly evolving AI market alongside companies such as C3.ai (AI - Free Report) , BigBear.ai Holdings (BBAI - Free Report) and Innodata (INOD - Free Report) .
C3.ai remains a leading enterprise AI software provider focused on helping organizations deploy AI applications across industries. C3.ai continues to benefit from growing enterprise AI spending, and it has built strong relationships with government and commercial customers. However, C3.ai faces intense competition from both large software vendors and emerging AI companies.
BigBear.ai has carved out a niche in defense, intelligence and government markets. BigBear.ai is benefiting from rising demand for AI-enabled decision-making tools, while it continues expanding its presence in national security applications. However, BigBear.ai remains dependent on government contract activity and funding cycles.
Innodata has become an important player in AI data engineering and model training services. Innodata is benefiting from increasing demand for high-quality AI training data, and it continues to win business from leading AI developers. While Innodata operates in a different area of the AI ecosystem, it competes for investor attention as another high-growth AI stock.
How to Play SOUN Stock
SoundHound offers an attractive long-term growth story driven by expanding enterprise adoption, growing customer relationships, the OASYS platform launch and the pending LivePerson acquisition. The company is building a broader conversational AI ecosystem that could support significant revenue growth over the next several years.
However, investors must balance these positives against ongoing losses, rising investment spending, acquisition integration risks and worsening earnings estimates. While the stock trades at a premium valuation, profitability remains elusive and estimate revisions have moved in the wrong direction.
Given these factors, the current risk-reward profile appears unfavorable despite the company's promising growth prospects. This view is consistent with SoundHound's current Zacks Rank #4 (Sell), suggesting investors should remain on the sidelines until earnings trends and estimate revisions begin to improve.
View the Zacks #1 Rank List
Image: Bigstock
SoundHound Trades at a Premium to the Industry: How to Play the Stock?
Key Takeaways
SoundHound AI (SOUN - Free Report) has emerged as one of the more prominent pure-play conversational AI companies, benefiting from growing enterprise adoption of voice and agentic AI solutions. However, while the company's growth prospects remain attractive, its valuation continues to spark debate among investors. SOUN stock currently trades at a forward 12-month price-to-sales (P/S) ratio of 12.6X, above the Zacks Computers - IT Services industry's average of 11.88X. Such a premium typically reflects expectations for stronger growth, expanding market opportunities and future profitability. The question is whether SoundHound's business momentum can justify paying more than the industry average.
SOUN Stock’s Valuation (P/S F12M)
Image Source: Zacks Investment Research
SoundHound continues to deliver strong revenue growth, launch new AI products and expand its enterprise customer base. At the same time, losses remain elevated, earnings estimates have moved lower, and the stock has plunged 26.2% year to date. Investors must therefore weigh the company's long-term AI opportunity against its near-term execution and profitability risks when deciding how to play the stock.
SOUN’s YTD Price Performance
Image Source: Zacks Investment Research
Strong Demand Supports Growth Story for SOUN Stock
SoundHound entered 2026 with solid operating momentum. First-quarter revenues increased 52% year over year to a record $44.2 million. Management highlighted that excluding acquisition-related contributions, revenues from its core automotive and IoT AI business jumped 88%, reflecting strong customer demand across its key markets.
The company continues to benefit from growing adoption of conversational AI across industries. During the first quarter, SoundHound signed new agreements and expanded existing relationships across automotive, financial services, healthcare, retail, telecommunications and energy markets. The company also reported strong traction in enterprise AI, which remained its largest revenue contributor.
Management reaffirmed its 2026 revenue guidance of $225-$260 million, signaling confidence that current demand trends will continue through the remainder of the year.
SoundHound’s OASYS Expands the AI Opportunity
One of SoundHound's biggest recent developments is the launch of OASYS, its self-learning agentic AI platform. The platform is designed to automate the creation, deployment and continuous improvement of AI agents. Unlike traditional AI solutions that require ongoing manual updates, OASYS can automatically evaluate performance, identify gaps and improve workflows over time. The company believes this approach can significantly reduce implementation time and lower operating costs for customers.
Another advantage is channel flexibility. Businesses can deploy AI agents across phones, websites, text messaging, drive-thrus, kiosks, vehicles and smart devices using a unified platform. This capability strengthens SoundHound's position as enterprises increasingly seek integrated AI solutions rather than standalone products.
Management views OASYS as a key step toward building a unified agentic AI ecosystem that combines technologies from its acquisitions and internal development efforts.
LivePerson Deal Could be Transformational for SOUN
Another major growth catalyst is SoundHound's planned acquisition of LivePerson. The transaction would combine SoundHound's voice AI and agentic AI capabilities with LivePerson's digital messaging and customer engagement platform. Together, the companies would serve enterprise customers in more than 30 countries, including many leading banks, airlines, automakers and telecommunications providers.
The acquisition broadens SoundHound's reach into digital customer engagement while creating opportunities to cross-sell voice AI solutions to LivePerson's customer base. Management expects the combined platform to offer one of the most comprehensive conversational AI ecosystems in the market.
The company believes the existing customer base alone could support a long-term revenue opportunity approaching $500 million, while the combined business is expected to generate annual revenues of at least $350-$400 million in 2027 after the transaction closes.
SOUN’s Customer Expansion Remains a Key Tailwind
SoundHound is not only winning new customers but also expanding relationships with existing ones. A recent example is Casey's General Stores, which expanded its partnership with SoundHound after the company's AI-powered ordering agents handled more than 21 million guest interactions across more than 2,600 locations. The success of such deployments demonstrates the practical value customers are receiving from SoundHound's technology.
The company also reported increased cross-selling activity among restaurant customers, stronger adoption of Voice Insights and growing deployment of voice commerce solutions across automotive and consumer electronics platforms. These trends support management's strategy of generating more revenue from existing customers while adding new ones.
Profitability Challenges Remain for SoundHound
Despite strong revenue growth, profitability continues to be SoundHound's biggest challenge. The company reported a first-quarter adjusted EBITDA loss of $26.7 million and a non-GAAP net loss of $26.6 million. Operating expenses increased as SoundHound continued investing in research and development, sales expansion and acquisition integration activities.
Management is also investing in proprietary AI foundation models that are expected to power OASYS and reduce long-term dependence on third-party AI models. While these investments may improve future margins, they are likely to keep near-term profitability under pressure.
On a positive note, SoundHound ended the quarter with $216 million in cash and no debt, providing financial flexibility to support growth initiatives and acquisitions.
SOUN Stock’s Estimate Revisions Raise Concerns
Investor sentiment has also been affected by deteriorating earnings expectations. Over the past 60 days, the Zacks Consensus Estimate for SoundHound's 2026 loss widened to 18 cents per share from 9 cents. The projected loss is also wider than the 13-cent loss reported in the previous year.
Although analysts expect revenues to grow 38% in 2026 and another 15.9% in 2027, earnings are still expected to remain in negative territory. The consensus estimate calls for a loss of 17 cents per share in 2027.
Negative estimate revisions often indicate that analysts expect profitability improvements to take longer than previously anticipated, which can weigh on stock performance.
SOUN Stock’s Estimate Revision
Image Source: Zacks Investment Research
AI Rivals Are Also Chasing Growth
SoundHound competes in a rapidly evolving AI market alongside companies such as C3.ai (AI - Free Report) , BigBear.ai Holdings (BBAI - Free Report) and Innodata (INOD - Free Report) .
C3.ai remains a leading enterprise AI software provider focused on helping organizations deploy AI applications across industries. C3.ai continues to benefit from growing enterprise AI spending, and it has built strong relationships with government and commercial customers. However, C3.ai faces intense competition from both large software vendors and emerging AI companies.
BigBear.ai has carved out a niche in defense, intelligence and government markets. BigBear.ai is benefiting from rising demand for AI-enabled decision-making tools, while it continues expanding its presence in national security applications. However, BigBear.ai remains dependent on government contract activity and funding cycles.
Innodata has become an important player in AI data engineering and model training services. Innodata is benefiting from increasing demand for high-quality AI training data, and it continues to win business from leading AI developers. While Innodata operates in a different area of the AI ecosystem, it competes for investor attention as another high-growth AI stock.
How to Play SOUN Stock
SoundHound offers an attractive long-term growth story driven by expanding enterprise adoption, growing customer relationships, the OASYS platform launch and the pending LivePerson acquisition. The company is building a broader conversational AI ecosystem that could support significant revenue growth over the next several years.
However, investors must balance these positives against ongoing losses, rising investment spending, acquisition integration risks and worsening earnings estimates. While the stock trades at a premium valuation, profitability remains elusive and estimate revisions have moved in the wrong direction.
Given these factors, the current risk-reward profile appears unfavorable despite the company's promising growth prospects. This view is consistent with SoundHound's current Zacks Rank #4 (Sell), suggesting investors should remain on the sidelines until earnings trends and estimate revisions begin to improve.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.