SoundHound's Q2 NRR Hits 120% From 90%: What's Fueling the Rise?

SoundHound AI, Inc. SOUN posted standout second-quarter 2025 results, but one of the most telling metrics was its net revenue retention (NRR) — which surged from under 90% pre-acquisition to more than 120% in the quarter. This sharp improvement signals not just stronger customer retention, but significant upselling and cross-selling success.

The jump is tied directly to SoundHound’s integration of recent acquisitions, particularly Amelia and Synq3. By replacing third-party ASR engines with its in-house Polaris speech recognition model, SoundHound has delivered measurable improvements in accuracy, latency, and cost efficiency. These technology gains have translated into better customer satisfaction, faster deployment cycles, and higher close rates on renewals.

Cross-selling between business units is another driver. In the second quarter, SoundHound sold solutions from its most recent acquisition to a marquee customer of an earlier acquisition — securing both an expansion and a multi-year renewal. This multi-pillar approach, spanning enterprise AI, automotive, and restaurant automation, increases wallet share while locking customers deeper into its ecosystem.

Channel partnerships with AVANT Communications, Acrelec, and Par Technologies have amplified this momentum, opening doors to global restaurant chains, enterprise service providers, and large OEMs. These alliances not only drive new customer wins but also enable existing clients to adopt more SoundHound products across verticals.

With an expanded product suite — including the agentic AI platform Amelia 7 and emerging Voice Commerce ecosystem — SoundHound is positioned to maintain elevated NRR levels. Sustaining this growth, however, will hinge on execution in competitive markets dominated by big tech incumbents. (read more: SoundHound Q2 Earnings Beat as AI Demand Fuels 217% Sales Growth)

Competitive Landscape of SoundHound

In the conversational AI and voice technology space, SoundHound faces formidable competition from Nuance Communications, acquired by Microsoft MSFT and Cerence Inc. CRNC. Nuance, now part of Microsoft, has deep enterprise penetration, particularly in healthcare and customer engagement solutions, leveraging Microsoft’s cloud scale and AI resources to lock in long-term contracts. This makes Nuance a consistent competitor in sectors where SoundHound is expanding, such as healthcare and enterprise automation.

Cerence, meanwhile, dominates automotive voice technology, powering infotainment and in-car assistant solutions for many global OEMs. Cerence’s established relationships with automakers and its focus on embedded, cloud, and hybrid models keep it directly in SoundHound’s competitive path in automotive AI. Both Nuance and Cerence benefit from brand recognition, long-standing client ties, and robust R&D budgets. For SoundHound, differentiation will depend on sustaining its 120% net revenue retention through unique offerings like Voice Commerce and its proprietary Polaris engine.

SOUN Stock’s Price Performance & Valuation Trend

Shares of SoundHound have rallied more than 48% since its second-quarter earnings release, performing better than the Zacks Computers - IT Services industry, as you can see below.

SOUN Stock’s Price Performance

SOUN stock is currently trading at a premium compared with its industry peers, with a forward 12-month price-to-sales (P/S) ratio of 33.19, as evidenced by the chart below.

SOUN’s P/S Ratio (Forward 12-Month) vs. Industry

Earnings Estimate Trend of SOUN Stock

The Zacks Consensus Estimate for 2025 loss per share has narrowed in the past seven days.

The consensus estimate for 2025 sales implies growth of 98.3%. The same for the company’s 2025 bottom line is expected to improve from the year-ago loss of $1.04 per share.

SOUN’s Zacks Rank

SOUN stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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