SoundHound Stock Soars 49% Since Q2 Earnings: Should You Still Buy?

SoundHound AI, Inc. SOUN has been on a sharp upward trajectory since reporting its second-quarter 2025 results on Aug. 7. Shares have rallied 49% in the past week, far outpacing the Zacks Computers - IT Services industry and the broader Zacks Computer & Technology sector. The surge reflects renewed investor confidence in the company’s positioning in voice and conversational AI.

Yet despite the rebound, SOUN remains about 36% below its 52-week high of $24.98, though it trades nearly 270% above its 52-week low of $4.32. That raises the question—after such a quick run-up, does the stock still have room to grow?

SOUN’s Post Q2 Share Performance

Record-Breaking Q2 Performance of SoundHound

SoundHound posted its strongest quarter ever, with revenue of $42.7 million, up 217% year over year and beating consensus estimates by nearly $10 million. Non-GAAP net loss per share was 3 cents, narrower than expectations and an improvement from a 4-cent loss in the year-ago quarter.

Growth was broad-based across its three strategic pillars—Enterprise AI, Restaurants, and Automotive—powered by advances in agentic AI and Voice Commerce initiatives. Monthly query volume surpassed 1 billion, and active restaurant locations using its voice AI solutions exceeded 14,000. Management also raised 2025 revenue guidance to $160–$178 million, with an aim for adjusted EBITDA profitability by year-end (read more: SoundHound Q2 Earnings Beat as AI Demand Fuels 217% Sales Growth).

Let's delve deeper into the company's prospects to determine whether SOUN stock is a prudent addition to your portfolio now.

SoundHound’s Strategic Wins Across Verticals

In Enterprise AI, SoundHound launched Amelia 7, an integrated agentic AI platform incorporating its proprietary Polaris speech recognition model. Fifteen large enterprise customers are migrating to the platform, with adoption spanning financial services, healthcare, and retail.

The Restaurant segment delivered a “breakthrough” quarter, securing new logos such as Red Lobster, Peter Piper Pizza, and IHOP, alongside renewals and expansions with Chipotle, Firehouse Subs, and MOD Pizza. Cross-selling Amelia to existing restaurant clients created incremental revenue streams.

In Automotive, SoundHound achieved a significant win in China, integrating its voice assistant into a major OEM’s global vehicle lineup, while expanding its footprint in India with KIA. Generative AI-powered Chat AI rolled out across three major North American brands.

Technology Edge and Ecosystem Approach of SOUN

Polaris, SoundHound’s multimodal, multilingual speech model, remains a core differentiator—claiming more than 35% higher accuracy and four times lower latency than large tech rivals. The company is also layering in Vision AI for real-time visual understanding, expanding the scope of conversational AI applications.

Voice Commerce is emerging as a pivotal growth driver. By enabling in-car or in-app transactions for food ordering, parking, and reservations, SoundHound is building a network effect between its Enterprise AI and Automotive customers. While large-scale revenue from Voice Commerce is expected in future periods, pilots with OEMs and global merchants are already influencing deal wins across other pillars.

SoundHound’s Financial Health and Margins

In the second quarter, GAAP gross margin fell to 39% from 63% a year ago, largely due to acquisition mix, but improved sequentially. Non-GAAP gross margin came in at 58.4%. Adjusted EBITDA loss of $14.3 million was roughly flat year over year.

The balance sheet remains solid with $230 million in cash and no debt. Management is targeting more cost synergies from cloud optimization and legacy system migration in the coming quarters, alongside continued discipline in sales, marketing, and G&A expenses.

Competitive Landscape and Market Position of SoundHound

SoundHound faces competition from both specialized voice AI firms and large technology companies. However, its domain-specific expertise, multilingual capabilities, and cross-vertical integration give it an edge in high-value use cases. In restaurants, its solutions are deployed across major brands like Chipotle, MOD Pizza, and Red Lobster. In automotive, it is expanding with KIA in India and entering China with a major OEM win. The company’s omnichannel approach — spanning phone ordering, drive-thru, SMS, and in-vehicle voice assistants — positions it to capture market share in both consumer-facing and enterprise environments.

SoundHound competes in a dynamic voice and conversational AI market alongside peers such as Cerence Inc. CRNC, Alphabet Inc. GOOGL, and Microsoft Corp. MSFT. Cerence is a dominant player in automotive voice solutions, with deep OEM relationships and an established revenue base, though recent contract cycles have pressured growth. Alphabet, through Google Assistant and its AI-driven cloud offerings, remains a formidable rival, leveraging massive consumer reach and data advantages. Microsoft, via Nuance Communications, has a stronghold in healthcare voice AI and is expanding into enterprise automation. While Cerence focuses on embedded automotive systems, Alphabet and Microsoft are building multi-platform ecosystems that overlap with SOUN’s enterprise and automotive ambitions. For SoundHound to sustain its momentum, it must continue to differentiate through proprietary technology and ecosystem integration to compete effectively against CRNC, GOOG, and MSFT across both niche and mass-market segments.

Valuation and Estimate Trends of SOUN Stock

SOUN’s rapid share price appreciation has stretched its valuation. The forward 12-month price-to-sales ratio is 33.34, nearly double the industry average of 16.74. This premium reflects investor optimism but leaves little margin for error if growth slows.

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

On the earnings side, the Zacks Consensus Estimate for 2025 loss per share has narrowed to 15 cents from 16 cents over the past week, and the estimated figure reflects an improvement from the year-ago reported loss of $1.04 per share.

Risks and Considerations

While the second quarter demonstrated strong execution, investors should note potential risks. These include competitive pricing pressure, slower-than-expected adoption of Voice Commerce, and dependency on large enterprise deals that can cause revenue lumpiness. Additionally, profitability targets hinge on achieving continued cost synergies and scaling high-margin offerings.

The current valuation leaves the stock vulnerable to volatility if quarterly results fall short of elevated expectations. Given the 49% post-earnings rally, short-term upside could be limited without further positive catalysts.

Conclusion

SoundHound’s second-quarter results showcase a company firing on multiple growth cylinders, with rising adoption across its strategic pillars and promising early traction for Amelia 7 and Voice Commerce. The raised guidance and profitability target add to the bullish case. However, the valuation premium and recent sharp rally temper the near-term risk/reward balance.

With a Zacks Rank #3 (Hold), SOUN appears best suited for investors already holding positions, while new entrants may prefer to wait for a more favorable entry point or confirmation of sustained growth momentum. 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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