SoundHound Rises 22% Over the Past Month: Buy, Sell or Hold the Stock?

SoundHound AI Inc. SOUN shares have seen a significant increase in the past month, with the stock price rising 21.8% over the period. The stock has sharply outperformed its industry, broader Computer and Technology sector and the S&P 500 over the past month, as shown below. At the current price of $18.20 (as of Oct. 7), shares sit nearly 299.1% above the 52-week low, yet remain 27.1% below the 52-week high — a sign of both strong recovery momentum and continued volatility.

The rally has been supported by SoundHound’s strategic moves to expand its platform and customer reach. Its acquisition of Interactions LLC for around $60 million enhanced its enterprise AI capabilities, especially in customer service automation. The company continues to deepen its presence in automotive, healthcare and voice commerce, positioning itself as a key player in the conversational AI and agentic AI markets. These developments signal that SoundHound is not only growing rapidly but also broadening its long-term addressable market.

SOUN Stock’s 1-Month Performance

SOUN Stock's Moving Average Trends

The stock is currently trading well above both its 50-day and 200-day moving averages, underscoring strong bullish momentum. The upward trend in the 50-day average highlights near-term strength, driven by the recent acquisition, solid second-quarter 2025 earnings and renewed optimism in AI equities. Meanwhile, the 200-day average has also begun to slope higher, signaling improving long-term investor confidence following a volatile first half of the year.

Let’s analyze SoundHound’s growth drivers powering the rally.

SoundHound Boosts AI Expansion With Interactions Deal

SoundHound has acquired Interactions, a specialist in AI-powered customer engagement, to strengthen its enterprise presence. The deal combines SoundHound’s Agentic AI platform with Interactions’ virtual assistant technology, broadening its client portfolio across consumer brands, insurers, automakers and Fortune 100 firms.

With Interactions’ two decades of experience in enterprise integration, SoundHound can now deliver a more complete suite of omnichannel AI solutions, helping businesses shift from human-reliant systems to automation. The merger also unlocks opportunities for product expansion, cross-selling and long-term growth across industries like financial services, healthcare and retail.

IDC Names SoundHound a Conversational AI Leader

In late September, SoundHound was recognized as a Leader in the IDC MarketScape for Worldwide General-Purpose Conversational AI Platforms 2025. IDC highlighted the company’s Amelia 7 platform for its robust natural language understanding, large language model intent recognition, conversational memory and superior voice AI capabilities. Customers particularly praised Amelia for handling complex, multi-intent requests with high satisfaction.

IDC recommended Amelia 7 for large enterprises seeking a scalable, installable or fully managed conversational AI solution with human-like dynamic responses and strong support for voice channels. The platform’s on-the-fly learning, generative AI, and agentic capabilities make it well-suited for a diverse range of enterprise use cases.

Partnerships & Macro Tailwinds

Recently, SoundHound has partnered with Red Lobster to roll out an AI-powered phone ordering system across all its restaurants. The solution ensures every call is answered, manages multiple orders simultaneously and routes them directly to the point-of-sale system. This reduces staff workload and frees employees to focus on in-store service quality.

For SoundHound, the deal adds a high-profile client and strengthens its position in the restaurant tech space. With more than 14,000 locations already using its solutions, the Red Lobster partnership underscores the scalability of its AI platform. As diners increasingly value speed and convenience, this move could drive sustained adoption and revenue growth for SoundHound.

Wins with IHOP, Red Lobster, and Peter Piper Pizza, as well as expansions with Chipotle CMG and Firehouse Subs, highlight both new customer acquisition and deeper penetration of existing accounts.

However, SoundHound’s expansion into quick-service restaurants faces formidable competition from Amazon AMZN and Alphabet GOOGL. Amazon leverages Alexa and AWS to deliver a broad ecosystem of voice-enabled tools already proven across devices and retail platforms. Google, through Dialogflow and its advanced natural language expertise, provides powerful automation via Google Cloud. Both companies bring unmatched scale, brand recognition, and deep AI capabilities, making them strong rivals that could constrain SoundHound’s ability to capture leadership in the QSR AI market.

Balance Sheet and Outlook

SoundHound ended the second quarter with $230 million in cash and no debt. This liquidity provides flexibility to invest in growth and absorb operating losses while moving toward its target of adjusted EBITDA profitability by late 2025. The company raised its 2025 revenue outlook to $160–$178 million, reflecting confidence in its pipeline.

For investors, this financial cushion reduces near-term solvency risk but does not offset the execution challenge of sustaining growth while managing expenses.

Profitability Pressures Remain

SoundHound continues to face profitability challenges despite solid top-line growth. GAAP gross margin slipped to 39% in the second quarter, reflecting newly acquired contracts with thinner initial margins. Although non-GAAP gross margin improved sequentially to 58% — a sign that integration synergies are beginning to take hold — the transition period is still weighing on results.

Rising expenses are another drag. Research and development costs surged 64% year over year, while sales and marketing soared 180% and G&A climbed 91%. These investments are critical to expansion, but keep adjusted EBITDA in negative territory, with the second quarter posting a $14.3 million loss.

Management cautioned that deal timing could add volatility, as enterprise and OEM contracts tend to be uneven. The company expects some seasonal softness in the third quarter before momentum builds again in the year-end period.

Valuation and Estimate Trends of SOUN Stock

SoundHound is currently trading at a forward 12-month price-to-sales (P/S) multiple of 36.59X. This valuation stands well above both its three-year median of 14.88X and its industry averages. 

Over the past three years, the company’s trading range has fluctuated dramatically between 2.92X and 94.4X, underscoring both investor enthusiasm and volatility.

The current multiple reflects optimism around AI adoption, but also raises questions about sustainability, particularly given the company's ongoing losses on both GAAP and adjusted EBITDA bases.

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

On the earnings side, the Zacks Consensus Estimate for 2025 loss per share has remained unchanged at 13 cents over the past 60 days, and the estimated figure reflects an improvement from the year-ago reported loss of $1.04 per share.

Conclusion

SoundHound’s recent momentum, strengthened enterprise presence and expanding restaurant partnerships make it a compelling growth story in conversational AI. Its cash position reduces near-term risk, and industry recognition adds credibility. However, steep valuation and persistent losses limit the near-term upside. For investors, SOUN is best viewed as a Zacks Rank #3 (Hold) — a stock with strong long-term promise but one that still requires proof of execution before earning a clear “Buy.” You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research