SoundHound AI (NASDAQ: SOUN) has been clobbered on the stock market this year. Shares of the provider of conversational artificial intelligence (AI) voice solutions have retreated 62% as of this writing even though the company has been delivering outstanding growth in recent quarters.
A big reason behind SoundHound AI's sell-off this year has been the risk-averse nature of investors caused by the ongoing economic uncertainty. The trade tariffs imposed by the White House sent stocks packing, leading to an increase in the probability of a recession. As a result, high-flying stocks such as SoundHound that delivered stunning gains in 2024 are taking a big hit, as investors looking to book profits and preserve capital.
However, is this AI stock worth buying following its recent pullback, especially considering its remarkable growth and the huge end-market that it could benefit from? Let's find out.
The pullback has made the stock cheaper
SoundHound's expensive valuation is one reason the stock took a beating in 2025. The company was trading at an expensive 90 times sales at the end of last year. However, it is now trading at a relatively lower sales multiple of 29 following its sharp decline. But even that's on the expensive side considering that the U.S. technology sector index has an average price-to-sales ratio of 6.2.
But there is a good chance that the company may be able to justify its expensive valuation by maintaining remarkable growth for a long time. It provides multiple voice AI services that are deployed across several industries, including automaking, restaurants, smart devices, banking and finance, healthcare, and contact centers, among others.
Its voice AI solutions have an impressive list of customers, including Stellantis, Hyundai, Kia, Qualcomm, Oracle, Snap, and Pandora. These clients are not only driving remarkable growth in SoundHound's top line, but also allowed it to build a robust long-term revenue pipeline.
For instance, revenue jumped 85% to just under $85 million in 2024. The company is expecting that to almost double this year as its growth accelerates in 2025. SoundHound's faster growth comes from its already solid customer base, as well as its efforts to expand its reach into more business sectors.
A massive end market and a huge revenue pipeline mean a bright future
SoundHound AI completed two acquisitions in the last 15 months. One was Synq3, a provider of voice AI for the restaurant industry.
It then added Amelia to its portfolio in August 2024 to increase its reach in the customer service space. These are smart moves considering that the global market for voice AI is forecast to have 35% annual growth over the next decade.
The size of the market is expected to generate almost $48 billion in annual revenue in 2034. So, SoundHound is growing faster than its end market and seems ready to sustain its current outstanding growth.
The company finished 2024 with an impressive cumulative backlog of subscriptions and bookings of $1.2 billion, up 75% from the previous year. Management says this figure, based on signed contracts, is "a snapshot of the revenue we expect to realize over the coming several years." And it added that it's an incomplete measure since it has seen new deals each quarter "as well as significant cross-sell and upsell opportunities."
SoundHound could grow faster than its 2025 forecast and keep up a healthy pace in the long run considering its sizable backlog. In addition, it has a solid balance sheet with negligible debt and nearly $200 million in cash. And that should help it grab further growth in voice AI with acquisitions and aggressive marketing.
Investors looking for a beaten-down growth stock to take advantage of the widening adoption of voice AI can think about buying SoundHound stock while it is on its way down. Based on its growth story, SoundHound is clearly built for phenomenal long-term gains.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle and Qualcomm. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
