Can SoundHound's Q3 Growth Signal a New AI Profit Cycle?

SoundHound AI, Inc. SOUN delivered another record quarter, suggesting that its aggressive expansion across enterprise and conversational AI markets may be laying the groundwork for a new profit cycle. The company’s third-quarter 2025 revenue surged 68% year over year to $42 million, surpassing expectations, driven by broad-based growth across automotive, restaurant and enterprise verticals. Management lifted full-year revenue guidance to a range of $165–$180 million, citing accelerating adoption of its Agentic+ framework and Amelia 7.3 platform upgrades.

Gross margin expansion and improved cost leverage point to operational momentum. Non-GAAP gross margin reached 59%, up from 42.6% on a GAAP basis, aided by migration to in-house models and tighter cloud efficiencies. Adjusted EBITDA loss narrowed 8% sequentially to $14.5 million, while non-GAAP net loss per share was 3 cents, marking progress toward breakeven by 2026. With $269 million in cash and no debt, SoundHound is positioned to sustain heavy R&D investment while pursuing accretive M&A opportunities such as its recent acquisition of Interactions.

Strategically, the company continues to widen its technology moat through its proprietary Polaris foundation model and enterprise-ready Amelia platform, which integrate deterministic automation with generative AI to deliver faster, safer deployments. Expanding enterprise wins, new Fortune 100 customers, and early-stage Voice Commerce pilots with automakers and global QSR brands suggest a long runway for monetization.

If SoundHound maintains its execution pace, its shift from scaling growth to profit generation could define the next phase of the company’s evolution — signaling the emergence of a sustainable AI profit cycle in 2026 and beyond.

Palantir and C3.ai Intensify the AI Race

As SoundHound sharpens its focus on profitability, it faces intensifying competition from enterprise AI players like Palantir Technologies PLTR and C3.ai AI.

Both Palantir and C3.ai are scaling fast within adjacent markets — Palantir in data-driven defense and enterprise analytics, and C3.ai in industrial and energy automation. Yet, Palantir’s push into AI platforms for governments and enterprises increasingly overlaps with SoundHound’s Agentic+ ambitions, particularly in mission-critical automation. C3.ai, meanwhile, competes on AI model flexibility, but SoundHound’s voice-first framework and proprietary speech-to-meaning technology deliver real-time conversational advantages that C3.ai lacks.

Unlike Palantir, which relies on deep integration contracts, SoundHound’s scalable licensing model offers faster deployments and recurring revenue potential. As Palantir and C3.ai continue to capture institutional clients, SoundHound’s unique blend of agentic automation and voice commerce could help it carve out a profitable niche in the expanding enterprise AI ecosystem.

SOUN’s Price Performance, Valuation and Estimates

SoundHound shares have gained 28.5% in the past six months against the Zacks Computers - IT Services industry’s 11.3% decline. The SOUN stock has lagged the broader Computer and Technology sector but performed better than the S&P 500, as shown below.

SOUN’s Price Performance

In terms of its forward 12-month price-to-sales ratio, SOUN is trading at 27.84, up from the industry’s 16.65.

SOUN’s Valuation

Over the past 30 days, the Zacks Consensus Estimate for SOUN’s 2025 loss per share has remained unchanged at 13 cents. The estimated figure indicates an improvement from the year-ago loss of $1.04 per share.
 

SOUN 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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