SoundHound Must Prove Its Margin Rebound And Oasis Momentum After A 45% Stock Slide

SoundHound AI heads into its third-quarter report with a gap between story and stock price. Last quarter management described demand as the strongest it has ever been, margins snapped back, and the full-year revenue floor moved higher. The market has not cared. Shares have fallen roughly 45% since that report while the S&P 500 barely moved, so Thursday's release after the close is less about whether the company can grow and more about whether its improving fundamentals are durable enough to change the stock's direction.

The Street is looking for revenue of about $63.0 million, up nearly 50% from $42.0 million a year ago, and a non-GAAP loss of 7 cents a share. That revenue figure is only a modest step up from the $61.9 million posted in the second quarter, but the growth rate matters. Year-over-year expansion has slowed every quarter for a year, from 68% to 45%, and a print near 50% would mark the first reacceleration in that streak. The earnings whisper sits at a loss of 9 cents, a bit worse than consensus, which suggests the more skeptical crowd is not demanding much on the bottom line. Last quarter's loss was 10 cents, and the year-ago figure was 27 cents.

Guidance frames the bigger question. Management narrowed its 2026 outlook to $230 million to $260 million, lifting only the low end. Full-year consensus of roughly $233 million sits uncomfortably close to that floor. Through the first half the company booked about $106 million, so the Street is effectively modeling a second half only slightly above the bottom of management's range. That leaves room for upside, particularly if the LivePerson acquisition closes in the second half as planned and begins adding to a revenue base management says could eventually reach $500 million combined. It also means any trim to the top end would read as a meaningful retreat from last quarter's confidence.

Margins are the second pillar. Non-GAAP gross margin rebounded to 58% in the second quarter from a 50% first quarter distorted by a one-time true-up, and adjusted EBITDA loss shrank to $9.6 million from $26.7 million. Holding gross margin near or above 58% would show that the rebound was not a one-quarter bounce, while progress toward the company's 70%-plus target would require evidence that low-margin acquired contracts are being repriced or run off. Elevated general and administrative spending, up 43% to $26 million on deal-related legal and advisory costs, is another swing factor. If those costs persist or swell as LivePerson closes, operating leverage could stall even with solid sales.

The demand narrative also needs follow-through. Management pointed to its Oasis agentic platform moving from launch to signed deals across verticals, seven healthcare wins including a seven-figure contract, a fifth straight quarter of growth in Asian automotive, and new channel partnerships with a global IT services firm and a Latin American Samsung technology distributor. Investors should want to see those relationships translate into named expansions, larger deal sizes or measurable contribution, not just additional announcements.

Sentiment has drifted slightly more bearish than heading into the last report, and the stock trades around $4.44, well below its 200-day average of $7.27 and only modestly above its post-earnings low of $4.20. That positioning lowers the bar somewhat, but it also signals deep doubt. The central issue is whether SoundHound can pair a reacceleration in growth with gross margins that hold their recovery. Delivering both, while keeping the full-year range intact, would validate last quarter's inflection story. Falling short on either would give skeptics reason to believe the improvement was temporary.

This earnings preview was originally published on Earnings Whispers.

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