Where will SoundHound AI be in 3 years?

Shares SoundHound AI (NASDAQ: SOUN) more than doubled over the past year as investors sought out fast-growing companies in the artificial intelligence (AI) space. The company’s focus on building some of the best voice assistant tools for large enterprises and its acquisitions have boosted SoundHound’s sales and bolstered the narrative that the company can continue its winning streak.

But can SoundHound keep up the momentum? Here’s what’s going well at the company, what investors should watch, and where the AI-powered voice assistant company could be in three years.

What’s going well with SoundHound

SoundHound has 20 years of experience creating speech recognition software, and the company continues to attract large enterprises looking for the best in AI-powered voice technology.

For example, the SoundHound platform is used by Chipotle Mexican Grill, QualcommAND Stellantis“automotive brands offering speech recognition systems for restaurants and in-vehicle voice assistants.”

There are plenty of AI companies trying to capitalize on the AI ​​hype, but SoundHound is generating significant revenue from its platform. Sales rose 54% in the fiscal second quarter (ended Aug. 8) to $13.5 million, and management says full-year revenue will grow 74% to more than $80 million.

Voice recognition and speech recognition technology in conversations has caught the attention of the company Nvidiawhich revealed earlier this year that it had invested about $3.7 million in SoundHound. While that’s a relatively small stake for a major tech company like Nvidia, the fact that the AI ​​giant is using SoundHound for the voice assistant technology in its Nvidia Drive driver assistance system is an indicator of how SoundHound’s platform is perceived.

To expand its voice AI platform, SoundHound recently acquired Amelia for $80 million, which helps SoundHound further develop conversational AI services for healthcare, insurance, financial services and retail. The move is a bet on conversational AI disrupting customer service operations.

What to look for in SoundHound

As with any stock, there are a few things potential investors should know about SoundHound. First, the company is not profitable.

SoundHound’s GAAP net loss for the second quarter was $37.3 million, up from a loss of $27.3 million in the year-ago quarter. It’s not unusual for high-growth companies to post losses, but investors will want to see those losses start to narrow. The good news is that some analysts are estimating that could happen soon, with the company’s estimated loss per share of $0.35 in 2024 narrowing to a loss of $0.21 in 2025.

Image source: Getty Images.

It’s also important to point out that this stock isn’t cheap. SoundHound’s 114% gains over the past year have boosted its valuation, and the stock currently has a price-to-sales ratio of 24.

Where will SoundHound be in three years?

SoundHound is clearly on a growth trajectory, and the company could continue to benefit as companies increase spending in the generative AI market. SoundHound’s management believes it can tap into an estimated $175 billion to $250 billion in enterprise AI spending by 2027.

SoundHound has made strategic moves to help capture more of that market, most notably with the acquisition of Amelia. Management believes it will hit $150 million in total revenue by the end of 2025, with $45 million of that coming from Amelia alone.

With a solid customer base, strong revenue growth, and an acquisition that further fuels sales, SoundHound is poised to continue to outperform the market over the next three years. Be prepared for some volatility in the stock, and watch closely to see if the company’s losses narrow over the next year or more.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Nvidia, and Qualcomm. The Motley Fool recommends Stellantis and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.