SoundHound AI‘s (SOUN 0.36%) stock has rallied by more than 230% over the past 12 months. The developer of AI-powered voice- and audio-recognition tools impressed investors with its accelerating sales growth, bold acquisitions, and guidance boosts.

But is SoundHound AI’s stock still worth buying at these levels? Let’s take a fresh look at its business model, growth rates, and valuations to decide.

Image source: Getty Images.

An early mover in the agentic AI market

SoundHound AI’s namesake app can identify songs from just a few seconds of recorded audio or a few hummed bars. But it generates most of its revenue from Houndify, its developer-oriented platform that enables companies to create their own voice-recognition tools.

Houndify is a popular choice for companies that don’t want to share their data with tech giants like Microsoft or Alphabet. It serves a wide range of customers across the automotive, restaurant, customer service, retail, hospitality, healthcare, financial, and smart device industries.

SoundHound has also been expanding through acquisitions. Over the past two years, it acquired the AI restaurant services provider SYNQ3, the online food ordering platform Allset, the conversational AI company Amelia, and the AI-powered customer service company Interactions.

These acquisitions should strengthen SoundHound’s position in the nascent agentic AI market, which Precedence Research expects to expand at a compound annual rate of 43.8% from 2025 to 2034. In other words, SoundHound’s AI-powered chatbots could replace a lot of human workers over the next decade.

Accelerating growth with shrinking margins

Over the past two-and-a-half years, SoundHound AI’s revenue growth accelerated, but its adjusted gross margins shrank. A lot of its top-line growth was driven by acquisitions, which increased its exposure to the lower-margin restaurant service industry.

Data source: SoundHound AI. YOY = Year-over-year.

Its rising cloud expenses and the high costs of onboarding new customers exacerbated that pressure. The costs of integrating its acquisitions could further compress its margins.

When it delivered its second-quarter report on Aug. 7, SoundHound raised its full-year revenue guidance range from 85% to 109% growth to 89% to 110% growth. But that new outlook was based on how matters stood before the Sept. 9 announcement of its purchase of Interactions — which management expects to be “immediately accretive” to its operating profits. It’s unclear how much that acquisition will boost its full-year revenue.

Meanwhile, though, SoundHound’s bottom line remains deep in the red. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped from negative $35.9 million in 2023 to negative $61.9 million in 2024, and came in at negative $36.5 million in the first half of 2025.

What’s next for SoundHound AI?

From 2024 to 2027, analysts expect SoundHound’s revenue to grow at a compound annual rate of 47%, and the consensus view is that its adjusted EBITDA will be positive by 2027. That growth should be driven by the secular expansion of the conversational AI market, with chatbots increasingly used by companies across the quick-serve restaurant (QSR), retail, hospitality, and customer service industries as substitutes for lower-wage workers in a tight labor market.

SoundHound’s customer list already includes automakers like Stellantis, QSRs like Chipotle, and credit card giants like Mastercard — and that list should keep growing as more companies recognize the benefits of using AI agents.

SoundHound’s recent acquisitions could support its expansion and evolution into a more diversified, vertically integrated provider of enterprise AI services. As the company expands, it will be able to roll out a broader range of subscription-based services (like SoundHound for Restaurants) to lock in customers and widen its moat against big tech competitors.

That outlook sounds promising, but a lot of anticipated growth is already baked into SoundHound’s high-flying shares. With an enterprise value of $6.2 billion, it already trades at 29 times next year’s sales. The company has also more than doubled the number of shares outstanding since its SPAC-backed debut in April 2020 via secondary offerings and stock-based compensation.

That might be why Nvidia liquidated its stake in SoundHound earlier this year, and why SoundHound’s insiders were net sellers over the past 12 months. Simply put, investors shouldn’t be too surprised if SoundHound’s stock stalls or stumbles through the end of the year.

Is SoundHound AI a good stock to buy right now?

SoundHound AI has established an early mover’s advantage in the agentic AI market, and it could grow much larger over the next few years. But its margins are still wobbly, it remains deeply unprofitable, and its frothy valuations could limit its upside potential. If you can afford to hold onto SoundHound stock for a few more years, it could be a decent AI play to nibble on in this choppy market. However, its share price could easily be cut in half during a market downturn, so if you invest in SoundHound, keep a close eye on its margins and competitive threats.