Is SoundHound AI Stock a Buy Right Now?

SoundHound AI (NASDAQ: SOUN) just released its earnings for the second quarter of 2026. Although it reported considerable revenue growth and increased its revenue guidance, the stock is now close to 52-week lows. Consequently, it trades at more than 70% below its all-time high.

Moreover, profitability seems to remain out of reach, and although its valuation is at multi-year lows, it is still a relatively expensive stock. Knowing these facts, is SoundHound AI stock now a buy, or should investors continue to stay on the sidelines?

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SoundHound AI continues to prosper

SoundHound AI continues to benefit from high demand for its conversational AI tools. Businesses as diverse as restaurants and automobile companies have applied its technology to make their operations more efficient.

Investors should also note its new platform called the Orchestrated Agent System (OASYS). The OASYS builds AI agents that can speak with customers, handle transactions, and resolve issues with service. Additionally, its AI can improve as it learns from customer interactions.

Thanks to this technology, SoundHound AI's systems now handle over 10 billion conversations annually. Furthermore, it now holds over 400 patents related to its technology, helping it compete with the largest tech enterprises in terms of speed and accuracy.

However, investors need to remember that its size is a tiny fraction of said big tech enterprises. For example, SoundHound has a market cap of around $3 billion, but that is less than one-one-thousandth of Google parent Alphabet's market cap.

Alphabet has pledged to spend between $195 billion and $205 billion on capital expenditures this year, raising some doubts about its finances. Nonetheless, that still leaves Alphabet in better financial shape than SoundHound, and that may leave investors wondering about SoundHound's long-term competitiveness.

SoundHound AI by the numbers

Indeed, its financial condition gives investors reason for both optimism and worry. It posted massive growth in the first half of 2026, with its revenue of $106 million up 48% from the year-ago period. Unfortunately, SoundHound lost $68 million in that same timeframe, and its free cash flow of negative $61 million in the first six months of 2026 confirms its continued dependence on outside funding.

Since it holds about $203 million in liquidity, it can absorb losses for a few more quarters. Nonetheless, it has increased its share count by 122% since a SPAC took SoundHound AI public in April 2022. These actions dilute shareholder value, making it more difficult to profit from the tech stock.

Investors are also down slightly since the SPAC purchase. Although the stock has risen significantly in the past, it seems to give back its gains fairly quickly.

Additionally, its valuation may not be low enough to entice investors. Amid ongoing losses, it does not have a P/E ratio, though its price-to-sales (P/S) ratio is 15. While that is far above the S&P 500 average of 3.8, its sales multiple is not unusually high for a fast-growing tech stock in a relatively new industry.

Still, considering its heavyweight competitors and ongoing losses, it is unclear whether investors will willingly pay that price in the long term.

Stay on the sidelines

Given its current condition, investors may be best off staying on the sidelines.

Admittedly, SoundHound AI's offerings continue to gain traction with key customers, and its revenue grows rapidly as a result. However, if an industry heavyweight like Alphabet decides to compete more aggressively with SoundHound, one has to wonder whether SoundHound could respond given its financial condition. Moreover, with the continuing losses, SoundHound may further have to dilute its shares, making it more difficult for investors to earn positive returns.

Given those uncertainties, investors with the risk tolerance to buy this stock should probably hold out for a lower valuation before taking a chance on SoundHound.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and SoundHound AI. The Motley Fool has a disclosure policy.