3 Reasons SoundHound AI Stock Could Explode Higher

Key Points

• There is a massive market opportunity in conversational intelligence.

• SoundHound AI is winning customers and growing revenue rapidly.

• Investors could make tremendous returns over the next few years.

• 10 stocks we like better than SoundHound AI ›

If you haven't used them yet, you probably will soon. They communicate with you conversationally, take orders, solve customer service issues, and respond to detailed queries. But they aren't human.

I'm talking about AI-powered voice-recognition systems that are popping up across multiple industries, such as restaurants (drive-thru, in-person, and phone ordering), automotive, call centers, smart devices, and others. Statista pegs the addressable market as $8.6 billion this year and nearly doubling by 2030 to $15.9 billion.

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The adoption is likely to be rapid as the technology is perfected. There is simply too much cost savings for companies not to use it. This is the first reason SoundHound AI (NASDAQ: SOUN) could be ready for a massive bull run: tremendous market opportunity.

Major customer wins

SoundHound operates mainly on a recurring revenue model. Customers pay royalties based on usage, per device, or through subscription services, where the payment is made monthly, based on usage or the number of interactions. This is a terrific model. Recurring revenue makes sales and cash flow more predictable and increases the lifetime value of each customer. That is, once SoundHound wins a customer, it will continue to receive revenue until the customer cancels the contract.

And SoundHound is winning customers hand over fist. Plus, it is expanding relationships with current customers who tried the technology and want to expand it to thousands more locations. For instance, SoundHound reported expansions with Firehouse Subs, Five Guys, White Castle, and other food brands, as well as healthcare, retail, and other customers in its last earnings release. Its customer list is impressive and growing, as shown below.

Image source: SoundHound AI.

Gaining customers is the company's No. 1 job right now to feed its recurring revenue model -- and so its recent success is the second reason the stock could catch fire soon.

Financial growth and valuation

The third reason is financial. The stock price is down while revenue is skyrocketing. The stock got ahead of the company's results in 2024. It was up over 1,000% during the year at one point. The price-to-sales ratio hit 110. Once the momentum turned in 2025, the stock price fell nearly 70% and is still more than 50% off its 2024 high. But fortunes are turning.

SoundHound reported a massive 151% year-over-year increase in sales in the first quarter of 2025, hitting $29 million. It also finished with $246 million in cash and no long-term debt. The company isn't profitable yet, but this isn't unusual for a fast-growing tech upstart focusing on investing in its technology and building its customer base.

The result of the stock price crash and revenue ramp is a more attractive valuation. The price-to-sales ratio is now 42, which is still expensive; however, look what happens to it on a forward basis:

SOUN PS Ratio data by YCharts

The stock market is forward-looking investors buying companies based on what they expect in the future. SoundHound stock's price-to-sales ratio has fallen quickly to 29, based on revenue estimates for 2025, and is expected to fall further to 22 based on next year's sales. This also assumes that SoundHound will hit the low end of its revenue guidance in 2025; the company is predicting $157 million to $177 million. This would push the forward price-to-sales ratio down even further.

Suffice it to say, revenue is soaring, and the valuation is getting more and more attractive, which could lead to massive gains for investors over the next few years.

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Bradley Guichard has the following options: long January 2027 $20 calls on SoundHound AI. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.