Is SoundHound AI (SOUN) Stock a Buy? Here's Why You Should Think Twice
TradingKey - If you've been keeping an eye on the AI space, you've probably heard of SoundHound AI (SOUN) stock. This company has been making waves with its impressive conversational AI tech, catching the attention of big names like Chipotle, Hyundai, and even Nvidia. But before you jump on the SOUN stock bandwagon, let's take a closer look at why it might not be the best bet right now.
Unprofitable and Rising Expenses
SoundHound is Still Deep in the Red
Despite a 68% revenue jump to $42 million in Q3, the company reported a non-GAAP loss per share of $0.03. While that's a slight improvement from the previous year's $0.04 loss, it's not enough to celebrate just yet.
What's more concerning is that SoundHound's expenses are skyrocketing. Even if we exclude the $66 million non-cash change in liabilities from acquisitions, the company's costs are rising at an alarming rate. This makes their increasing sales less impressive and suggests that profitability is still a distant dream.
Burning Through Cash
SoundHound is playing in a highly competitive market, and it's spending big to stay in the game. In the first nine months of 2025, the company's free cash flow was a staggering negative $78.7 million, even worse than the negative $76.3 million in the same period of 2024.
Despite rising sales, SoundHound's free cash flow is heading in the wrong direction. The company isn't achieving operational leverage, meaning each new dollar earned costs about the same as before. It's unclear how long SoundHound can sustain this massive spending before having to cut back, boost revenue substantially, or raise more capital.
Overpriced Stock
If the unprofitability and cash burn weren't enough to give you pause, consider this: SoundHound AI's stock is seriously overpriced. With a price-to-sales ratio of around 30, it's way above the tech sector average of 9.
Sure, overpriced AI stocks are nothing new these days, but there are plenty of other tech companies betting big on AI that are actually profitable. Given SoundHound's ongoing spending, rising expenses, and long road to profitability, it's hard to justify its steep price tag.
Comparison With Peer AI Companies
To better assess whether SoundHound AI is an attractive investment, it is useful to compare the company with other publicly listed AI-focused peers in terms of profitability, cash flow, and valuation. This comparison highlights why SoundHound’s stock currently appears less compelling.
SoundHound AI vs. Selected AI Peers
Company | Core Business Focus | Profitability | Free Cash Flow | Valuation (P/S) |
SoundHound AI (SOUN) | Conversational voice AI | Not profitable | Persistently negative | ~30x |
C3.ai (AI) | Enterprise AI software | Near breakeven / Loss-making | Improving but still weak | Lower than SOUN |
Palantir (PLTR) | Data analytics & AI platforms | Profitable | Consistently positive | High, but supported by cash flow |
Big Tech AI Units | Cloud & AI services | Profitable | Strongly positive | Lower relative multiples |
While SoundHound AI operates in an attractive niche within conversational AI, it lags behind several peers in critical financial dimensions.
In other words, investors are paying a premium valuation for SoundHound AI without clear evidence of an imminent path to profitability. Compared with peers that either have stronger balance sheets or clearer operating leverage, SoundHound AI currently offers a less favorable risk–reward profile.
So, is SoundHound AI stock a buy now? Based on the company's losses, rising expenses, negative free cash flow, and overpriced shares, I'd say investors are better off looking elsewhere. While the recent pullback in SOUN stock might seem tempting, it's probably wise to wait until the company proves it can turn a profit before jumping in.
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