Within the first quarter, the AI-powered voice options supplier continued to submit robust income development, however its sizable losses additionally continued.
SoundHound AI (SOUN -8.16%) inventory declined 7.8% on Friday following the conversational synthetic intelligence (AI) know-how supplier’s launch of its first-quarter 2025 report on the prior afternoon. The drop is essentially attributable to the quarter’s income falling in need of Wall Avenue’s expectations. The underside-line end result was according to the analyst consensus estimate.
Picture supply: SoundHound AI.
SoundHound AI’s key numbers
| Metric | Q1 2024 | Q1 2025 | Change |
|---|---|---|---|
| Income | $11.6 million | $29.1 million | 151% |
| GAAP working earnings | ($28.5 million) | $128.1 million | Flipped from unfavorable to optimistic |
| GAAP internet earnings | ($33 million) | $129.9 million | Flipped from unfavorable to optimistic |
| Adjusted internet earnings | ($20.2 million) | ($22.3 million) | Loss widened by 10% |
| GAAP earnings per share (EPS) | ($0.12) | $0.31 | Flipped from unfavorable to optimistic |
| Adjusted EPS | ($0.07) | ($0.06) | Loss narrowed by 14% |
Traders ought to give attention to the adjusted numbers, which exclude one-time gadgets. Q1 2025 GAAP numbers embrace an accounting-only (noncash) acquire associated to acquisitions. Knowledge supply: SoundHound AI. GAAP = typically accepted accounting rules.
Acquisitions over the past yr have helped income development yr over yr, although we have no idea to what diploma. In different phrases, we do not know the natural income development price. On the optimistic aspect, these acquisitions have enabled the corporate to raised diversify its buyer base on each particular person and business bases. No single buyer accounted for greater than 10% of income within the quarter.
Traders ought to give attention to the adjusted numbers, which exclude one-time gadgets. Wall Avenue was searching for an adjusted lack of $0.06 per share on income of $30.4 million, so SoundHound met the bottom-line expectation however missed the top-line one.
SoundHound used $19.2 million in money to run its operation, barely higher than its working money movement of unfavorable $21.9 million within the year-ago interval. Free money movement was unfavorable $19.3 million, in contrast with unfavorable $25.7 million within the year-ago interval. The corporate ended the quarter with money and money equivalents of $246 million and no long-term debt. On the present money burn price, SoundHound’s money will final about 12.7 quarters, or simply over three years.
What the CEO needed to say
CEO Keyvan Mohajer’s assertion within the earnings launch:
SoundHound continues to increase its attain and create new potentialities for actual world AI purposes. The discharge of our full AI agent platform delivers full, voice-enabled Agentic AI for purchasers throughout all industries. On the identical time, our daring development initiatives are paying dividends, and we’re realizing vital cross-sell and upsell alternatives following our acquisitions.
SoundHound AI’s 2025 steering
On the earnings name, CFO Nitesh Sharan reaffirmed the corporate’s prior steering as follows:
- For full-year 2025, income is anticipated to vary from $157 million to $177 million. This may equate to annual development of 85% to 90%. Annual development will likely be helped significantly by acquisitions made within the final yr, notably the $80 million Amelia acquisition.
- By year-end 2025, the corporate expects to realize optimistic adjusted EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortization).
SoundHound is price watching, however the inventory isn’t a purchase
SoundHound AI — the corporate — is price anticipating the easy cause that the voice synthetic intelligence (AI) market is poised to be large. That stated, SoundHound AI — the inventory — has been a lot too hyped by the monetary press and on social media over the past year-plus, in my opinion. It is not the corporate’s fault, nevertheless, that its inventory value acquired forward of itself as a consequence of all of the hype.
Positive, the corporate has potential — loads. However I preserve a wholesome skepticism about its means to be a long-term winner within the AI-powered voice tech house. (In contrast to unhealthy skepticism, wholesome skepticism has been stated to be the idea for crucial considering and entails remaining open-minded.) Certainly, I stay open-minded, particularly as a result of it is comparatively early innings within the conversational AI house.
Earlier than I get into my considerations, a notable optimistic is that SoundHound’s money will final about 12.7 quarters, or simply over three years, at its present money burn price.
What are my principal considerations?
The primary has to do with the corporate rising via numerous acquisitions. Progress methods that rely considerably on acquisitions are difficult to tug off properly, as they contain integrating often-diverse company cultures.
Furthermore — and that is the principle cause I don’t like these development methods — they will obscure an organization’s lack of strong natural (inside) income development and points with its personal core merchandise and tech. It is merely not doable for traders to precisely gauge such an organization’s efficiency except it usually reveals its natural development charges (development excluding that from contributions made by vital acquisitions made inside the previous yr).
The second principal subject entails profitability — or, extra precisely, the shortage thereof. Granted, it is commonplace for newly public tech firms to prioritize income development over reaching profitability. However the lack of progress towards profitability is only one concern. My different concern is how issues have performed out relative to profitability steering.
The corporate initially guided for optimistic adjusted EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortization) within the fourth quarter of 2023. 5 quarters later, its adjusted EBITDA is unfavorable $22.2 million. When that milestone wasn’t hit, it guided for reaching optimistic EBITDA for full-year 2025.
At the moment, steering contains reaching optimistic adjusted EBITDA by the tip of the yr (which probably means within the fourth quarter). One query that involves thoughts is whether or not the present profitability outlook is feasible now solely due to the $80 million Amelia acquisition made in August 2024.
Lastly, competitors in conversational AI purposes is already robust, because the gamers within the auto end-market, specifically, embrace massive tech firms with tons of money. And competitors guarantees to warmth up additional. Whether or not SoundHound has sufficient aggressive benefits to develop income at scale and generate strong income stays to be seen.
Together with the massive techs, traders ought to watch Cerence (CRNC 5.58%) within the voice AI house. In October 2019, this firm spun off from Nuance Communications (which has since been acquired by Microsoft). Cerence has had execution points, however with a high-profile CEO (former Intel CEO Brian Krzanich) put in final fall, the corporate’s efficiency may enhance.
Once more, I am remaining open-minded about SoundHound AI, and so ought to traders.
