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Is SoundHound AI Stock a Buy Now?

Key Points

  • SoundHound AI’s second quarter earnings crushed analysts’ expectations.

  • The company raised its revenue guidance for the full year.

  • But it’s unprofitable, its gross margins are slipping, and its valuations look frothy.

SoundHound AI (NASDAQ: SOUN), a developer of AI-powered audio recognition services, posted its second-quarter earnings report on Aug. 7. Its revenue surged 217% year over year to $42.7 million and exceeded analysts' expectations by $9.8 million. On the bottom line, it narrowed its adjusted net loss from $14.9 million to $11.9 million, or $0.03 per share, which also cleared the consensus forecast by two cents.

For the full year, the company expects its revenue to rise 89%-110%, compared to its previous guidance for 85%-109% growth and analysts' expectations for 97% growth. Those impressive numbers sparked a post-earnings rally, but the stock remains more than 40% below its all-time high from last December.

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Let's see if this volatile AI growth stock is still worth buying.

A person talks to a smart speaker.

Image source: Getty Images.

Why is SoundHound growing so rapidly?

SoundHound's namesake app helps people identify songs with just a few seconds of audio or a few hummed bars. But it generates most of its revenue from Houndify, a developer-oriented platform which enables companies to customize their own voice recognition services.

It's a popular option for businesses which don't want to share their voice data with a tech giant like Microsoft or Alphabet's Google. Its growing list of customers includes automakers like Stellantis, quick-serve restaurants like Chipotle, and tech giants like Tencent. Here's how its revenue, adjusted gross margins, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) have changed since its public debut in 2022.

Metric

2023

2024

1H 2025

Revenue

$31.1 million

$45.9 million

$71.8 million

Revenue Growth (YOY)

47%

85%

187%

Adjusted Gross Margin

76.2%

58.5%

55.3%

Adjusted EBITDA

($35.9 million)

($61.9 million)

($36.5 million)

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

SoundHound's revenues are soaring, but its acceleration was mainly driven by its acquisitions of the AI restaurant services provider SYNQ3, the online food ordering platform Allset, and the conversational AI company Amelia throughout 2023 and 2024. Without those acquisitions, its core business would have grown at a much slower rate.

As SoundHound expanded, its growing dependence on lower-margin restaurant service revenue, rising cloud infrastructure costs, and high onboarding and customization expenses for its new customers compressed its gross margins. That pressure could worsen if the company relies on more acquisitions to drive its top line growth.

However, SoundHound believes its gross margins will stabilize and improve over the long term as economies of scale kick in and it expands its higher-margin software licensing and royalties segment, which integrates Houndify into cars and other connected devices.

But is SoundHound getting overvalued at these levels?

From 2024 to 2027, analysts expect SoundHound's revenue to grow at a compound annual growth rate of 47% as its adjusted EBITDA turns positive by the final year. But with an enterprise value of $4.14 billion, it already trades at 25 times this year's sales. The company has also more than doubled its number of shares since its public debut, and that dilution should continue for the foreseeable future.

SoundHound's declining margins, steep losses, high valuation, and persistent dilution should limit its upside potential, even as its revenue keeps rising. That might be why Nvidia sold its entire stake in SoundHound earlier this year, and why its insiders sold nearly seven times as many shares as they bought over the past 12 months.

So while SoundHound might be a promising play on the expansion of the "agentic AI" market, investors shouldn't pay the wrong price for the right stock. It could be worth nibbling on at these levels, but I wouldn't accumulate a bigger position unless the company proves that it can grow its business organically and stabilize its gross margins.

Should you invest $1,000 in SoundHound AI right now?

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Chipotle Mexican Grill, Microsoft, Nvidia, and Tencent. The Motley Fool recommends Stellantis and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short September 2025 $60 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Why Pony.ai Stock Is Skyrocketing Today

Shares of Pony.ai (NASDAQ: PONY) are flying higher on Monday. The company's stock rose 40.2% as of 12:16 p.m. ET today. The move comes as the S&P 500 lost 0.8% and the Nasdaq Composite lost 1.3%.

A key big-tech partnership

The company, which develops self-driving technologies, announced a new partnership with Tencent Holdings, a large Chinese tech company headquartered in Shenzhen. Pony.ai will integrate its autonomous robotaxi services into Tencent's Weixin Mobility Services platform and Tencent Maps.

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A boost for the company's profile

The deal validates the company's technology, demonstrating its usefulness to a company as powerful as Tencent. The collaboration will likely help Pony.ai gain more clients and drive revenue growth. It also benefits from exposure to Tencent's tech ecosystem, whose advanced cloud computing, big data, and artificial intelligence muscle will enhance Pony.ai's platform and help refine its models.

The business is currently bleeding cash and has fairly meager revenue. Last quarter, it lost roughly $180 million on $35 million in sales.

These numbers look concerning, but they're not unusual for a relatively young company still proving its technology. It is well funded and has a strong balance sheet with nearly $750 million in cash on hand.

The new partnership will undoubtedly help it move toward profitability. For those with patience and a higher risk tolerance, I think Pony.ai could pay off.

Should you invest $1,000 in Pony Ai right now?

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tencent. The Motley Fool has a disclosure policy.

Why Pony AI Stock Keeps Racing Higher

Pony AI (NASDAQ: PONY) stock just keeps on galloping. For the third day in a row, the small-cap Chinese robotaxi and robotruck company rode higher on Friday, building on huge gains Wednesday and Thursday. The stock tacked on another 22.7% through 9:40 a.m. this morning and now is up more than 120% over the past three days.

Yes, you read that right: Pony doubled, and then went up even more.

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Horse race.

Image source: Getty Images.

Pony express delivers good news

So far this week, the biggest little Chinese small cap you've never heard of (before this week) has announced it's producing three new robotaxi models in cooperation with Beijing Automotive Group, Guangzhou Automobile Group, and Toyota Motor (NYSE: TM), respectively, and that it has lined up local partner Hesai Group (NASDAQ: HSAI) to supply it with AT128 lidar sensors for its robotaxis.

Today, Pony added that it's partnering with another local company, Tencent Holdings (OTC: TCEHY), to further "advance autonomous driving technology and robotaxi commercial deployment."

This tie-up will pair Pony's "cutting-edge" autonomous driving system with tech products from Tencent, specifically the latter's Weixin (or "WeChat") social media, messaging, and payment app, Tencent Maps, and its "robust cloud computing, big data and AI infrastructure," all of which sound to me like logical add-ons to an electric-car-slash-robotaxi service.

Is Pony AI stock a buy?

Tencent might do well to ante up a bit of cash. Tencent's tech contributions are all great, but there's no mention of financial support in the press release, and Pony is still burning cash, and losing $274 million a year.

While the company has considerable cash reserves, a little more could go a long way to ensuring Pony stock doesn't go bankrupt before 2029, the first year it's expected to be profitable, according to analysts polled by S&P Global Market Intelligence. Meanwhile, until the financial picture firms up, I must still consider Pony a speculative, momentum-driven stock.

Should you invest $1,000 in Pony Ai right now?

Before you buy stock in Pony Ai, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Pony Ai wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tencent. The Motley Fool has a disclosure policy.

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