SoundHound shares have been on a roller coaster ride throughout 2025.
AI SoundHound (HER 3.16%) is a fairly popular artificial intelligence (AI) action for its size. It’s a roughly $5 billion company in terms of market cap, making it relatively small. However, these small businesses have the capacity to grow quickly, which could generate explosive returns.
SoundHound hasn’t had a great 2025, as its stock is down about 15% for the year. However, as of October, shares were up about 40% for the year. This suggests extreme volatility in SoundHound stock, which shouldn’t be surprising given its size and popularity.
So, can he make a comeback in 2026? Let’s find out.
Image source: Getty Images.
SoundHound AI is a pioneer in important applications
SoundHound AI combines audio recognition technology and generative AI. This is an important application of AI because it could be used to automate human-to-human interactions that don’t happen in person. So far, one of the biggest use cases for its technology is in the restaurant industry, as many restaurant operators are integrating its technology into drive-thru windows.
Another area where SoundHound products could provide significant value is any industry with significant customer service, such as healthcare, insurance and financial services. If SoundHound can replace the thousands of customer service agents these companies employ, its product will be incredibly useful.
We are already seeing signs of global adoption of its products, as SoundHound announced that three of the world’s 10 largest financial institutions purchased additional services during the third quarter and signed a contract with a French insurance company.
Today’s change
(-3.16%) $-0.38
Current price
$11:65 a.m.
Key Data Points
Market capitalization
$4.9 billion
Daily scope
$11:48 a.m. -$12.64
52 week range
$6.52 -$24.98
Volume
27M
Average flight
45M
Gross margin
30.02%
Even though SoundHound is successful in several industries, the ultimate test will be whether the consumer accepts it. So far, robotic customer service agents haven’t been very helpful because they’re set up to follow a specific chain of action. Service agents based on generative artificial intelligence should be able to offer more flexibility and look more human.
However, customers will have to accept that they are no longer speaking to a human counterpart on the other side of the phone. If they don’t like that, SoundHound customers could ask everyone who calls for a human operator rather than the AI ​​generative agent. SoundHound AI’s product needs to be good enough for this not to happen, but it’s a real concern.
However, with all the money customers are spending with SoundHound AI, I suspect it could be a huge success if done correctly.
SoundHound AI is growing rapidly
SoundHound’s revenue increased 68% year over year to $42 million in the third quarter. While that’s not a huge total, its growth rate is impressive. Management believes it can generate organic growth of 50% or more for the “foreseeable” future, indicating strong growth ahead. We’ll see how long it can maintain its growth, but if SoundHound AI continues to grow at a rate of 50% or more throughout 2026, I’d be surprised if the stock isn’t a winner.
One thing that could hinder its success is its high valuation. Despite a record year, SoundHound AI still trades at 34 times sales.
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Most software companies trade between 10 and 20 times sales, but these companies typically don’t experience 68% growth. I think this is a pretty reasonable valuation for SoundHound stock, and if it continues to deliver strong growth, the valuation is reasonable at its current level.
One issue SoundHound investors need to watch out for is its profound unprofitability. In the third quarter, its operating loss was $116 million on revenue of $42 million. This means he lost almost three times what he brought in. This worries a lot of investors, but it doesn’t concern me as much because SoundHound is trying to capture market share in an incredibly large market. If SoundHound’s business is as successful as some think, these losses will be worth it. But he still has a lot of work to do.
Overall, I think SoundHound AI could have a strong 2026, but its success is tied to its continued rapid growth rate and the market’s appetite for risk. If any of these falter, SoundHound stock will have a bad 2026.
