Can SoundHound AI Stock Experience a Dramatic Rise After Its Recent Earnings?

SoundHound AI (SOUN 4.48%) has faced a rough patch in the stock market for most of this year, but the situation took a positive turn after the company announced its fourth-quarter results for 2024 on February 27.

Following the earnings release, shares of SoundHound AI, known for its voice artificial intelligence (AI) solutions, jumped by more than 17%. This substantial increase was fueled by better-than-expected financial figures and an improved outlook for 2025.

Let’s take a deeper dive into SoundHound’s quarterly report and evaluate whether the factors driving the company can lead to a significant spike in its stock price.

SoundHound's Strong Backlog Indicates a Positive Outlook

SoundHound delivered impressive revenue growth, reporting an 85% increase in 2024, bringing its total to nearly $85 million. The company's guidance for 2025 further added to the excitement, projecting revenues to nearly double, with estimates ranging from $157 million to $177 million. Interestingly, the initial 2025 guidance had been slightly lower, at $155 million to $175 million.

The rapid demand for SoundHound's conversational AI solutions across various industries is a key factor behind the company's confidence in accelerated revenue growth. In its latest press release, SoundHound detailed several new customer gains in diverse sectors. The company has established a strong presence in the automotive and restaurant industries and is now expanding into healthcare, retail, telecom, energy, and even government sectors.

Additionally, SoundHound is set to innovate by launching agentic AI tools, aiming to leverage upcoming trends in AI technology. Agentic AI allows AI systems to perform tasks and make decisions with minimal human involvement. Estimates suggest that the global market for agentic AI could see a tremendous 40-fold growth in the next decade, potentially generating nearly $200 billion in annual revenues by 2034.

This emerging market presents an excellent growth opportunity for SoundHound. The company aims to enhance its conversational AI assistants' capabilities by integrating these agentic AI tools. CEO Keyvan Mohajer stated during the latest earnings call, "We have seen exciting results in the agentic AI tools we've created and are building and testing agentic use cases in every major vertical. We will bring these to commercial deployment soon, and this will be a game changer for our customers and the industry."

Thus, it is reasonable to anticipate that SoundHound's already robust revenue pipeline may continue to strengthen. By the end of 2024, the company reported a cumulative subscriptions and bookings backlog of $1.2 billion, a remarkable increase of 75% from the previous year. Management indicated that this metric reflects signed contracts and serves as a snapshot of expected revenue over the upcoming years.

SoundHound also mentioned that this backlog is likely to grow with new contracts in the works and "significant cross-sell and upsell opportunities" arising from adding new SKUs and use cases across various sectors. Therefore, the impressive growth outlook SoundHound has for 2025 seems likely to persist in the future.

Is a Parabolic Move Possible for SoundHound Stock?

A parabolic move refers to a sharp increase in a stock’s price in a brief period, resembling the upward curve of a parabola. SoundHound has experienced such movements before, notably when AI leader Nvidia invested in the company last year. However, following Nvidia's decision to divest its stake in SoundHound recently, the stock experienced a downturn.

Nevertheless, the latest quarterly report has restored investor confidence in SoundHound’s potential. Analysts project a 30% increase in the stock's price over the next year, with a 12-month median price target of $13.50. Notably, while the stock is currently trading at a high valuation of 43 times sales, many have observed that SoundHound can substantiate this premium valuation.

The strength of the company’s subscriptions and bookings backlog surpasses its 2025 revenue forecast and aligns well with analysts' revenue expectations for 2026.

Given these factors, there is a good chance that SoundHound’s ongoing results could continue to surpass expectations, paving the way for a dramatic increase in stock value in the long run.

Note: The author has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia.

SoundHound, AI, Stocks