Key Points
SoundHound AI has been beaten down badly this year, but a closer look at its business indicates that a turnaround is possible.
The company is growing faster than the conversational AI market, suggesting that it is built for healthy long-term growth.
Potential cost-cutting moves could boost investor confidence in the stock.
This has been a brutal year for SoundHound AI (NASDAQ:SOUN) investors, as shares of the conversational voice artificial intelligence (AI) specialist have lost over 58% of their value.
Concerns about the company's cash burn and losses have led investors to press the panic button and look elsewhere to capitalize on the AI software boom. However, this AI stock could get a nice boost when it releases its third-quarter results after the market closes on Nov. 5. Let's look at the reasons why.
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Software stocks have been in fine form lately
The iShares Expanded Tech-Software Sector ETF has jumped by 22% over the past three months. This impressive rally has been fueled by the belief that AI won't disrupt traditional software businesses as was thought earlier.
However, SoundHound AI has missed the bus, even though it is an enterprise AI software provider that helps clients improve productivity. The company has missed Wall Street's free cash flow estimates over the last four quarters, and the following chart clearly indicates that its cash burn has accelerated recently.
SOUN Free Cash Flow data by YCharts
But investors looking to buy and hold an AI software stock that may become a big winner over the long run should consider the bigger picture. SoundHound AI operates in the fast-growing conversational AI market that's expected to generate $136 billion in revenue in 2035, well above last year's levels of $12.8 billion. This translates into a compound annual growth rate (CAGR) of 24%.
SoundHound is growing faster than the end market, and its acquisition-based growth strategy is positioning it for solid long-term expansion. SoundHound's revenue increased by 45% year over year in Q2 to $62 million. Analysts are anticipating an 84% year-over-year jump in Q3 to $77.2 million. This acceleration will be fueled by SoundHound's acquisition of LivePerson, which was completed last month.
This acquisition should bolster SoundHound's presence in the conversational AI market. That's because LivePerson develops and deploys voice-based AI agents, and it has a strong customer base. SoundHound AI management believes that the combined company could generate more than $500 million in revenue over the long run. For comparison, SoundHound AI delivered $169 million in revenue in 2025.
SoundHound's growth strategy could improve investor confidence
Analysts have become bullish on SoundHound's revenue growth potential lately, suggesting it could reach $500 million in revenue.
SOUN Revenue Estimates for Current Fiscal Year data by YCharts
Moreover, the company notes that its new CFO, John Collins, has a track record of achieving more than $200 million in cost reductions and turning cash burn into cash generation. As a result, there is a chance SoundHound AI could exceed expectations and post a surprise on the cash flow front when it releases its results.
Also, the potential cost-optimization moves that the company may announce following its latest acquisition could increase investor confidence in the stock. What's more, SoundHound AI has a strong balance sheet with just $5.4 million in debt and nearly $203 million in cash.
With the stock trading at an attractive 9 times sales right now, there is a likelihood that SoundHound will jump higher after delivering positive news to investors on Nov. 5. As such, SoundHound AI may end the year on a bright note, following a sharp decline in 2026 so far.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends SoundHound AI. The Motley Fool has a disclosure policy.