Although voice artificial intelligence (AI) company SoundHound AI (SOUN 1.69%) has been generating some impressive growth in recent quarters, its stock has been struggling. Thus far in 2026, it's down around 30%, and at roughly $7, it would need to more than triple in value to get back to the high of more than $22 it reached last year.
Given the opportunities in AI and the company's continued growth through acquisitions, is SoundHound AI's stock overdue for a rebound, and could it be a good buy right now?
Image source: Getty Images.
The big problem with SoundHound AI isn't a lack of growth; it's its bottom line, which is often in the red. As you'll see from the charts below, while SoundHound AI has done an excellent job of growing revenue, its bottom line, aside from a few quarters, has typically remained in the red in recent years.
SOUN Revenue (Quarterly) data by YCharts
This is a concern for investors because if a business is growing its sales but not its earnings, it may be chasing growth opportunities too aggressively rather than carefully pursuing those that are accretive to the bottom line. Without strong financials, the business may need to raise cash through debt or equity offerings to invest in its operations and future growth. And those concerns may very well be weighing down the tech stock right now.
SoundHound AI's stock may not seem too expensive, with a market cap of $3 billion, but it still trades at 16 times its revenue, which isn't cheap. And although the company technically posted a profit in one of its recent quarters, there's a lot of noise in its financials due to acquisitions; without other income items, it would have landed in the red, as it has incurred an operating loss in each of the past four quarters.
Unfortunately, while SoundHound AI's business is growing, it isn't demonstrating to investors that it's becoming a safer overall investment. Investors aren't going to be impressed by growth driven primarily by acquisitions. Plus, with interest rates potentially rising further this year, risky stocks such as SoundHound AI may be under even greater pressure in the near future, which is why I don't expect a rally in the stock unless it shows a drastic improvement in its bottom line.
David Jagielski, CPA 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.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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The stock is down close to 70% from its 52-week high.