Where will SoundHound AI be in 3 years?

Actions of SoundHound AI (SOUND -1.86%) has doubled over the past year as investors sought high-growth companies in the artificial intelligence (AI) segment. The company’s focus on building some of the best voice assistance tools for large enterprises and its acquisitions boosted SoundHound’s sales and added to the narrative that the company could continue its winning streak.

But can SoundHound keep the momentum going? Here’s what’s going right with the company, what investors should look out for, and where this AI-powered voice assistant company could be in three years.

What’s going well with SoundHound

SoundHound has 20 years of experience in voice recognition software, and the company continues to attract large enterprises looking for the best in AI voice technology.

For example, the SoundHound platform is used by Chipotle Mexican Grill, Qualcommand Stellar‘ car brands for speech recognition for restaurants and in-vehicle voice assistants.

There are plenty of AI companies trying to ride the AI ​​hype, but SoundHound generates significant revenue from its platform. Sales rose 54 percent in the fiscal second quarter (ended Aug. 8) to $13.5 million, and management says full-year revenue will rise 74 percent to more than $80 million.

The company’s voice recognition and conversational speech awareness technology has attracted attention Nvidiawhich disclosed earlier this year that it had invested about $3.7 million in SoundHound. While that’s a relatively small stake for a tech company as big as Nvidia, the fact that AI is using SoundHound for voice assistant technology in its Nvidia Drive driver assistance system is an indicator of how the SoundHound platform is viewed.

To expand its voice AI platform, SoundHound recently purchased Amelia for $80 million, which helps SoundHound move further into conversational AI services for healthcare, insurance, financial services and retail. The move is a bet on conversational AI disrupting customer service operations.

What to look out for with SoundHound

As with any stock, there are a few things potential investors should be aware of with SoundHound. First, the company is not profitable.

SoundHound’s second-quarter generally accepted accounting principles (GAAP) net loss was $37.3 million, which was higher than its loss of $27.3 million in the year-ago quarter. It’s not unusual for high-growth companies to operate at a loss, but investors will want to see those losses begin to narrow. The good news is that some analysts are predicting that could happen soon, with an estimated loss per share of $0.35 in 2024 narrowing to a loss of $0.21 in 2025.

Image source: Getty Images.

It’s also important to point out that its stock isn’t exactly cheap. SoundHound’s 114% gains over the past year have boosted the valuation, with the company’s stock trading at a price-to-sales ratio of 24 right now.

Where will SoundHound be in three years?

SoundHound is clearly on a growth trajectory, and the company could continue to benefit as companies increase their spending in the generative AI market. SoundHound management believes it can take advantage of enterprise spending on artificial intelligence, which will reach approximately $175-250 billion by 2027.

SoundHound has made strategic moves to help capture more of this market, notably through the acquisition of Amelia. Management believes that total revenue will be $150 million by the end of 2025, and that $45 million of that will come from Amelia alone.

With its solid customer base, strong revenue growth and an acquisition that further propels sales, SoundHound could continue to outperform the market over the next three years. Just be prepared for some stock volatility and keep a close eye on whether or not the company’s losses narrow over the next year.