SoundHound AI Expansion In Autos And Dining, Plus Q4 Profit Target, Fuels Bullish Analyst View

H.C. Wainwright analyst Scott Buck maintained SoundHound AI Inc SOUN with a Buy and lowered the price target from $26 to $18 on Monday.

After the market closed on Thursday, SoundHound AI released its first-quarter 2025 operating results, which included revenue of $29.1 million, just below Buck’s $30.2 million estimate and $30.4 million for the Street, driven by contributions from recent acquisitions and high demand for legacy products in the automotive and restaurant space.

The GAAP gross margin of 36.5% was down sequentially from 39.9% and down from 59.7% a year ago, reflecting some lower-margin businesses associated with recent M&A.

Also Read: SoundHound AI Stock Slides On Mixed Q1 Results, Reaffirms FY25 Outlook

Over time, Buck noted the gross margin should continue to move towards 70% levels.

The combination of lower revenue, lower gross margin and lower cash operating expense resulted in an adjusted EBITDA loss of $22.2 million versus Buck’s $19.0 million loss estimate. The company has a cash balance of $246 million and no debt.

While the numbers were just okay compared to expectations, Buck noted several takeaways from the earnings call that should drive increasing investor optimism. These include a series of new customer announcements across multiple sectors, suggesting further diversification in the business.

In addition, the company’s restaurant business now exceeds 13,000 locations.

An estimated $200 per month would represent $31.2 million of annual recurring revenue.

Further, the analyst noted the number of locations could increase meaningfully over the remainder of 2025 and expects average monthly revenue to increase over time as additional services are added.

While he noted the company could prove its ability to grow organically in 2025, $246 million of available balance sheet cash should allow the company to be opportunistic in pursuing additional M&A.

Buck now modeled 2025 revenue of $164 million, down from $170 million but within management’s $157 million-$177 million revenue guidance. The analyst’s adjusted EBITDA estimate moves to a loss of $50.4 million but includes positive adjusted EBITDA of $0.9 million in the fourth quarter of 2025, a powerful inflection point in the business.

He modeled 2026 revenue of $220 million, up 34.1% from 2025 levels, and an adjusted EBITDA loss of $26.1 million. The analyst expects 2026 visibility to improve in the coming quarters as the business scales.

SOUN Price Action: SoundHound stock was up 23.33% at $11.08 at publication on Monday.

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