SoundHound AI (NASDAQ:SOUN) continues to pile on the sales. “Record Q1 Revenue” screamed the company’s Q1 2026 earnings release
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Indeed, the company’s $44.2 million in sales was up 52% year-over-year, a concrete demonstration that SoundHound is succeeding in generating top-line growth. However, that’s only half of the story.
SoundHound’s Achilles heel, at least according to many investors, is its lack of profits. Here, the trend wasn’t moving in such a positive direction, with GAAP gross margin declining to 31.1% from 36.5% in Q1 2025. The company explained that part of the decrease was due to third-party expenses that won’t be recurring.
However, the bottom-line concerns appear to have overshadowed the top-line growth, with SOUN’s share price falling in the low double digits in the week following the earnings release. Could this be an opportunity for some dip buying?
Not according to top investor Geoffrey Seiler.
“Right now, SoundHound is going after a big opportunity, but it’s juggling a lot,” says the 5-star investor, who is among the top 3% of stock pros covered by TipRanks.
Seiler explains that SoundHound’s recent agreement to acquire LivePerson “dominated” the earnings call. He points out that while LivePerson has a large customer base, it has also had issues with net retention and a high debt load.
SoundHound believes that the combined company – the LivePerson deal is expected to close later this year – will generate between $350 and $400 million in 2027 sales. LivePerson is projected to contribute at least $100 million to this total, though Seiler adds that this might be a conservative figure.
However, it’s not just that SoundHound is now faced with the prospect of “another big acquisition and integration project.” Seiler also mentions the company’s lack of profits and cash burn (though he does note that SoundHound had $216 million in cash and no debt).
Seiler calculates that SOUN trades at a forward price-to-sales multiple of 9.5x the higher end of its 2027 revenue projection. That wouldn’t ordinarily be expensive for a company growing revenues at such a fast clip, he admits, if it had a high gross margin (“which it currently does not”).
“I’d stay on the sidelines,” concludes Seiler. (To watch Seiler’s track record, click here)
In contrast, Wall Street is keeping its eyes on the opportunity. With 5 Buys and 1 Hold, SOUN enjoys a Strong Buy consensus rating. Its 12-month average price target of $13.33 points to an upside of 58%. (See SOUN stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.