SoundHound Revenue Rose More Than 48%; Gross Margin Fell to 50.3%

By Nathan Brooks

SoundHound AI (NASDAQ: SOUN) posted third-quarter revenue of $62.4 million, up more than 48% and ahead of MarketBeat's consensus, while non-GAAP gross margin fell nine percentage points to 50.3%. Adjusted losses widened despite an earnings-per-share beat. The quarter's arithmetic is less comfortable than the revenue headline suggests.

Management is not treating the margin decline as an ordinary quarterly fluctuation. It is allowing lower-margin, dilutive legacy contracts to lapse and moving customers toward new hosted services built on the OASYS platform, with the aim of becoming a higher-margin software-as-a-service business.

That strategy depresses reported growth and widens losses while the transition proceeds. Management forecast “positive adjusted EBITDA” for the back half of next year, a target three to four quarters away.

What drove the quarter?

Revenue growth came from new enterprise wins, upsells and renewals across several verticals. SoundHound's AI-powered voice platform for enterprise automation has also expanded through acquisitions, including LivePerson, which broadened the addressable market, product portfolio and cost-savings potential while creating cross-selling opportunities.

Executives reported “encouraging feedback” about continued business and interest in enterprise-level agentic voice services from LivePerson's largest clients. Those clients represent approximately $100 million in annual recurring revenue, giving management a sizable installed base for the cross-selling plan.

LivePerson serves 25 of the Fortune 100, a high double-digit number of Fortune 500 companies, and 35% of Forbes' Most Valuable Brands. Those relationships are the near-term test of whether the acquisition becomes a distribution channel rather than a collection of legacy contracts.

What must the guidance deliver?

Management guided to $255 million of 2026 revenue at the midpoint, a level it described as better than expected. For 2027, management forecast “sustained, nearly 50% growth.” The longer-term forecast was described as likely to be cautious.

Four operating factors support the fourth-quarter and 2027 outlook:

• Cross-selling to LivePerson clients
• New enterprise wins
• Migration to a software-as-a-service model
• Scaling operations

A recent deal to bring SoundHound-powered commerce to LG Smart TVs could open another revenue stream, although no revenue figure or timetable was provided. At 50.3%, non-GAAP gross margin sits just above half of revenue. The nine-point year-over-year decline matters because the company still must cover operating costs before that revenue becomes adjusted profit.

Why analysts and short sellers disagree

Early-November analyst responses were mixed. Some analysts cut price targets but retained their ratings; MarketBeat's consensus rating remained Hold, although its assessment of sentiment leaned positive.

Institutional activity was modest, with slightly more buying than selling. At publication, MarketBeat listed SOUN at $4.11, down 3.5%, against a 52-week range of $3.88 to $14.98. The table showed no dividend, no applicable P/E ratio and a MarketRank score of 2.1415 out of five.

The $9.50 consensus price target implied more than 100% upside, suggesting a disconnect between valuation and trading. Short interest exceeded 40% and had hovered there for months, while days to cover stood above 10.

Cash burn and uncertainty around the profit transition attracted that positioning. It can weigh on the shares without a catalyst and hinder a rally even when one arrives, but it also creates substantial short-covering potential.

MarketBeat did not include SoundHound among the five stocks it said top-rated analysts favored in December, and the article's investment section rated it Hold rather than endorsing a purchase. That editorial distance matches the numerical split between target price and current price.

What signals matter next?

MarketBeat's technical reading found that SOUN's price action was trending lower in the fourth quarter. The stochastic and moving average convergence and divergence indicators showed divergence and an increasingly weak bearish force.

The setup suggested an imminent rebound, but only with a catalyst. Both indicators measure momentum, market strength and direction; neither can establish where the bottom sits or how high any rebound may run.

A possible trigger could arrive in early 2027 with the fourth-quarter release and updated 2027 guidance. The analysis nevertheless said major catalysts were unlikely before the fourth-quarter earnings report. Possible support sits near the April 2024 low, with the February 2024 low next if that level breaks. Neither support point was guaranteed.

Competition remains a stated risk. Management's counterargument is a differentiated voice approach that can deliver higher-quality responses and interactions, though renewals and expansion must still validate that claimed moat.

Looking ahead, the key test is whether enterprise wins and LivePerson cross-sales offset contract runoff before management reaches positive adjusted EBITDA in the second half of next year. Success could force short covering and magnify the benefit; failure would magnify the same leverage. The fourth-quarter report and updated 2027 guidance should reveal more than another broad promise of enterprise AI demand.