NEW YORK, July 17, 2026, 3:09 p.m. EDT — SoundHound AI (NASDAQ:SOUN) shares reversed earlier losses on Friday, bouncing back after preliminary merger data suggested a significant improvement in gross margins. The stock rose 0.3% to $6.33, recovering from a session low of $5.98, which represented a 5.2% decline. Despite the rebound, shares remained down approximately 4.7% for the week.
Trading volume reached 39.0 million shares, about 33% higher than the 65-day average, indicating heightened investor interest. The move occurred without any new company statement; the most recent update on SoundHound's investor page remains dated July 13.
Merger Metrics Show Margin Expansion
The key catalyst for the turnaround is the planned acquisition of LivePerson (NASDAQ:LPSN). Preliminary unaudited SEC data for the first quarter of 2026 shows that on a pro forma combined basis, SoundHound's gross margin would climb by 20.5 percentage points to 51.6%, compared with 31.1% on a standalone basis. Total combined revenue reached $101.2 million, a 129% increase over SoundHound's standalone $44.2 million.
The combined net loss stands at $24.6 million, slightly less than SoundHound's individual loss of $25.0 million. These figures are adjusted by excluding LivePerson's interest expense and do not include anticipated synergies. LivePerson reported a Q1 gross margin of approximately 70.9%, and the increase in higher-margin revenue is a key factor behind the overall gains.
Dilution Concerns Remain
Investors are weighing whether the margin improvements can offset the dilution from issuing additional shares. The basic weighted share count would increase by 42.6 million, or 10.1%, to 464.1 million. This increase is significantly less than the revenue boost, forming a central investment premise. The price collar for the deal has become relevant: the stock portion is determined by a 10-day SoundHound VWAP, with a minimum of $7 and a maximum of $12. With SoundHound at $6.33, a further decline would not raise the share count due to the floor set by the VWAP. Additional closing adjustments remain in place.
SoundHound has the option to substitute certain noteholder stock with cash. The initial balance sheet lists $262.4 million in cash and no long-term debt, contingent on the deal's finalization.
Management and Market Context
Chief Executive Keyvan Mohajer described the deal as broadening the company's channels, stating, “Our combined customers will realize immediate value through expanded capabilities and enhanced scale.” In afternoon trading, SoundHound outperformed peers: C3.ai (NYSE:AI) traded mostly flat, BigBear.ai (NYSE:BBAI) declined by 2.1%, and LivePerson dropped 2.3%.
Short interest stood at 162.9 million shares as of June 30, representing roughly 41.2% of the float. This does not confirm that Friday's rebound was due to short covering. Risks remain significant: the deal still requires approval from LivePerson shareholders and regulators. SoundHound spent $26.3 million in operating cash in Q1, and final accounting for the acquisition may differ substantially.
For investors, the merger criteria are straightforward: the 20-point margin increase must be sustained after integration, with dilution holding around 10%. Friday's rebound altered the price but did not affect that standard.
