SoundHound AI (SOUN) experienced a 12% decline in after-hours trading on Thursday, despite posting record first-quarter revenue of $44.2 million, a 52% increase year-over-year. The drop reflects investor concerns over the company's ongoing losses and the financial implications of its planned acquisition of LivePerson.
The company's GAAP net loss for the quarter was $25 million, while on a non-GAAP basis, the loss was $26.6 million. SoundHound ended March with $216 million in cash and no debt, but the market remains cautious about the path to profitability. The company's GAAP gross margin slipped to 31.1% from 36.5% a year ago, and operating cash burn totaled $26.3 million for the quarter.
SoundHound's core strategy is shifting from voice technology for restaurants and automotive to a broader enterprise customer-service automation platform. The planned acquisition of LivePerson, announced on April 21, is a key part of this transformation. The all-stock deal values LivePerson's equity at $43 million, a 22% premium over its 30-day volume-weighted average, with an enterprise value of approximately $250 million after adjusting for debt discounts.
LivePerson brings a digital messaging platform that handles over a billion customer messages monthly, serving 12 of the world's 15 largest banks, four of the top five global airlines, and four of the top five global automakers. SoundHound CEO Keyvan Mohajer described the union as a combination of "two complementary conversational AI pioneers," aiming to bridge voice and text interactions seamlessly.
Despite the strategic rationale, analysts are wary of integration risks. Wedbush maintained an Outperform rating with a $12 price target, citing a "transformational market shift." D.A. Davidson also kept a Buy rating but flagged potential challenges. The deal is not expected to close until the second half of 2026, meaning any revenue contribution will likely not materialize until 2027.
SoundHound's 2026 revenue guidance remains unchanged at $225 million to $260 million. Excluding acquisitions, the company's core automotive and IoT AI unit saw revenue jump 88% year-over-year, according to Mohajer. The company also highlighted its OASYS orchestrated agentic-AI platform, which it says can create, coordinate, and refine AI agents over time.
Competition in the conversational AI space is intensifying, with players like Cognigy, Kore.ai, and Genesys Cloud CX offering similar solutions. SoundHound differentiates itself with a unified platform covering voice, messaging, and agentic AI capable of multi-step actions. However, the company's losses and cash burn raise questions about its ability to execute without further dilution.
Investors will watch for signs of margin improvement and integration progress in the coming quarters. The market's reaction underscores the challenge of balancing growth investments with profitability in a competitive landscape.
