Shares of SoundHound AI (NASDAQ:SOUN) edged lower in Wednesday afternoon trading, falling 1.8% to $6.44 as the market braces for the company's second-quarter earnings report scheduled for August 5. The voice AI specialist will release its results after the closing bell, followed by a conference call at 5 p.m. EDT.
Revenue Growth Under the Microscope
Analysts' preliminary consensus calls for second-quarter revenue of $52.47 million, representing a 23% increase from $42.7 million in the same period last year. This would also mark a sequential improvement of 19% from the first quarter's $44.2 million. However, the company's full-year 2026 revenue guidance of $225 million to $260 million implies that first-half sales of approximately $96.7 million will need to be followed by $128.3 million to $163.3 million in the second half to meet the target.
To achieve the lower end of that range, the company would need to average $64.2 million per quarter in the second half—22% above the Q2 projection. The upper end requires an average of $81.7 million per quarter, a 56% jump from current estimates. These figures underscore the steep growth trajectory SoundHound must maintain, with contract timing playing a pivotal role.
Financial Health and Margin Pressure
Despite the top-line growth, SoundHound continues to grapple with significant expenses. In the first quarter, adjusted EBITDA came in at a loss of $26.7 million against $44.2 million in revenue, resulting in an adjusted EBITDA margin of nearly negative 60%. Operating cash outflows widened to $26.3 million from $19.2 million a year earlier. As of March 31, the company held $216 million in cash and remained debt-free.
Gross margins also contracted. GAAP gross margin fell by 5.4 percentage points to 31.1%, while non-GAAP gross margin slipped 1.1 points to 49.7%. The company attributed the decline to non-recurring vendor true-up expenses.
Acquisition and Long-Term Outlook
Adding to the execution challenges is the pending acquisition of LivePerson (NASDAQ:LPSN). SoundHound has agreed to an equity valuation of approximately $43 million and expects the deal to close in the second half of 2026. The company projects total revenue in 2027 of at least $350 million, with up to $100 million expected from existing LivePerson clients. However, the transaction is subject to shareholder and regulatory approvals, and integration risks could weigh on customer relationships and expenses.
CEO Keyvan Mohajer expressed confidence in the company's momentum earlier this year, noting that core automotive and IoT revenue grew 88% organically in the first quarter. Still, the stock trades near the lower end of its 52-week range, up about 10% from its $5.83 low but roughly 71% below its $22.17 high.
With a market capitalization of approximately $2.77 billion—about 11.4 times the midpoint of its annual forecast—SoundHound faces a critical test on August 5. The company must not only deliver on its promised revenue acceleration in the second half but also demonstrate improved margins and tighter cash management to reassure investors.
