SoundHound (SOUN) is on a rapid growth trajectory, as reflected in its latest earnings report for the fourth quarter. The company, which provides voice artificial intelligence (AI) solutions, reported a staggering $34.5 million in revenue, marking a 101% increase compared to the previous year. For 2024, SoundHound’s revenue surged by 85% to $84.7 million.

Notably, over the past three years, SoundHound has consistently grown its revenue at an impressive CAGR of more than 50%. Since its IPO less than three years ago, the company has achieved significant milestones, including an eightfold increase in revenue and a fivefold increase in bookings.

Despite already delivering strong growth in 2024, there are at least three compelling reasons why investors should consider buying SoundHound stock following its Q4 earnings.

Reason #1: SoundHound to Maintain its Hypergrowth

SoundHound’s hypergrowth will continue well into 2025 and beyond. The company has diversified its business across multiple industries, setting the stage for sustainable and scalable growth. It now collaborates with 30% of the world’s top quick-service restaurants and 70% of the leading financial institutions. It has also expanded its footprint in the automotive sector, healthcare, and even energy, where it recently secured a major seven-figure deal.

The company’s broad product portfolio serves a massive and rapidly growing market. For example, in the automotive industry, over 90 million light vehicles are produced globally each year, presenting SoundHound with billions in potential recurring revenue. The restaurant sector also offers enormous opportunities, with over 75 billion transactions happening annually, many of which could be automated for pickup, delivery, and drive-thru services. The U.S. drive-thru market alone represents a $5 billion annual revenue opportunity.

Beyond that, the healthcare, retail, and energy industries generate trillions of customer interactions each year, creating a vast market for automation solutions that enhance efficiency and cut costs. SoundHound’s AI-driven technology positions it as a leader in these industries, further cementing its long-term growth prospects.

Looking ahead to 2025, SoundHound expects revenue to reach between $157 million and $177 million, representing growth of 85% to 109%. The company also anticipates a significant revenue ramp-up throughout the year due to seasonality and large customer deals. Growth will also be supported by an increase in unit pricing in the automotive sector and a growing base of active cloud users.

Reason #2: SoundHound Lower’s Customer Concentration Risk

Another crucial factor strengthening SoundHound stock’s attractiveness is its reduced dependency on a few major clients. In 2024, its largest customer contributed just over 14% of total revenue, compared to nearly half in 2023. Previously, five clients accounted for over 90% of its revenue; today, they make up only one-third. This diversification has made its revenue streams more predictable and stable.

Additionally, SoundHound has shifted toward more recurring revenue, creating a sustainable business model. By the end of 2024, it had a cumulative subscription and bookings backlog of nearly $1.2 billion, up 75% year-over-year and providing visibility into its future revenue. Further, the company continues to secure new deals each quarter and has expanded its use cases, opening up significant cross-sell and upsell opportunities.

Reason #3: SoundHound to Deliver Profitable Growth

SoundHound is on track to deliver profitable growth. Its focus on scaling operations and prioritizing growth initiatives that enhance efficiency and maximize return on investment will cushion its margins. SoundHound aims to reach adjusted EBITDA profitability by the end of 2025, signaling a clear trajectory toward financial success.

The company’s ability to leverage synergies from recent acquisitions is a key driver of this profitability push. SoundHound has already begun realizing operational efficiencies, streamlining workflows, and refining its product mix to improve gross margins. As automation becomes a larger part of its operations, the company anticipates a meaningful uptick in margins, targeting a return to levels exceeding 70%.

Additionally, SoundHound is reassessing its acquired customer contracts, selectively avoiding deals that do not align with its long-term profitability goals. While this shift may impact its short-term revenues, it is expected to strengthen its financials by improving margins and providing a solid base for long-term growth. 

Analyst Sentiment on SOUN Stock

Wall Street analysts maintain a Moderate Buy consensus rating on SoundHound stock. 

The average price target of $13.75 suggests compelling upside potential of 35%. At the same time, the highest price target on the Street is $26, implying SOUN stock could more than double over the next 12 months.