SOUN · SoundHound AI
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $4.26
Note written ·
Price against the kill line
18.1% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $4.26, set on 13 November 2026. The shares are down 50.4% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $4.26, the 5 November 2026 close before the third-quarter report, which would show the shares had recovered the whole post-report decline; or a raised 2027 revenue outlook above $400 million.
Research onlyNot in the portfolio.
The business · as of
SoundHound AI sells voice and conversational AI software: voice assistants for carmakers and devices, phone and drive-through ordering for restaurants, and customer-service AI agents for banks and enterprises, enlarged by the LivePerson purchase. It earns licence, subscription and usage fees. Revenue was $62.4 million in the quarter to 30 September 2026.
What is changing, and what follows · as of
- What is changing now
- On 5 November 2026 the company reported third-quarter revenue of $62.4 million, narrowed 2026 guidance to $250–260 million, reaffirmed $350–400 million for 2027 and began cutting about 27% of its workforce (8-K).
- What follows for the company
- The restructuring brings $18–22 million of pre-tax charges, mostly in the fourth quarter of 2026, aiming at $120 million of annual savings and positive adjusted EBITDA in the second half of 2027; gross margin fell to 34.1%.
- What follows for its customers, suppliers and competitors
- Customers shift from upfront licences to hosted contracts, which lowers near-term licence revenue; SoundHound competes for voice and customer-service AI work with Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Cerence (CRNC).
What the price assumes · as of
At the 13 November 2026 close (filed inputs to 9 November 2026) the shares trade at 6.2 times sales and 2.0 times book, for an enterprise value of $1,382 million; P/E is not meaningful and the free-cash-flow yield is −7.5%. That holds only if revenue keeps growing near the 48.5% of the latest filed quarter while the −73.6% operating margin closes toward breakeven.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 9 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 62.4
- Revenue, change on a year (%)
- +48.5
- Gross margin (%)
- 34.1
- Operating margin (%)
- −73.6
- Free cash flow, four quarters ($M)
- −119
- Net cash, cash less debt ($M)
- 204
- Enterprise value to sales (×)
- 6.2
- Free-cash-flow yield (%)
- −7.5
All filed numbers
What SoundHound AI reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 62.4 | +48.5 | 34.1 | −73.6 |
| first filed | 61.9 | +45.0 | 45.1 | −70.0 |
| first filed | 44.2 | +51.7 | 31.1 | −51.3 |
| first filed | 55.1 | +59.4 | 47.9 | 77.3 |
| first filed | 42.0 | +67.6 | 42.6 | −275.6 |
| first filed | 42.7 | +217.1 | 39.0 | −182.9 |
| Pre-tax income ($M) | −46.2 |
| Net income ($M) four quarters: −73.6 | −45.8 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +10.4 |
| Operating cash flow ($M) | −118 |
| Capital spending ($M) | 1.5 |
| Free cash flow ($M) | −119 |
| Cash and short-term investments ($M) | 208 |
| Debt ($M) convertible debt | 3.8 |
| Net cash, cash less debt ($M) | 204 |
| Deferred revenue ($M) +144.3% on a year | 69.5 |
| Backlog, orders not yet delivered ($M) +171.1% on a year | 191 |
| Receivables ($M) | Not reported |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 806 |
| Market value ($M) | 1,586 |
| Enterprise value, market value plus net debt ($M) | 1,383 |
| Enterprise value to sales (×) | 6.2 |
| Enterprise value to operating income (×) | Not meaningful |
| Price to earnings (×) | Not meaningful |
| Price to book value (×) | 2.0 |
| Free-cash-flow yield (%) | −7.5 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 37.6% of shares outstanding sold short, 10.1 days of average trading to cover, +7.5% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $1.8M |
| 12 monthsfrom | $0 | $11.1M |
Linked companies · as of
- Customers:
- STLA
The thesis
SoundHound AI's shares are more likely to lag the S&P 500 over the next three months. Revenue is growing near 50%, but gross margin fell, cash burn continues and the company cut 27% of its staff. The case rests on a 2027 outlook and a profitability target that no reported quarter has yet tested. The fourth-quarter report, expected around late February 2027, is the first test.
The third-quarter report on 5 November 2026 delivered growth. Revenue was a record $62.4 million, up 48.5% from $42.0 million a year earlier, according to the company's 8-K. The company narrowed 2026 revenue guidance to $250–260 million from $230–260 million and reaffirmed $350–400 million for 2027. On the earnings call, management said about $35 million had come out of 2026 expectations. About $8 million came from exiting negative-margin contracts and about $27 million from lower second-half licensing, as upfront licences move to hosted contracts.
The rating is Low because profitability has worsened while the share count keeps rising. GAAP gross margin fell to 34.1% in the third quarter of 2026 from 42.6% a year earlier. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a loss of $20.7 million. Free cash flow over the four quarters to 30 September 2026 was negative $119 million, and diluted shares rose 10.4% from a year earlier, according to the 10-Q filed 9 November 2026. Breakeven on adjusted EBITDA is a target for the second half of 2027, after the three-month window ends.
An 8-K filed on 13 November 2026 named Tyler Moore, hired as chief accounting officer on 2 November 2026, as principal accounting officer from 9 November 2026. John Collins remains chief financial officer.
Bullish and bearish views on SoundHound AI, Inc
The bull case on SoundHound AI, Inc (SOUN), in brief: revenue growth near 50% continues. The bear case: gross margins are falling.
Bull case
- Revenue growth near 50% continues. Third-quarter 2026 revenue of $62.4 million rose 48.5% from a year earlier, the fourth straight quarter of growth above 45% in the company's filed results (10-Q, 9 November 2026).
- Contracted revenue is building. Backlog was $191 million on 30 September 2026, up 171.1% from a year earlier, and deferred revenue was $69 million, up 144.3% (10-Q, 9 November 2026).
- 2027 outlook reaffirmed after the cut. The company kept its $350–400 million 2027 revenue outlook on 5 November 2026 and expects adjusted EBITDA to be sustainably positive in the second half of 2027, even at the low end of that range (8-K, 5 November 2026).
- A dated cost plan. The company targets $120 million of annual cost savings, with over $80 million of actions scheduled before 1 January 2027 (8-K, 5 November 2026).
- Net cash, almost no debt. Cash and short-term investments were $208 million on 30 September 2026 against $3.8 million of debt (10-Q, 9 November 2026).
Bear case
- Gross margins are falling. Non-GAAP gross margin fell to 50.3% in the third quarter of 2026 from 59.3% a year earlier; GAAP gross margin fell to 34.1% from 42.6% (8-K, 5 November 2026).
- Cash burn remains heavy. Operating cash outflow was $118 million over the four quarters to 30 September 2026, and the restructuring adds $18–22 million of pre-tax charges, mostly in the fourth quarter of 2026 (10-Q, 9 November 2026; 8-K, 5 November 2026).
- Share count keeps rising. The company issued 41,891,373 Class A shares for LivePerson and sold 6,232,900 shares through at-the-market offerings in the first nine months of 2026 for $48.5 million gross (10-Q).
- Analysts cut targets after the report. Cantor Fitzgerald cut its target to $10 from $15 on 6 November 2026 and kept Overweight. DA Davidson cut its target to $5 from $10 on 6 November 2026 and kept Buy, and Northland Securities lowered its target to $8 with a Buy rating, reported 8 November 2026.
- Insiders sold in September. SEC Form 4 filings show open-market sales at $6.33 on 15 September 2026 by the chief executive (137,290 shares), the chief operating officer (71,113), the chief product officer (38,730) and the chief strategy officer (38,730).
Price setup
The shares closed at $3.49 on 13 November 2026, the lowest close of the past 52 weeks. The 3-month change is −50.4% from the reference close of $7.04 on 17 August 2026. The last close is 73.5% below the 52-week intraday high of $13.19 set on 20 November 2025.
The last close sits below the 50-day moving average of $5.19 and the 200-day moving average of $6.87, both as of 13 November 2026. A common market view is that shares trading below both averages and setting new closing lows tend to keep lagging; that is a belief, and the case here rests on the margins and cash burn above.
The report came after the close on 5 November 2026. The shares closed at $4.11 on 6 November 2026, $4.05 on 9 November 2026, $3.87 on 10 November 2026, $3.91 on 11 November 2026, $3.60 on 12 November 2026 and $3.49 on 13 November 2026. Company news in that week, an Everest Group "Leader" ranking on 10 November 2026 and a credit-union customer passing 500,000 AI-agent conversations on 12 November 2026, did not stop the decline. The 5 November 2026 pre-report close is the level that would mark a full recovery of the post-report fall; the 50-day average is the next level above it.
Catalysts ahead
- ~31 December 2026 (est.): Completion of over $80 million of scheduled annual cost-saving actions. The company scheduled these actions for before 1 January 2027. Completing them is the first step toward its target of positive adjusted EBITDA in the second half of 2027.
- ~26 February 2027 (est.): Fourth-quarter and full-year 2026 report. Shows whether 2026 revenue lands within $250–260 million and whether the $350–400 million 2027 outlook holds after the restructuring. A raised outlook would break the lag call.
What would change the view
A daily close above $4.26, the 5 November 2026 close before the third-quarter report, which would show the shares had recovered the whole post-report decline; or a raised 2027 revenue outlook above $400 million.
What it trades with
Company events have set this price more than the broad market has. The shares fell 57% in 2026 through early November, according to TIKR, while the company absorbed LivePerson, issued new shares and reset its revenue mix. The shares trade with the speculative AI-software group. A common market view is that sentiment moves that group together, so a broad AI-software rally could lift the shares regardless of company results; that is the main way a lag call fails without a change in the business.
Caveats
- SoundHound AI has two share classes: 455,858,001 Class A and 32,535,408 Class B shares were outstanding on 5 November 2026. Form 10-Q for the quarter ended 30 September 2026 · as of
- The company has an at-the-market equity program, under an agreement dated 11 May 2026, that lets it sell new Class A shares into the market. Form 10-Q for the quarter ended 30 September 2026 · as of
- The LivePerson purchase price allocation is preliminary, so goodwill of $261.8 million recorded for the deal may be revised. Form 10-Q for the quarter ended 30 September 2026 · as of
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was a record $62.4 million, up 48.5% from $42.0 million a year earlier; GAAP net loss was $46.4 million. SoundHound AI 8-K earnings release, 5 November 2026 · as of
- GAAP gross margin fell to 34.1% from 42.6% and non-GAAP gross margin to 50.3% from 59.3% a year earlier; adjusted EBITDA was a loss of $20.7 million. SoundHound AI 8-K earnings release, 5 November 2026 · as of
- 2026 revenue guidance narrowed to $250–260 million from $230–260 million; 2027 revenue outlook of $350–400 million reaffirmed; adjusted EBITDA expected to be sustainably positive in the second half of 2027. SoundHound AI 8-K earnings release, 5 November 2026 · as of
- A restructuring begun on 4 November 2026 cuts about 27% of the global workforce, with $18–22 million of pre-tax charges, mostly in the fourth quarter of 2026. SoundHound AI 8-K, 5 November 2026 · as of
- Backlog was $191 million, up 171.1% from a year earlier; cash and short-term investments were $208 million against $3.8 million of debt; free cash flow over four quarters was negative $119 million. SoundHound AI 10-Q for the quarter ended 30 September 2026 · as of
- Cantor Fitzgerald cut its price target to $10 from $15 and DA Davidson to $5 from $10, both keeping positive ratings. Benzinga, 6 November 2026 · as of
- The chief executive, chief operating officer, chief product officer and chief strategy officer sold a combined 285,863 shares in the open market at $6.33 on 15 September 2026. SEC Form 4 filings dated 17 September 2026 · as of
- Tyler Moore, hired as chief accounting officer on 2 November 2026, became principal accounting officer on 9 November 2026; John Collins remains chief financial officer. SoundHound AI 8-K filed 13 November 2026 · as of
Sources
- SOUNDHOUND AI, INC. - Form 8-K - FY2026 · sec.gov ·
- SOUNDHOUND AI, INC. - Form 10-Q - FY2026 · sec.gov
- SoundHound AI (SOUN) Q3 2026 Earnings Call Transcript · fool.com ·
- SoundHound AI Inc (SOUN) (Q3 2026) Earnings Call Highlights: Record $62.4 Million Revenue, $120 Million Cost Cuts, and First Profitability Target for 2027 · gurufocus.com
- SOUNDHOUND AI, INC. - Form 8-K - FY2026 · sec.gov ·
- Cantor Fitzgerald’s $10 Target Says SoundHound AI’s Selloff Went Too Far · tikr.com
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