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
Updated ·
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 $400 million.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 9 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($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 ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| filed | 62.4 | +48.5 | 34.1 | −73.6 |
| filed | 61.9 | +45.0 | 45.1 | −70.0 |
| filed | 44.2 | +51.7 | 31.1 | −51.3 |
| filed | 55.1 | +59.4 | 47.9 | 77.3 |
| filed | 42.0 | +67.6 | 42.6 | −275.6 |
| filed | 42.7 | +217.1 | 39.0 | −182.9 |
| Pre-tax income ($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 13 November 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 |
The thesis
SoundHound AI's shares are more likely to lag the S&P 500 over the next three months. Revenue is growing fast, but the company removed lower-quality revenue, cut 27% of staff and posted lower gross margins. That leaves the case resting on a 2027 outlook that no reported quarter has yet tested. The fourth-quarter report, expected around late February 2027, is the first test of that outlook.
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 its 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 licenses move to hosted contracts.
The rating is Low because profitability has worsened. In the third quarter of 2026, GAAP gross margin fell to 34.1% from 42.6% a year earlier, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a loss of $20.7 million against a loss of $14.5 million. Breakeven is a target for the second half of 2027, after the three-month window ends. At the 12 November 2026 close of $3.60, the shares were 74.0% below the 52-week intraday high of $13.87 set on 12 November 2025. The price reflects deep doubt that the 2027 outlook and the profitability target will hold.
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, and adjusted earnings per share of a $0.05 loss beat the $0.06 loss analysts expected (company 8-K, 5 November 2026).
- 2027 outlook reaffirmed after the cut. The company kept its $350–400 million 2027 revenue outlook on 5 November 2026 and said the 2026 changes do not affect it.
- A dated path to breakeven. The company expects to be sustainably positive on adjusted EBITDA in the second half of 2027, even at the low end of its revenue range. It is targeting $120 million of annual cost savings, with over $80 million of actions scheduled before 1 January 2027 (8-K, 5 November 2026).
- LivePerson adds enterprise accounts. The all-stock LivePerson deal closed on 4 September 2026. The company says LivePerson's top 90 enterprise accounts carry over $100 million in annual recurring revenue (8-K, 5 November 2026).
- No borrowings and cash on hand. Unrestricted cash was $207.6 million on 30 September 2026, and the 10-Q contains no substantial-doubt language. Only $3.8 million of LivePerson short-term debt remained, due for repayment in the fourth quarter.
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 (8-K, 5 November 2026). Lower-margin acquired revenue is diluting the core business.
- Cash burn remains heavy. Operating cash outflow was $96.0 million in the nine months to 30 September 2026, and the restructuring adds $18–22 million of pre-tax charges, mostly in the fourth quarter (10-Q; 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. Class A shares outstanding were 455,858,001 on 5 November 2026 (10-Q).
- Analysts cut targets after the report. Cantor Fitzgerald cut its target to $10 from $15 on 6 November 2026 and kept its Overweight rating. DA Davidson kept its Buy rating and cut its target to $5 on 6 November 2026, according to Benzinga.
- 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 shares), the chief product officer (38,730 shares) and the chief strategy officer (38,730 shares).
Price setup
The shares closed at $3.60 on 12 November 2026. That is the lowest close of the past 52 weeks and a 51.5% fall from the 3-month reference close of $7.43 on 14 August 2026. The last close sits below the 50-day moving average of $5.25 and the 200-day moving average of $6.90, both as of 12 November 2026.
The report came after the close on 5 November 2026, when the shares closed at $4.26. They closed at $4.11 on 6 November 2026 and fell further over the next four sessions, to $4.05 on 9 November 2026 and $3.60 on 12 November 2026. Since the report, the price has kept falling. The $4.26 close of 5 November 2026 is the level that marks a full recovery of the post-report decline. 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. This 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 5 November 2026, according to TIKR, while the company absorbed LivePerson, issued new shares and reset its revenue mix. The shares trade in the speculative AI-software group, where sentiment moves the whole group together. A broad AI-software rally could lift them regardless of company results, which is the main way a lag call fails without a change in the business.
Notes
- SoundHound AI has two share classes: 455,858,001 Class A and 32,535,408 Class B shares were outstanding on 5 November 2026, according to the company's 10-Q.
- 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.
- The LivePerson purchase price allocation is preliminary as of the 30 September 2026 10-Q, so goodwill of $261.8 million may be revised.
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
- Unrestricted cash was $207.6 million on 30 September 2026; operating cash outflow was $96.0 million for the first nine months of 2026. SoundHound AI 10-Q for the quarter ended 30 September 2026 · as of
- The LivePerson acquisition closed on 4 September 2026, with 41,891,373 Class A shares issued, valued at $283.5 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 kept its Overweight rating. TIKR, 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
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
- Cantor Fitzgerald’s $10 Target Says SoundHound AI’s Selloff Went Too Far · tikr.com
- SoundHound AI Completes Acquisition of LivePerson, Creating a World-Leading Omnichannel Conversational AI Powerhouse · soundhound.gcs-web.com
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