SoundHound AI Shares (NASDAQ: SOUN) Up Big In PreMarket On Earnings Beat

SoundHound AI share price (NASDAQ:SOUN) is moving at a rate of knots in the premarket, up 15% at the time of writing. The recently released first-quarter earnings report has simultaneously beaten expectations and raised some eyebrows among investors.

While the company showcased a notable performance in revenue, there remains a layer of scepticism regarding its sustainability and underlying business metrics. It is this scepticism that has driven some of the volatility in recent months, with a pullback post downgrade leaving many with questions. Despite these facts, SOUN still traded up 128.37% through 2024 (before the premarket push we are currently seeing).

So what is going on behind the scenes at SoundHound?

• Revenue Beat – $11.6 million against consensus $10.1 million- growth of 73% YoY
• FY Revenue outlook $65-$77 million against consensus $69.49 million.
• Cash reserves increased to $226 million
• EPS Beat – loss $0.07 against expected $0.09

From an earnings perspective, the report shows that SoundHound AI has outperformed its projected revenue targets on multiple metrics, a positive sign that reflects the company's ability to attract customers and monetize its services. Comments from the firm's CEO outlines just that :

“Our first quarter sets the tone for 2024 as another year of strong growth for SoundHound. Voice AI is fast becoming a must-have tool for customer service, and that's reflected in the demand we're seeing for subscriptions,”

Keyvan Mohajer, CEO and Co-Founder of SoundHound AI

What are some of the highlights operationally?

The formation of a strategic partnership with NVIDIA to bring in-vehicle, voice-enabled generative AI capabilities that operate independently of connectivity, leveraging the robust NVIDIA DRIVE platform. This is a significant step forward in automotive technology.

SoundHound Chat AI, which is distinguished as the world’s first voice assistant with integrated generative AI, is expanding its footprint with Stellantis, incorporating brands such as Opel, Peugeot, Vauxhall, and DS Automobiles. Moreover, Alfa Romeo and Lancia have recently come on board, demonstrating the growing appeal of this technology.

In a noteworthy milestone, Stellantis’s DS Automobiles has become the pioneer in Japan, deploying voice-enabled generative AI through SoundHound Chat AI. Furthermore, SoundHound has secured a multi-year licensing agreement with a substantial broadcaster and telecommunications company that spans across Austria, Germany, Ireland, Italy, and the UK.

Looking ahead, later this summer, a prominent US-based electric vehicle manufacturer will begin production with SoundHound voice assistants integrated across its entire range of market-leading vehicles. Additionally, SoundHound has entered into a new agreement with a leading Asian electric car manufacturer to integrate their software into an expanding line-up of affordable luxury vehicles.

Despite the swathe of positivity, it should be noted that there had previously been a shift in momentum recently for the stock, as you can see on the 6 month chart above.

One of the critical aspects that analysts scrutinize is the cost associated with acquisitions and retention of customers, which can significantly impact net income. It seems that in order to maintain its growth trajectory, SoundHound AI has ramped up its marketing and sales expenses. While this is a common practice, particularly for tech companies striving to capture market share, it raises questions about how the company plans to transition to a more sustainable, profit-generating model.

Moreover, concerns extend to the broader context in which SoundHound AI is operating. The tech sector, in particular, is susceptible to swift changes in investor sentiment, as seen in past market cycles. Companies that fail to demonstrate a clear path to profitability can quickly fall out of favour, particularly during economic downturns or periods of market correction.

In the seesaw world of stock sentiment, the analyst consensus still remains rather positive. There are always bulls and bears in every story, so you always need to take a closer look youself.

Whether this quarter and the outlook will be enough to shift that tide again is a question you would need to answer, as there has been quite a bit of volatility that will not suit all.