SoundHound AI: NVDA darling falls short of the hype, will it matter?

SoundHound A (SOUN), a leading provider of artificial intelligence (AI) solutions, released its Q4 2023 earnings report. Shares of SOUN have been on a tear, running from $2.22 on February 14 to $7.90 on the 27th. It garnered plenty of interest after Nvidia (NVDA) revealed a position in the stock in its 13F filing. The news put SOUN on the radar. Shares are sliding following the release of results as expectations were simply too high to live up to a 375% rally. 

The company reported a loss of $0.07 per share, which was slightly worse than the consensus estimates of ($0.06). However, this loss represented a 53% improvement compared to the prior year. Revenue for the quarter rose by 80% year-over-year to $17.1 million, falling short of the consensus estimate of $17.75 million.

Adjusted EBITDA for the quarter was ($3.7) million, a significant improvement of 80% compared to the prior year. This improvement in financial performance is a testament to the company's focus on operational efficiency and cost management.

Looking forward, SoundHound AI has provided in-line guidance for the full year 2024, with revenue expectations of $63-$77 million, compared to the consensus estimate of $69.73 million. The company has also introduced a 2025 outlook, projecting a further acceleration in growth, with revenue exceeding $100 million and achieving positive adjusted EBITDA.

The company's growth is evident in its full-year performance, with revenue increasing by 47% year-over-year to $45.9 million and gross margin improving by 6 percentage points to 75%. The net loss per share for the full year was $0.40, a 46% improvement compared to the prior year. Adjusted EBITDA also showed a significant improvement, decreasing by 51% to ($35.9) million compared to the prior year.

SoundHound AI's customer base has expanded rapidly, with the combined cumulative subscriptions and bookings backlog growing to $661 million, a twofold increase compared to the prior year. The company has also achieved an annual run rate of approximately 3.5 billion queries, a growth of roughly 50% year-over-year.

CFO Nitesh Sharan expressed confidence in the company's ability to capitalize on the growing demand for its AI solutions, stating, We finished the year strong by accelerating revenue and meaningfully increasing our penetration in the marketplace. We have fortified our balance sheet and taken prudent measures to strengthen our bottom line to ensure we can continue to capitalize on the tremendous customer demand for our AI solutions.

In conclusion, SoundHound AI's Q4 2023 earnings report highlights the company's resilience and commitment to delivering value to its shareholders. The company's focus on operational efficiency, cost management, and expanding its customer base has led to significant improvements in financial performance. With a strong balance sheet and a clear growth trajectory, SoundHound AI is well-positioned to capitalize on the growing demand for AI solutions and deliver long-term value to its stakeholders.