Stock-Split Watch: Is SoundHound AI Next?

In an era where stock splits are often seen as a rite of passage for rising tech companies, investors are buzzing about SoundHound AI (NASDAQ: SOUN) and whether its rapid growth might trigger a split. While the company has already executed a rare 2-for-3 split in early 2025, the question remains: Is this the start of more structural adjustments, or is SoundHound’s focus elsewhere? Let’s dive into the data.

The Reverse Split Speculation: Regulatory Pressure or Strategic Maneuver?

SoundHound’s shares surged to $28 by April 2025, up from around $15 in early 2024, driven by record revenue growth (85% year-over-year in 2024). Yet, the company’s financial health is a mixed bag. While cash reserves sit at a healthy $198.9 million, its net loss hit $258.6 million in 2024, and a class-action lawsuit has clouded investor confidence.

Analysts suggest a reverse split could address regulatory concerns—specifically, NASDAQ’s requirement for shares to stay above $1. But with SoundHound’s stock already above this threshold, the move might instead signal a bid to elevate its market prestige. A reverse split could consolidate shares, boosting the price per share without altering equity value—a tactic used by firms seeking to appear more “established.”

The 2025 Split: A Prelude to More?

The company’s first-ever stock split—a 2-for-3 split in early 2025—was aimed at improving liquidity and accessibility. This move reduced the price per share, making it easier for retail investors to buy in. However, the split was not traditional in nature; it followed a period of volatility tied to delayed SEC filings and legal disputes.

Critics argue the split was a response to operational challenges rather than soaring valuations. Unlike companies like Tesla (TSLA), which split stocks to keep prices within reach of average investors, SoundHound’s split occurred at a price point ($15–$28) that already offered accessibility.

The Elephant in the Room: Legal and Financial Headwinds

SoundHound’s Q4 2024 financials highlight a stark reality. Despite $34.5 million in quarterly revenue (up 101% YoY), its EBIT margin plunged to -425%, and it faced a 12% stock drop after delaying its 10-K filing until March 2025. The lawsuit alleging inflated goodwill valuations and mismanagement of acquisitions further complicates matters.

The Bull Case: AI Growth and Strategic Partnerships

Supporters point to SoundHound’s 300+ patents and partnerships with firms like NVIDIA and Lucid Motors. Its voice AI solutions for automotive and healthcare sectors are poised to capitalize on a $1.3 trillion generative AI market by 2032. With 2025 revenue guidance raised to $157–$177 million, the company’s top-line momentum remains undeniable.

The Bear Case: Execution Risks and Regulatory Uncertainty

The delayed SEC filings and ongoing litigation underscore governance concerns. Even with strong cash reserves, the company’s ability to turn revenue into profit remains unproven. A reverse split might temporarily boost the stock’s image, but it won’t fix negative EBIT margins or legal liabilities.

Conclusion: A Split Isn’t the Play—Focus on Fundamentals

While SoundHound’s 2025 stock split marked a strategic move to enhance liquidity, investors should look beyond structural changes. The company’s near-term fate hinges on resolving its regulatory and legal challenges, improving operational efficiency, and proving it can monetize AI innovations sustainably.

Key data points:
- Revenue Growth: 85% in 2024, with 2025 guidance up to $177 million.
- Cash Reserves: $198.9 million (no debt), providing a buffer for growth.
- Legal Risks: Class-action lawsuit and delayed filings have already cost the stock 12% in value.

A reverse split might follow, but it’s a sideshow. The real story is whether SoundHound can convert its AI-driven revenue into profitability. Until then, the stock remains a high-risk, high-reward bet on the future of voice technology—split or no split.

Investors should prioritize the company’s ability to resolve its current disputes, stabilize financial reporting, and demonstrate margin improvements. Without these, even a reverse split won’t silence the skeptics.