10-Q: SoundHound AI Q3: Revenue Surges, Acquisitions Drive Growth

Sentiment:

Quarterly Report 10 November 2025 4:23 PM

SoundHound AI reported a 68% increase in Q3 2025 revenue, driven by recent acquisitions, despite continued net losses and identified material weaknesses in internal controls.

Capital raiseOn January 24, 2025, the company entered into the Second Equity Distribution Agreement to offer and sell up to $250.0 million of Class A Common Stock through an at-the-market equity program.During the nine months ended September 30, 2025, the company sold 13,913,014 shares under this agreement, raising $201.5 million in gross proceeds.As of September 30, 2025, the company had a remaining capacity to sell up to an additional $48.5 million of its common stock under the Second Equity Distribution Agreement.

Worse than expectedThe net loss for the three months ended September 30, 2025, significantly worsened to $(109.3) million compared to $(21.8) million in the prior year, primarily driven by a $66.2 million loss from the change in fair value of contingent acquisition liabilities.Gross margin declined to 43% for the three months and 40% for the nine months ended September 30, 2025, compared to 49% and 55% in the respective prior periods, indicating a decrease in profitability per unit of revenue.

Summary

Total revenues increased by $17.0 million, or 68%, to $42.0 million for the three months ended September 30, 2025, compared to $25.1 million in the same period of 2024.
For the nine months ended September 30, 2025, total revenues increased by $63.7 million, or 127%, to $113.9 million, compared to $50.2 million in the same period of 2024.
Net loss for the three months ended September 30, 2025, was $(109.3) million, a significant increase from $(21.8) million in the prior year, primarily due to a $66.2 million loss from the change in fair value of contingent acquisition liabilities.
Net loss for the nine months ended September 30, 2025, improved to $(54.1) million from $(92.1) million in the prior year, largely due to a $78.5 million gain from the change in fair value of contingent acquisition liabilities.
Gross margin decreased to 43% for the three months and 40% for the nine months ended September 30, 2025, down from 49% and 55% respectively in 2024, primarily due to amortization of acquired intangible assets from the Amelia and Interactions acquisitions.
Cash and cash equivalents increased to $268.9 million as of September 30, 2025, from $198.2 million at December 31, 2024.
The company completed the acquisition of Interactions Corporation on September 3, 2025, for a preliminary purchase consideration of $76.1 million, expanding its market penetration in customer service AI.
Material weaknesses in internal control over financial reporting were identified, including insufficient oversight, inadequate controls for complex transactions, lack of segregation of duties, and IT general control deficiencies.

Sentiment

Score: 4

Explanation: While the company demonstrates strong revenue growth and strategic expansion through acquisitions, the significant increase in quarterly net loss, declining gross margins, and persistent material weaknesses in internal controls present considerable concerns. The reliance on equity financing to fund operations and acquisitions, coupled with ongoing litigation, indicates a high-risk profile despite long-term growth potential.

Positives

Strong revenue growth of 68% for the three months and 127% for the nine months ended September 30, 2025, driven by acquisitions.
Service subscription revenue saw a substantial increase of 78% for the three months and 245% for the nine months, primarily from acquisitions.
Net loss for the nine months ended September 30, 2025, improved by 41% compared to the prior year, reducing from $(92.1) million to $(54.1) million.
Cash and cash equivalents increased to $268.9 million, providing a strong liquidity position.
Strategic acquisitions of SYNQ3, Amelia, and Interactions Corporation are expected to strengthen the company's position in voice and conversational AI, expand market reach, and introduce new customer portfolios.
Successful capital raise through the Second Equity Distribution Agreement, generating $201.5 million in gross proceeds year-to-date, with $48.5 million remaining capacity.

Negatives

Net loss for the three months ended September 30, 2025, significantly worsened to $(109.3) million from $(21.8) million in the prior year, primarily due to a non-cash loss from the change in fair value of contingent acquisition liabilities.
Gross margin decreased to 43% (three months) and 40% (nine months) in 2025, down from 49% and 55% in 2024, mainly due to amortization of acquired intangible assets.
Operating expenses increased substantially by 168% for the three months and 34% for the nine months, largely due to acquisition-related personnel costs and the change in fair value of contingent acquisition liabilities.
Net cash used in operating activities slightly increased to $(76.3) million for the nine months ended September 30, 2025, indicating continued cash burn from operations.
Net cash used in investing activities significantly increased to $(57.0) million for the nine months, primarily due to payments related to acquisitions and capitalized software development costs.
Accumulated deficit increased to $(997.1) million as of September 30, 2025, reflecting ongoing losses since inception.

Risks

Ability to execute business strategy, including launching new product offerings and expanding information and technology capabilities.
Market opportunity and ability to acquire new customers and retain existing customers.
Timing and impact of growth initiatives on future financial performance.
Ability to integrate businesses and operations from recent acquisitions to realize expected benefits.
Ability to protect intellectual property and trade secrets.
Ability to obtain additional capital, including equity or debt financing, on acceptable terms.
Changes in applicable laws or regulations and extensive and evolving government regulations.
Ability to attract or maintain a qualified workforce.
Level of product service failures that could lead customers to use competitors' services.
Investigations, claims, disputes, enforcement actions, litigation, patent infringements, and/or other regulatory or legal proceedings, including with respect to AI technology.
Uncertainty of estimates of market opportunity and forecasts of market growth.
Adverse effects from other economic, business, and/or competitive factors.

Future Outlook

The company expects monetization revenue to increase meaningfully in the future, driven by a 'monetization flywheel' effect as more products integrate into its platform. Gross margins are expected to gradually improve in the mid-term, especially with the integration of recent acquisitions. Sales and marketing, and research and development expenses are anticipated to remain stable in the short term, but grow at a rate below that of revenue in the long term, aligning with a strategic emphasis on cost effectiveness and sustainable financial performance.

Management Comments

"We believe voice-enabled conversational user interface is a more natural interface for nearly all use cases, and product creators should have the ability to design, customize, differentiate, innovate and monetize the interface to their own product, as opposed to outsourcing it to a third-party assistant."
"We believe that SoundHound is well-positioned to fill the growing void and demand for an independent Voice AI platform."
"We expect this disruptive, three-pillar business model will create a monetization flywheel; as more products integrate into our platform, more users will use it and more services will choose to integrate as well."
"We aim to deliver the most advanced Voice AI in the world and thus allowing our partners to differentiate and innovate their overall experiences for their brands."

Industry Context

SoundHound AI operates in the rapidly evolving Voice AI and conversational intelligence market. The company positions itself as an independent Voice AI platform, differentiating from 'big tech' companies whose offerings may disintermediate brands and user data. The strategic acquisitions of SYNQ3, Amelia, and Interactions Corporation reflect a trend towards consolidating specialized AI solutions to expand market reach into new industries like restaurants, healthcare, insurance, financial services, and enterprise customer service, particularly in Agentic AI and workflow orchestration. The high technical barriers to entry in Voice AI continue to limit new market participants, creating opportunities for established players like SoundHound AI.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Executive Officer and Director	NA	Dr. Keyvan Mohajer	2025-08-19	Adopted a new Rule 10b5-1 trading plan for future stock sales.
Chief Product Officer and Director	NA	James M. Hom	2025-05-20	Adopted a new Rule 10b5-1 trading plan for future stock sales.
Chief Product Officer and Director	NA	James M. Hom	2025-08-19	Adopted a new Rule 10b5-1 trading plan for future stock sales.
Chief Science Officer and Senior Vice President	NA	Majid Emami	2025-09-23	Adopted a new Rule 10b5-1 trading plan for future stock sales.
Director	NA	Diana Sroka	2025-08-12	Adopted a new Rule 10b5-1 trading plan for future stock sales.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Bylaw Amendment	Stockholders approved the Opportunity Waiver Limitation Amendment to Article XII of the Certificate of Incorporation.	2025-05-23	Resolved a stockholder class action and revised corporate opportunity provisions.
Share Authorization Increase	Stockholders approved an increase in the number of authorized shares of Class A Common Stock from 455,000,000 to 755,000,000.	2025-05-23	Provides greater flexibility for future equity financing and stock-based compensation.

Legal Proceedings

SYNQ3 v. TEBO: Litigation settled on January 15, 2025, with a $1.8 million payment by SYNQ3.
VB Assets, LLC v. SoundHound AI, Inc.: Patent infringement lawsuit filed on November 21, 2024, alleging infringement of multiple U.S. patents. The company intends to vigorously defend itself, and no reasonably possible loss can be estimated.
Liles v. SoundHound AI, Inc.: Securities class action complaint filed on March 28, 2025, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The company intends to vigorously defend the claims, and no reasonably possible loss can be estimated.
Bishop v. Mohajer and Roy v. Mohajer: Purported shareholder derivative complaints filed on April 8, 2025, and April 16, 2025, respectively, alleging breach of fiduciary duty, unjust enrichment, and other claims. These actions are pending resolution of the securities class action, and no reasonably possible loss can be estimated.
Corporate Opportunity Action: A stockholder class action filed on February 6, 2025, was resolved with the approval of the Opportunity Waiver Limitation Amendment by stockholders on May 23, 2025, and an immaterial payment of attorneys' fees.
Possible Sales Tax Liability: The company continues to analyze potential sales tax exposure and has recorded a liability of $4.1 million as of September 30, 2025.

Related Party Transactions

The company paid commissions of $0.1 million for the three months and $0.4 million for the nine months ended September 30, 2025, to Guggenheim Securities, LLC, one of the Sales Managers for the Second Equity Distribution Agreement. The brother of one of the company's Board of Directors is a Senior Advisor to Guggenheim Securities, LLC.

Stakeholder Impact

Shareholders: Experience dilution from ongoing at-the-market equity programs and face potential impacts from multiple legal proceedings. The volatility in the fair value of contingent acquisition liabilities can also affect reported earnings.
Employees: Integration of acquired employees from SYNQ3, Amelia, and Interactions, along with stock-based compensation plans, impacts employee incentives and retention.
Customers: Benefit from expanded Voice AI and conversational AI solutions through strategic acquisitions, particularly in customer service and industry-specific applications.
Creditors: The company's debt obligations (Term Loan and Amelia Debt) were fully repaid, reducing financial leverage and interest expense.

Next Steps

Finalize the purchase price allocation for the Interactions acquisition within 12 months from September 3, 2025.
Management continues to execute remediation activities to address identified material weaknesses in internal control over financial reporting.
The company expects to file a motion to dismiss the securities class action lawsuit (Liles v. SoundHound AI, Inc.) on or before December 12, 2025.

Key Dates

Date	Description
2023-07-28	Company entered into a Controlled Equity Offering Sales Agreement (Sales Agreement) to sell up to $150.0 million of Class A Common Stock.
2024-01-03	Company completed the acquisition of Synq3, Inc. (SYNQ3).
2024-04-09	Company entered into an Equity Distribution Agreement for an at-the-market equity program to sell up to $150.0 million of Class A Common Stock.
2024-06-07	Company entered into a letter agreement to prepay in full all indebtedness under the Senior Secured Term Loan Credit Agreement.
2024-06-14	Company completed an immaterial acquisition for $1.0 million.
2024-08-06	Company completed the acquisition of Amelia Holdings, Inc. (Amelia).
2024-08-07	Company paid $70.0 million in cash and issued 2,943,917 shares of Class A common stock to pay down a portion of the outstanding principal balance and settle certain fees associated with the Amelia Debt.
2024-11-12	Company entered into an Execute Equity Distribution Agreement for an at-the-market equity program to sell up to $120.0 million of Class A Common Stock.
2024-11-21	VB Assets, LLC filed a patent infringement complaint against the Company in the United States District Court for the District of Delaware.
2024-12-03	Company entered into a letter agreement to prepay in full all indebtedness under the Amelia Debt Credit Agreement.
2025-01-15	Company entered a Settlement Agreement with TEBO to resolve litigation, requiring a $1.8 million payment.
2025-01-24	Company entered into the Second Equity Distribution Agreement for an at-the-market equity program to sell up to $250.0 million of Class A Common Stock.
2025-02-06	A stockholder filed a putative class action (Corporate Opportunity Action) alleging violation of Delaware law.
2025-03-28	A class action complaint (Liles v. SoundHound AI, Inc.) was filed in the United States District Court for the Northern District of California.
2025-04-08	A purported shareholder derivative complaint (Bishop v. Mohajer) was filed in the United States District Court for the Northern District of California.
2025-04-16	A similar purported shareholder derivative complaint (Roy v. Mohajer) was filed against the same defendants.
2025-05-23	Company's stockholders approved the Opportunity Waiver Limitation Amendment and increased the number of authorized shares of Class A Common Stock.
2025-07-14	Judge Rita Lin appointed the leading plaintiff in the securities litigation.
2025-07-24	Court entered an order closing the Corporate Opportunity Action case.
2025-08-12	Director Diana Sroka adopted a new Rule 10b5-1 trading plan.
2025-08-19	CEO Dr. Keyvan Mohajer and CPO James M. Hom adopted new Rule 10b5-1 trading plans.
2025-09-03	Company completed the acquisition of Interactions Corporation (Interactions).
2025-09-23	CSO Majid Emami adopted a new Rule 10b5-1 trading plan.
2025-09-30	End of the quarterly reporting period.
2025-10-01	Lead Plaintiff served their amended complaint in the securities litigation.
2025-11-06	Date of Class A and Class B Common Stock shares outstanding.
2025-11-10	Date of filing of the Quarterly Report on Form 10-Q.

Recommendation

hold

The company exhibits strong revenue growth, driven by strategic acquisitions that expand its market presence and technological capabilities in the Voice AI sector. However, this growth is accompanied by significant net losses, particularly in the most recent quarter due to non-cash fair value adjustments, and a decline in gross margins. The ongoing reliance on equity financing for liquidity and the disclosed material weaknesses in internal controls over financial reporting introduce considerable uncertainty and risk. While the long-term strategic vision and market opportunity are compelling, the current financial performance and operational challenges warrant a cautious 'hold' recommendation for investors, awaiting clearer signs of sustained profitability and successful remediation of internal control issues.

Keywords

Voice AI, Conversational AI, AI, Customer Service AI, Generative AI, SoundHound, SYNQ3, Amelia, Interactions, SEC Filing, 10-Q, Financial Report, Technology, Software, Acquisition, Revenue Growth, Net Loss, Internal Controls

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.