SoundHound AI(NASDAQ: SOUN) stock has been hammered on the market in 2025, down 44% as of this writing. Factors leading to this decline include Nvidia exiting its stake in the voice artificial intelligence (AI) solutions provider earlier this year, the broader correction in technology stocks thanks to the tariff-related turmoil, and most recently, the company's first-quarter earnings report.
SoundHound released its Q1 results on May 8. Though the company reported a big increase in its revenue during the quarter and reduced its adjusted loss, it slightly missed Wall Street's top-line estimates. This led investors to press the panic button. However, it may be a good idea to start accumulating SoundHound AI stock, as the fast-growing demand for conversational AI solutions could help the company regain its mojo and head higher over the next three years.
Let's look at the reasons why.
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SoundHound AI's growth is sustainable thanks to a fast-growing and lucrative addressable market
The conversational AI market is currently in its early phases of growth. Grand View Research estimates that this market was worth $11 billion last year, but it is forecast to clock a compound annual growth rate (CAGR) of nearly 24% through the end of the decade. The market's growth is expected to be driven by the adoption of voice AI solutions in customer support services and consumer applications across multiple industries.
What's worth noting is that SoundHound AI is growing at a faster pace than the conversational AI market. Its revenue in the first quarter of 2025 increased a whopping 151% from the year-ago period to $29.1 million. That was slightly lower than the $30.4 million consensus estimate. However, SoundHound management points out that a transition taking place by one of its customers reduced its quarterly revenue by $2 million.
It now expects to recognize that revenue later in the year. So, investors shouldn't read too much into the company's revenue miss last quarter, especially considering that it has reaffirmed its full-year guidance. SoundHound's revenue could nearly double in 2025 at the midpoint of its guidance range of $157 million to $177 million, suggesting that the company is confident about outpacing the broader market's growth.
Importantly, SoundHound is likely to sustain its strong revenue growth for the next couple of years as well, given the healthy growth in the company's customer base and its focus on pushing the envelope on the product development front in the voice AI market. The company is not only bringing new customers on board, but it is also seeing an expansion in the adoption of its offerings in various verticals such as restaurants, healthcare, automotive, telecom, and others.
Moreover, it is tapping emerging niches such as voice commerce and AI agents within the conversational AI market. That's a smart thing to do, as according to one estimate, the voice commerce market could almost triple in size over the next five years. SoundHound says that multiple restaurants and automakers have either integrated or are testing the company's voice commerce solutions. This could open another solid growth opportunity for SoundHound as it points out that "consumers are showing a strong appetite for this new convenient modality."
Meanwhile, SoundHound is also looking to cut its teeth in the fast-growing agentic AI market. It recently released a new platform that enables customers to build and deploy voice-enabled AI agents "capable of understanding, reasoning, and acting with an intimate knowledge of their enterprise across a variety of channels."
SoundHound management claims that its voice AI agent platform can tackle complex customer queries without human intervention, helping clients improve the efficiency of customer service operations. This, again, should give SoundHound AI's growth a big long-term boost since the size of the voice AI agent market could grow from just $2.4 billion last year to more than $47 billion in 2034.
All of this indicates that there is a strong probability of SoundHound sustaining its healthy growth levels for the next three years.
How much upside can this AI stock deliver in the next three years?
SoundHound's 2025 guidance suggests that it could end the year with $167 million in revenue as the midpoint of its guidance range. That would be a potential jump of 97% from 2024 levels when its top line increased by 85%. Assuming SoundHound's growth slows down and its top line grows by 50% in both 2026 and 2027, its annual revenue could hit $375 million after three years.
The stock is currently trading at an expensive 40 times sales, though that seems justified considering its accelerating growth and the fast-growing end-market that it serves. But even if SoundHound trades at half of its current sales multiple after three years, its market cap could hit $7.5 billion (based on the $375 million revenue estimated above).
That represents a potential upside of 70% over the next three years from its current market cap. However, don't be surprised to see SoundHound growing at a faster pace than that since its growth is unlikely to slow down, and its top line could be much larger than what's projected in this article, considering its potential revenue pipeline.
That may result in a stronger upside, as the market could continue rewarding it with a premium valuation in the long run, which is why growth investors can consider accumulating this AI stock following its big slide in 2025.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
