SoundHound AI went public through a SPAC nearly 4 years ago, opening at $8.72 but now trading below $8. Despite explosive revenue growth rates, analysts expect a 49% CAGR increase to $283 million by 2027. With an enterprise value of $3.1 billion, it currently trades at 14 times its 2026 sales.

The company’s growth stems from its developer platform, Houndify, used by various industries to avoid sharing data with tech giants. SoundHound acquired multiple AI companies post-SPAC merger, increasing its exposure to the restaurant and customer service sectors. However, acquisitions and competition caused a decline in gross margin from 69% to 49% in 2024.

The company is working to stabilize its gross margins by scaling the business, reducing costs, and shifting to higher-margin revenues. But ongoing headcount increases, data center spending, and potential acquisitions suggest margins may not improve soon, making the stock less attractive. The Motley Fool did not include SoundHound AI among the 10 best stocks for investors to buy now.

Read more at Yahoo Finance: Don’t Buy SoundHound AI (SOUN) Until This Happens