SoundHound AI (SOUN) Q3 2026 earnings review
SoundHound AI grows revenue via acquisitions, but its margins fall
SoundHound AI closed its buyout of customer-care software maker LivePerson, lifting annual sales while pulling profit margins down. Third-quarter revenue jumped 48% from a year ago to $62 million, but gross margin excluding one-offs dropped 9 percentage points to 50%. Chief executive Keyvan Mohajer raised the low end of the 2026 sales plan, leaving about $86 million for the fourth quarter by our math.
| Revenue | $62.4M +48% from a year ago |
|---|---|
| Gross margin, excluding one-offs | 50.3% 59.3% a year ago |
| EBITDA loss, excluding one-offs | $20.7M $14.5M loss a year ago |
| Full-year 2026 revenue outlook | Raised low end $20M middle of the range: $255M (+51%) |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because new cost cuts and a dated profit target are offset by weaker margins and confirmed past sales lumpiness. Finance chief John Collins outlined $120 million in yearly merger savings and promised positive EBITDA excluding one-offs by late 2027, yet he also had to exit money-losing contracts from earlier deals and move away from fluctuating upfront licenses.
The question now is whether shifting to recurring subscriptions and cutting duplicate staff can fix the company's cash burn without stalling top-line growth. Bulls see a unified conversational software platform scaling toward $350 million in 2027 sales, while skeptics see a roll-up masking shrinking underlying revenue with acquisitions. Fourth-quarter standalone revenue disclosures and gross margins will tell.
🐂 Bull Case
LivePerson Deal Closes and Resets the Profit Target
SoundHound AI builds voice and conversational software for cars, restaurants, and customer call centers. On September 4, chief executive Keyvan Mohajer "closed our acquisition of LivePerson, and guided that the company will be adjusted EBITDA profitable within the second half of 2027". The buyer retired almost all of LivePerson's debt at closing, leaving just $3.8 million of short-term notes to pay off in the fourth quarter.
The deal gives the software group a larger customer base to cut duplicate expenses against. Finance chief John Collins identified $120 million in yearly cost savings, with over $80 million taking effect before January 1, 2027. SoundHound also contacted LivePerson's top 90 enterprise accounts, which represent over $100 million in annual recurring revenue (ARR, the yearly value of subscription contracts), and won renewals with healthcare, telecom, and water utilities.
What to watch: fourth-quarter operating expenses in the annual report. If over $80 million of yearly cuts take effect by year-end, quarterly spending must drop by at least $20 million starting in the first quarter of 2027.
New Edge Software and TV Deals Expand the Pipeline
SoundHound wants its OASYS platform — software that builds and runs automated customer-service agents — inside everyday hardware without relying on internet servers. This quarter it launched OASYS Edge, "an on-device architecture bringing LLM-powered voice AI agents directly onto local device hardware in vehicles, TVs, and smart devices". Running software directly on a device lowers cloud computing bills and speeds up response times for drivers.
Commercial wins backed up the product launch across both automotive and retail channels. A top-tier Chinese auto supplier signed a seven-figure minimum-guarantee contract for voice and edge software, while electric two-wheeler maker Greaves Electric signed up for an embedded assistant. In retail, electronics maker LG agreed to put SoundHound's voice ordering across roughly 20 million smart televisions in the United States, alongside new partnerships with a large coffeehouse brand and a fast-casual chain.
What to watch: transaction revenue disclosures in the upcoming quarterly filing. The company has announced television and car ordering deals for over a year, so investors need to see whether LG and restaurant pilots generate measurable fees in 2027.
Positives this quarter didn't test
Two standing drivers from earlier quarters received no numeric update in the preliminary earnings release and await the full quarterly filing.
- In-house language models: moving customers onto SoundHound's own models to save third-party cloud fees; the quarterly filing's margin breakdown will show whether hosting costs fell.
- Asia automotive sales: after booking $9.0 million in China last quarter and signing a new seven-figure Chinese supplier deal in Q3, the filing's geographic table will show whether regional revenue kept growing.
🐻 Bear Case
Acquisitions Push Gross Margin Down Nine Points
Buying six businesses to build an enterprise software group has hurt SoundHound's profitability per dollar of sales. Cost of revenues — the direct expense of hosting software and serving customers — jumped from 57.4% of sales a year ago to 65.9% this quarter by our math. Meanwhile, general and administrative overhead climbed 15.6 percentage points from last quarter to 57.6% of sales as acquisition fees hit the income statement.
- Gross margin: 34.1%, down 8.5 percentage points from a year ago and 11.0 points from last quarter
- Gross margin excluding one-offs: 50.3%, down 9.0 percentage points from a year ago and 8.1 points from last quarter
- EBITDA loss excluding one-offs: $20.7 million, more than double last quarter's $9.6 million loss
Management's own outlook admits that past deals brought money-losing work. The voice AI group has been "strategically non-renewing and exiting certain negative gross margin contracts inherited from prior acquisitions". Dropping unprofitable contracts will help margins later, but it cuts against the narrative that every acquired customer base adds valuable scale.
What to watch: gross margin excluding one-offs in the fourth quarter, the first full period with LivePerson. A rebound back above 55% would show that contract exits and cost cuts are fixing the mix.
Pivot Away From Upfront Licenses Confirms Lumpy Past Sales
Last quarter SoundHound posted a 40% sequential revenue jump that relied heavily on one-time software licenses recognized all at once. This quarter, finance chief John Collins said the team is "improving our quality of earnings by shifting upfront license deals to hosted structures and exiting non-core, dilutive business lines, making our revenue more stable and predictable". In the outlook, the company added that it will "prioritize a hosted-service model and reduce upfront licensing, which has historically resulted in fluctuating point-in-time revenue contributions in prior quarters".
That shift explains why sequential growth stalled in the third quarter. Total revenue rose less than 1% from the second quarter to $62.4 million, even though the third quarter included 26 days of newly acquired LivePerson sales. Without LivePerson's September contribution, SoundHound's underlying revenue shrank from the second quarter as those one-time license deals dropped off.
What to watch: the revenue breakdown table in Note 4 of the third-quarter filing. It will disclose exact point-in-time license revenue and show how much LivePerson contributed to the $62.4 million total.
Cash Burn and Share Issuance Keep Climbing
Operating the combined business and buying competitors continues to consume cash and expand the share count. By our math, SoundHound burned $36.0 million in cash from operations during the third quarter, bringing its nine-month operating cash outflow to $96.0 million. Total cash held steady at $207.6 million only because the LivePerson takeover brought in $51.7 million of net cash upon closing.
Shareholders paid for that acquisition and past buyouts through dilution. SoundHound issued $283.5 million worth of Class A stock to buy LivePerson and another $56.2 million in stock during the first nine months to settle earn-out liabilities from earlier deals. Total common shares outstanding have risen 15.7% since December 2025 to 488.9 million by our math.
What to watch: fourth-quarter operating cash flow. With $80 million of yearly cost cuts scheduled before January, quarterly cash burn needs to narrow from $36 million toward zero over the next four quarters.
Risks this quarter didn't answer
Four standing concerns could not be tested because the preliminary earnings release omits footnote tables and conference call commentary.
- Sales from businesses owned a year ago: the release combines LivePerson and Interactions with SoundHound without giving a standalone growth rate; the quarterly filing's acquisition note will show LivePerson's exact revenue since September 4.
- Voice commerce revenue: partnerships with LG and restaurants were announced, but the filing's management discussion must confirm whether transaction fees have started generating dollar revenue.
- Accounting controls and lawsuits: John Collins took over as permanent finance chief in September, ending the interim period, but the filing will show whether internal control weaknesses remain and where the shareholder class action stands.
- Competition from large AI model makers: without the call transcript, investors cannot read how management views rival conversational tools from frontier model providers.
💲 Other KPIs
Total deferred revenue — cash billed to customers for services not yet delivered — more than doubled from $28.9 million last quarter to $69.5 million by our math. After falling 18% in the second quarter, the balance jumped by $40.6 million as SoundHound added LivePerson's subscription contracts onto its balance sheet.
Revenue recognized ahead of customer billing climbed to $85.3 million by our math, up 25.3% from $68.1 million at the end of 2025. The long-term portion — revenue booked today for cash due more than a year from now — rose 60.3% over those nine months to $47.9 million, tying up working capital.
Sales to an affiliated company in which SoundHound holds an investment dropped to $0.1 million in the third quarter. Across the first nine months of 2026, related-party sales totaled $7.6 million, meaning $7.5 million of that affiliated revenue occurred in the first half before pausing this quarter.
🔮 Guidance
Raised. Management lifted the bottom of its full-year sales plan by $20 million after closing the LivePerson buyout, pushing the middle of the range up $10 million to $255 million, or 51% annual growth by our math. That leaves $81.5 million to $91.5 million for the fourth quarter (57% growth at the middle of the range), even as the company exits unprofitable contracts and reduces upfront license deals.
Unchanged. The voice AI provider kept its 2027 sales target at $350 million to $400 million, which points to 47.1% growth from the middle of the 2026 plan by our math. Holding this range while walking away from money-losing contracts and one-time licenses means the retained LivePerson customer base and recurring cloud subscriptions must carry next year's growth.
New. After two quarters without a breakeven date, chief executive Keyvan Mohajer set a target to reach sustained positive EBITDA excluding one-offs within the second half of 2027, even at the $350 million low end of the sales outlook. Reaching breakeven from this quarter's $20.7 million loss relies on capturing the $120 million in annualized merger cost cuts.
❓ Key Questions
How much did LivePerson add to third-quarter sales?
LivePerson closed on September 4, contributing 26 days of revenue to the $62.4 million total. Because total sales rose only $0.5 million from the second quarter, investors need the standalone breakdown to see how much SoundHound's legacy revenue fell sequentially.
How much revenue will contract exits remove in 2027?
Management is canceling negative-margin contracts from prior acquisitions and shifting upfront licenses to recurring cloud subscriptions. Quantifying the dollar revenue lost to those two actions would show how much new business SoundHound must win to hit $350 million in 2027.
Why did long-term unbilled receivables jump to $47.9 million?
Non-current contract assets and unbilled receivables — sales booked today that will not be billed for over a year — rose by $18.0 million over the last nine months. Simultaneously shifting away from upfront licenses makes it unclear why long-term unbilled balances keep growing.
What are the cash restructuring costs for the $120 million savings?
SoundHound plans to enact over $80 million of annualized cost cuts before January 1, 2027. Management has not disclosed the total cash severance and contract termination bills required in the fourth quarter to unlock those savings.