ZACKS·2025-11-24 14:20Core Insights - Artificial intelligence is a dynamic market theme, with SoundHound AI (SOUN) and Veritone (VERI) positioned in high-growth enterprise applications [1][2] - Both companies are transitioning to higher-margin software models and reported strong revenue growth in the latest quarter [2] - The contrasting business models and financial profiles of SOUN and VERI provide relevant insights for investors [2][3] SoundHound Stock Analysis - SoundHound reported Q3 2025 revenue of $42 million, a 68% year-over-year increase, driven by diverse deployments across various sectors [4] - The company emphasizes global enterprise AI adoption and has expanded its presence through strategic partnerships [4][5] - SoundHound's competitive edge lies in its proprietary technology and language capabilities, with significant growth in the automotive sector [5] - Despite strong revenue growth, SoundHound continues to incur substantial losses, with operational complexities arising from rapid scaling and acquisitions [6] - The company's high valuation at a forward P/S ratio of 20.64X reflects growth expectations but poses risks if adoption slows [7][19] - SoundHound's strengths include platform scale and expanding product breadth, but profitability remains a long-term challenge [8] Veritone Stock Analysis - Veritone's Q3 2025 revenue grew 32% year-over-year to $29.1 million, with software revenue increasing by 55% [10] - The company has significantly improved its financial position by reducing annual debt service from over $14 million to approximately $800,000 [11] - Veritone's Data Refinery solution is gaining traction, with a bookings pipeline exceeding $40 million, indicating strong demand for AI-ready datasets [10][12] - The company benefits from recurring software revenue and a focused business model after divesting lower-margin operations [13] - Veritone's loss estimate for 2025 has narrowed, reflecting analysts' confidence in its path toward profitability [25] Market Performance Comparison - SoundHound shares are down 43.4% year-to-date, underperforming the tech sector and S&P 500, primarily due to concerns over losses and valuation [15] - In contrast, Veritone stock is up 20.7% year-to-date, benefiting from improved fundamentals and investor confidence [16] Valuation Insights - The valuation gap between SOUN and VERI is significant, with SOUN trading at a forward P/S ratio of 20.64X compared to VERI's 2.71X [19] - This disparity suggests that SOUN requires sustained execution to justify its premium valuation, while VERI could see multiple expansions with continued growth [20] EPS Estimate Trends - SoundHound's EPS estimate for 2025 remains unchanged at a loss of 13 cents, indicating limited near-term sentiment shift [21] - Veritone's EPS estimate has improved, narrowing to a loss of 47 cents, reflecting growing confidence in its profitability trajectory [25] Investment Outlook - Both companies operate in attractive AI markets, with SoundHound showing technological leadership and broad enterprise adoption [28] - Veritone presents a more favorable risk/reward profile with accelerating software growth and a transformed balance sheet [28][29]