How SOUN (SoundHound AI) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a conversational AI platform like SoundHound AI, Inc. (SOUN) makes money is essential for investors and anyone interested in the business of artificial intelligence and voice technology. In this post, we break down SoundHound AI's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick SoundHound AI Overview

SoundHound AI operates as a leading provider of voice AI solutions, enabling businesses to integrate conversational intelligence into products and services. Revenue comes primarily from licensing its voice AI platform to automotive, hospitality, and IoT device manufacturers, as well as from usage-based SaaS subscriptions and professional services. The company’s business segments include Product Royalties, Cloud-based SaaS, and Professional Services, serving clients across automotive, consumer electronics, and enterprise sectors.

Revenue Breakdown

• Total Revenue (Q2 2025): $19.2M (+38% YoY)
  • Product Royalties: $8.6M (45% of total)
  • Cloud-based SaaS: $7.1M (37% of total)
  • Professional Services: $3.5M (18% of total)
  • Growth is powered by increased adoption of voice AI in automotive and IoT, as well as expansion of SaaS contracts with enterprise clients.

Gross Profit and Margins

• Gross Profit: $13.1M (68% gross margin)
  • Cost of Revenue: $6.1M (+24% YoY)
  • SoundHound AI maintains robust margins due to its scalable software platform and high-margin SaaS revenue streams.
• Most costs come from cloud infrastructure, data processing, and technical support for enterprise deployments.

Operating Income and Expenses

• Operating Income: -$11.7M (loss narrowed by 22% YoY, -61% margin)
• Operating Expenses: $24.8M (+9% YoY)
  • R&D: $12.4M (+6% YoY, 65% of revenue) — Focused on advancing conversational AI models, natural language understanding, and expanding language support.
  • SG&A: $10.7M (+12% YoY, 56% of revenue) — Includes sales expansion, marketing, and administrative costs as the company scales operations.
  • SoundHound AI continues to prioritize innovation and invest in growth while maintaining efficiency in operating costs.

Net Income

• Pre-Tax Income: -$12.2M (loss improved by 19% YoY, -64% margin)
• Income Tax: $0.1M (1% effective tax rate)
• Net Income: -$12.3M (loss improved by 18% YoY, -64% net margin)
• SoundHound AI converts a moderate portion of sales into profit due to its high gross margins, but remains unprofitable as it invests heavily in R&D and market expansion.

What Drives SoundHound AI's Money Machine?

• Voice AI Platform Licensing: 45%+ of revenue comes from product royalties paid by automotive and device manufacturers for embedded voice AI.
• SaaS Usage Growth: Cloud-based SaaS subscriptions grew 41% YoY, driven by enterprise adoption and increased usage per customer.
• R&D Investment: $12.4M invested in Q2 2025 to enhance proprietary AI models and expand product capabilities.
• Future growth areas: Expansion into new verticals (healthcare, smart home), though these segments are not yet profitable.

Visualizing SoundHound AI's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially R&D) taking the largest chunk.
• Even after significant investments in innovation, 68% of revenue remains as gross profit, though net losses persist as the company scales.

Key Takeaways

• SoundHound AI's money comes overwhelmingly from licensing its voice AI platform and SaaS subscriptions.
• High gross margins illustrate the power of SoundHound AI's scalable software business model.
• Heavy investment in R&D, balanced by efficiency in operating costs as revenue grows faster than expenses.
• Ongoing growth is driven by enterprise SaaS adoption and expansion into new verticals.

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FAQ About SoundHound AI's Income Statement

1. What is the main source of SoundHound AI's revenue in 2025?

SoundHound AI generates over 45% of its revenue from licensing its voice AI platform to automotive and IoT device manufacturers. Additional revenue comes from cloud-based SaaS subscriptions 37% and professional services 18%.

2. How profitable is SoundHound AI in Q2 2025?

SoundHound AI reported net income of -$12.3M in Q2 2025, with a net margin of approximately -64%, reflecting moderate improvement as losses narrowed due to strong revenue growth and disciplined cost management.

3. What are the largest expense categories for SoundHound AI?

The biggest expenses on SoundHound AI's income statement are operating expenses, particularly Research & Development (R&D) and Sales, General & Administrative (SG&A) costs. R&D investment reached $12.4M in Q2 2025, as SoundHound AI prioritizes AI model development and product innovation.

4. Why does the Professional Services segment operate at a loss?

Professional Services, despite generating $3.5M in revenue, posted an operating loss of over $1.2M in Q2 2025. This is because SoundHound AI aggressively invests in custom client integrations and onboarding, believing these will drive long-term SaaS adoption—even if the division is unprofitable today.

5. How does SoundHound AI's effective tax rate compare to previous years?

SoundHound AI's effective tax rate in Q2 2025 was 1%, consistent with previous years. This low rate is primarily due to ongoing net operating losses and tax benefits from share-based compensation and international structuring.