AI SoundHound (NASDAQ:SON) has been one of the hottest stocks on the market in 2024, posting exceptional gains of nearly 140% as of this writing. But shares of the artificial intelligence (AI) voice solutions provider have seen a lot of volatility along the way.

The stock soared in the first three months of the year, buoyed by news that semiconductor giant Nvidia had done a small investment in the business. It actually peaked in March and SoundHound AI is down 51% from that all-time high.

In other words, the initial rise that the company experienced in the first months of 2024 is why it is still trading at a very rich level. assessment. The company is not yet profitable, but its price-to-sales ratio stands at 25, more than triple the average price-to-sales ratio in the US technology sector of 8.

While SoundHound is undoubtedly an expensive stock right now, the pace of its growth arguably justifies its rich valuation. More importantly, the company operates in a market that could allow it to maintain such impressive growth levels in the years to come.

So, should growth-oriented investors look beyond the price and buy SoundHound AI stock before the third-quarter earnings release on November 12? Let’s find out.

SoundHound AI is set to deliver another terrific quarterly report

Demand for SoundHound’s voice AI solutions is growing at an incredible rate, leading to tremendous revenue growth for the company. Its revenue in the first six months of the year increased 62% year over year to $25.1 million.

Analysts expect the company to report third-quarter revenue of $23.0 million, nearly matching its first-half figure. While that might seem overly optimistic at first, a closer look at SoundHound’s full-year forecast indicates that it might actually live up to analysts’ expectations.

Management’s full-year outlook calls for revenue of at least $80 million, or $54.9 million in the second half.

If analysts’ forecasts for the third quarter prove accurate at $23.0 million, the company’s revenue would increase 73% on a year-over-year basis. This would represent a significant acceleration compared to last quarter and last year.

There are two reasons why SoundHound AI could actually see such tremendous revenue growth. First, the company says it has built a strong revenue pipeline with a cumulative backlog of subscriptions and reservations of $723 million, a figure it says roughly doubled year over year in the second quarter.

Investors should note that cumulative bookings refer to the value of customer contracts committed by SoundHound at the end of a period. Cumulative subscriptions, on the other hand, refer to “potential revenue that the company can realize with current customers and for which the company is the primary or exclusive supplier” over a five-year period. So while there is an element of uncertainty and estimation to this metric, the rate at which it is growing bodes well for SoundHound’s future.

The second reason SoundHound should be able to generate such growth is its recent acquisition of Amelia, a company that provides enterprise AI software for customer service applications. SoundHound previously updated its 2024 revenue guidance to $80 million (or more) post-acquisition, up from a prior expectation of $71 million.

Reaching that $80 million base would represent 74% growth from 2023, and management expects another strong year in 2025 with at least $150 million in revenue. Additionally, SoundHound emphasizes that it has a total addressable market (TAM) of $140 billion, meaning the company could be at the start of a tremendous growth curve.

But is the stock a buy right now?

Right now, it’s evident that SoundHound is growing at a breakneck pace, and it might be able to maintain that pace for a while. However, there is no doubt that its high valuation will be a sticking point for many investors looking to buy the stock.

But there are other companies focused on AI software that trade at even more expensive levels. Palantir Technologiesfor example, has a sales multiple of 40 despite grow at a slower rate than SoundHound.

Of course, Palantir is a leading vendor in the rapidly growing field of AI software platforms, with a larger revenue base and newfound profitability, but the scale of SoundHound’s backlog indicates it could be poised to become a key player in the field of voice AI solutions. . After all, the company has built a solid customer base that includes Stellantiselectric vehicle (EV) manufacturers and several quick-service restaurants, not to mention other lucrative markets such as AI-assisted customer service.

All of this explains why SoundHound’s forward sales multiple looks much more attractive:

Data by Y Charts.

Investors with a good appetite for risk should still consider SoundHound as an attractive growth stock to add to their portfolios. When the company releases its report on November 12, strong results should send some AI Actions even higher.

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Hard Chauhan has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Nvidia and Palantir Technologies. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.