Contrasting Microsoft (NASDAQ:MSFT) & SoundHound AI (NASDAQ:SOUN)

Microsoft (NASDAQ:MSFT) and SoundHound AI (NASDAQ:SOUN) are both technology companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, risk, profitability and institutional ownership.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Microsoft and SoundHound AI, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Microsoft	2	5	41	0	2.81
SoundHound AI	1	2	3	1	2.57

Microsoft currently has a consensus price target of $578.73, indicating a potential upside of 9.24%. SoundHound AI has a consensus price target of $12.75, indicating a potential upside of 126.47%. Given SoundHound AI’s higher possible upside, analysts plainly believe SoundHound AI is more favorable than Microsoft.

Risk and Volatility

Microsoft has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500. Comparatively, SoundHound AI has a beta of 2.73, suggesting that its share price is 173% more volatile than the S&P 500.

Valuation and Earnings

This table compares Microsoft and SoundHound AI”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Microsoft	$331.84 billion	11.85	$133.75 billion	$17.96	29.50
SoundHound AI	$168.92 million	14.80	-$14.01 million	($0.38)	-14.82

Microsoft has higher revenue and earnings than SoundHound AI. SoundHound AI is trading at a lower price-to-earnings ratio than Microsoft, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Microsoft and SoundHound AI’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Microsoft	40.31%	31.98%	18.70%
SoundHound AI	-67.45%	-30.22%	-20.28%

Institutional and Insider Ownership

71.1% of Microsoft shares are held by institutional investors. Comparatively, 19.3% of SoundHound AI shares are held by institutional investors. 0.0% of Microsoft shares are held by company insiders. Comparatively, 8.8% of SoundHound AI shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Microsoft beats SoundHound AI on 10 of the 15 factors compared between the two stocks.

About Microsoft

Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services. This segment also provides LinkedIn; and dynamics business solutions, including Dynamics 365, a set of intelligent, cloud-based applications across ERP, CRM, power apps, and power automate; and on-premises ERP and CRM applications. The Intelligent Cloud segment offers server products and cloud services, such as azure and other cloud services; SQL and windows server, visual studio, system center, and related client access licenses, as well as nuance and GitHub; and enterprise services including enterprise support services, industry solutions, and nuance professional services. The More Personal Computing segment offers Windows, including windows OEM licensing and other non-volume licensing of the Windows operating system; Windows commercial comprising volume licensing of the Windows operating system, windows cloud services, and other Windows commercial offerings; patent licensing; and windows Internet of Things; and devices, such as surface, HoloLens, and PC accessories. Additionally, this segment provides gaming, which includes Xbox hardware and content, and first- and third-party content; Xbox game pass and other subscriptions, cloud gaming, advertising, third-party disc royalties, and other cloud services; and search and news advertising, which includes Bing, Microsoft News and Edge, and third-party affiliates. The company sells its products through OEMs, distributors, and resellers; and directly through digital marketplaces, online, and retail stores. The company was founded in 1975 and is headquartered in Redmond, Washington.

About SoundHound AI

SoundHound AI, Inc. develops independent voice artificial intelligence (AI) solutions that enables businesses across automotive, TV, and IoT, and to customer service industries to deliver high-quality conversational experiences to their customers. Its products include Houndify platform that offers a suite of Houndify tools to help brands build conversational voice assistants, such as Application Programming Interfaces (API) for text and voice queries, support for custom commands, extensive library of content domains, inclusive software development kit platforms, collaboration capabilities, diagnostic tools, and built-in analytics; SoundHound Chat AI that integrates with knowledge domains, pulling real-time data like weather, sports, stocks, flight status, and restaurants; and SoundHound Smart Answering is built to offer customer establishments custom AI-powered voice assistant. The company's products also include CaiNET software that uses machine learning to enhance how domains work together to handle queries; CaiLAN software that arbitrates responses so users get answers from the right domain; Dynamic Interaction a real-time, multimodal customer service interface; Smart Ordering which offers an easy-to-understand voice assistant for restaurants; Employee Assist; automatic speech recognition; natural language understanding; wake words; custom domains; text-to-speech; and embedded voice solutions. The company was founded in 2005 and is headquartered in Santa Clara, California.