In the fast-evolving software industry, Pegasystems Inc. (PEGA) and SoundHound AI, Inc. (SOUN) stand out for their innovative approaches to enterprise solutions and voice AI technology. Both companies operate within the application software sector but target different niches, offering a unique opportunity to compare their market strategies and growth potential. This article will help you decide which company deserves a place in your investment portfolio.
Table of contents
Companies Overview
I will begin the comparison between Pegasystems Inc. and SoundHound AI, Inc. by providing an overview of these two companies and their main differences.
Pegasystems Inc. Overview
Pegasystems Inc. develops and supports enterprise software applications globally, focusing on customer engagement and digital process automation. Its flagship products, including Pega Platform and Pega Infinity, serve diverse industries such as financial services, healthcare, and manufacturing. Headquartered in Massachusetts, Pegasystems leverages a direct sales force and partnerships to market its solutions, aiming to improve customer acquisition, sales automation, and service experiences.
SoundHound AI, Inc. Overview
SoundHound AI, Inc. specializes in voice artificial intelligence, offering the Houndify platform to enable businesses to build conversational voice assistants. Its technology includes automatic speech recognition, natural language understanding, and embedded voice solutions. Based in California, SoundHound targets multiple industries by enhancing customer interactions with voice AI, reflecting a more focused approach on speech and conversational interfaces since its 2022 IPO.
Key similarities and differences
Both companies operate within the software application industry and focus on enhancing customer experience through technology. Pegasystems offers a broader enterprise software suite centered on process automation and customer engagement across various sectors. In contrast, SoundHound AI concentrates exclusively on voice AI platforms to create conversational experiences. Pegasystems is more established with a larger workforce and market cap, while SoundHound AI shows higher beta, indicating greater stock volatility.
Income Statement Comparison
Below is a comparison of key income statement metrics for Pegasystems Inc. and SoundHound AI, Inc. for the fiscal year 2024.
| Metric | Pegasystems Inc. (PEGA) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| Market Cap | 8.9B | 4.7B |
| Revenue | 1.50B | 85M |
| EBITDA | 185M | -329M |
| EBIT | 149M | -348M |
| Net Income | 99M | -351M |
| EPS | 0.58 | -1.04 |
| Fiscal Year | 2024 | 2024 |
Income Statement Interpretations
Pegasystems Inc.
Pegasystems Inc. showed steady revenue growth from $1.02B in 2020 to $1.50B in 2024, with net income recovering from a loss of $61M in 2020 to a positive $99M in 2024. Gross margins remain strong around 74%, while net margins improved significantly to 6.63%. The latest year saw moderate revenue growth of 4.5% and favorable margin expansion, indicating improved profitability.
SoundHound AI, Inc.
SoundHound AI experienced rapid revenue growth from $13M in 2020 to $85M in 2024 but continued to report net losses, with net income falling to -$351M in 2024. Gross margin is favorable at nearly 49%, yet EBIT and net margins remain deeply negative, reflecting high operating expenses. The latest year showed strong revenue growth of 85%, but worsening profitability and unfavorable margin trends.
Which one has the stronger fundamentals?
Pegasystems exhibits stronger fundamentals with consistent revenue growth, positive net income, and improving margins over five years, supported by a favorable income statement evaluation. SoundHound AI, despite impressive top-line growth, struggles with persistent losses and unfavorable profitability metrics, resulting in an overall unfavorable income statement assessment.
Financial Ratios Comparison
The table below presents a side-by-side comparison of key financial ratios for Pegasystems Inc. and SoundHound AI, Inc. based on their latest fiscal year data of 2024.
| Ratios | Pegasystems Inc. (PEGA) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| ROE | 16.94% | -191.99% |
| ROIC | 7.40% | -68.13% |
| P/E | 80.12 | -19.15 |
| P/B | 13.57 | 36.76 |
| Current Ratio | 1.23 | 3.77 |
| Quick Ratio | 1.23 | 3.77 |
| D/E | 0.94 | 0.02 |
| Debt-to-Assets | 31.09% | 0.79% |
| Interest Coverage | 18.12 | -28.05 |
| Asset Turnover | 0.85 | 0.15 |
| Fixed Asset Turnover | 14.36 | 14.28 |
| Payout Ratio | 10.28% | 0% |
| Dividend Yield | 0.13% | 0% |
Interpretation of the Ratios
Pegasystems Inc.
Pegasystems shows a mixed but slightly favorable ratio profile with strong return on equity at 16.94% and solid interest coverage at 21.87, indicating good profitability and debt service capacity. However, high valuation multiples like a PE of 80.12 and PB of 13.57 raise concerns about overvaluation. The dividend yield is low at 0.13%, reflecting modest shareholder returns.
SoundHound AI, Inc.
SoundHound’s ratios are largely unfavorable, marked by deeply negative profitability metrics such as a net margin of -414.06% and ROE of -191.99%, indicating significant losses. While leverage is low with a debt-to-assets ratio of 0.79%, weak asset turnover and negative interest coverage highlight operational challenges. The company does not pay dividends, consistent with its growth and reinvestment focus.
Which one has the best ratios?
Pegasystems presents a more balanced and slightly favorable financial profile, driven by profitability and manageable debt levels despite valuation concerns. In contrast, SoundHound’s ratios reflect substantial operational and profitability difficulties, resulting in an unfavorable overall assessment. Pegasystems appears to have the stronger ratio set based on the 2024 data.
Strategic Positioning
This section compares the strategic positioning of Pegasystems Inc. and SoundHound AI, including market position, key segments, and exposure to technological disruption:
Pegasystems Inc.
- Established software application firm with $8.9B market cap facing moderate competition.
- Diverse revenue streams: cloud ($1.1B), subscriptions, maintenance, consulting services.
- Operates in enterprise software with moderate risk from AI and digital automation disruption.
SoundHound AI, Inc.
- Smaller AI voice platform company with $4.7B market cap and higher competitive volatility.
- Focused on voice AI platform with hosted services, licensing, and professional services.
- Concentrated in voice AI technology, highly exposed to advances and shifts in AI innovation.
Pegasystems Inc. vs SoundHound AI, Inc. Positioning
Pegasystems shows a diversified business model across various enterprise software segments with broader market reach, while SoundHound AI concentrates on voice AI solutions. Pegasystems benefits from scale and varied revenue sources; SoundHound faces higher concentration risk but targets a specialized niche.
Which has the best competitive advantage?
Both companies are currently shedding value with slightly unfavorable moats despite improving profitability. Pegasystems has a less negative ROIC gap and a stronger market presence, suggesting a relatively more stable competitive advantage than SoundHound AI.
Stock Comparison
The stock prices of Pegasystems Inc. and SoundHound AI, Inc. have shown significant bullish momentum over the past 12 months, although both experienced recent decelerations and downward corrections in late 2025 to early 2026.
Trend Analysis
Pegasystems Inc. (PEGA) exhibited a strong bullish trend with a 63.18% price increase over the past year, despite recent deceleration and an 18.32% decline between November 2025 and January 2026. The stock’s volatility measured by standard deviation was relatively high at 10.77.
SoundHound AI, Inc. (SOUN) demonstrated a more pronounced bullish trend with a 183.16% gain over the last year, also showing deceleration and a sharper 37.0% drop in the recent period. Its volatility was lower than PEGA’s, with a standard deviation of 4.66.
Comparing both, SoundHound AI delivered the highest market performance over the 12-month period, outperforming Pegasystems by a wide margin despite greater recent downward pressure.
Target Prices
Analysts provide a clear target price consensus for Pegasystems Inc. and SoundHound AI, Inc., reflecting moderate upside potential.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Pegasystems Inc. | 80 | 67 | 74 |
| SoundHound AI, Inc. | 15 | 11 | 13.33 |
The consensus targets suggest that Pegasystems shares, currently at $51.99, have significant upside potential, while SoundHound AI’s target consensus of $13.33 exceeds its current price of $11.10, indicating positive analyst expectations.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for Pegasystems Inc. and SoundHound AI, Inc.:
Rating Comparison
PEGA Rating
- Rating: B+ indicating a very favorable status.
- Discounted Cash Flow Score: 3, moderate valuation.
- ROE Score: 5, very favorable profitability.
- ROA Score: 5, very favorable asset utilization.
- Debt To Equity Score: 3, moderate financial risk.
- Overall Score: 3, moderate overall financial health.
SOUN Rating
- Rating: C- with a very unfavorable status.
- Discounted Cash Flow Score: 1, very unfavorable.
- ROE Score: 1, very unfavorable profitability.
- ROA Score: 1, very unfavorable asset utilization.
- Debt To Equity Score: 4, favorable financial risk.
- Overall Score: 1, very unfavorable overall health.
Which one is the best rated?
Based on the provided data, Pegasystems Inc. is better rated overall, with higher scores in discounted cash flow, ROE, ROA, and overall financial health. SoundHound AI, Inc. scores favorably only in debt to equity but trails significantly elsewhere.
Scores Comparison
Here is a comparison of the Altman Z-Score and Piotroski Score for Pegasystems Inc. and SoundHound AI, Inc.:
PEGA Scores
- Altman Z-Score: 10.31, indicating safe zone with very low bankruptcy risk.
- Piotroski Score: 8, classified as very strong financial health.
SOUN Scores
- Altman Z-Score: 6.62, indicating safe zone with low bankruptcy risk.
- Piotroski Score: 3, classified as very weak financial health.
Which company has the best scores?
Pegasystems has both a higher Altman Z-Score and a significantly stronger Piotroski Score than SoundHound, indicating comparatively better financial stability and strength based on the provided data.
Grades Comparison
Here is a comparison of the recent grades assigned to Pegasystems Inc. and SoundHound AI, Inc.:
Pegasystems Inc. Grades
The following table summarizes recent grades from reputable financial institutions for Pegasystems Inc.:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| JP Morgan | Maintain | Overweight | 2025-12-05 |
| Wedbush | Maintain | Outperform | 2025-10-23 |
| RBC Capital | Maintain | Outperform | 2025-10-23 |
| Barclays | Maintain | Equal Weight | 2025-10-23 |
| Rosenblatt | Maintain | Buy | 2025-10-23 |
| DA Davidson | Upgrade | Buy | 2025-10-22 |
| Rosenblatt | Maintain | Buy | 2025-10-15 |
| Rosenblatt | Maintain | Buy | 2025-07-24 |
| DA Davidson | Maintain | Neutral | 2025-07-24 |
| Wedbush | Maintain | Outperform | 2025-07-24 |
Pegasystems’ grades predominantly range from Neutral to Overweight, with multiple Buy and Outperform ratings, indicating a generally positive consensus among analysts.
SoundHound AI, Inc. Grades
The table below shows recent grades for SoundHound AI, Inc. from recognized grading firms:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Piper Sandler | Maintain | Neutral | 2026-01-05 |
| Cantor Fitzgerald | Upgrade | Overweight | 2025-12-12 |
| DA Davidson | Maintain | Buy | 2025-11-18 |
| Piper Sandler | Maintain | Neutral | 2025-11-07 |
| HC Wainwright & Co. | Maintain | Buy | 2025-10-16 |
| HC Wainwright & Co. | Maintain | Buy | 2025-09-17 |
| Wedbush | Maintain | Outperform | 2025-09-11 |
| DA Davidson | Maintain | Buy | 2025-09-10 |
| Ladenburg Thalmann | Upgrade | Buy | 2025-08-11 |
| Wedbush | Maintain | Outperform | 2025-08-08 |
SoundHound AI’s ratings mostly range between Neutral and Buy, with some Outperform and Overweight grades, reflecting a cautiously optimistic analyst sentiment.
Which company has the best grades?
Pegasystems Inc. has received more consistent Buy and Outperform grades from multiple firms, whereas SoundHound AI shows a mix of Neutral and Buy ratings with fewer strong endorsements. This suggests Pegasystems may be viewed more favorably by analysts, potentially indicating stronger confidence for investors in recent performance and outlook.
Strengths and Weaknesses
Below is a comparative table highlighting key strengths and weaknesses of Pegasystems Inc. (PEGA) and SoundHound AI, Inc. (SOUN) based on recent financial and operational data.
| Criterion | Pegasystems Inc. (PEGA) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| Diversification | Broad revenue streams: Cloud $1.13B, Subscription $398M, Maintenance $341M, Consulting $213M | More concentrated: Hosted Services $57M, Licensing $18M, Professional Service $9M |
| Profitability | Neutral net margin at 6.63%, ROE favorable at 16.94%, ROIC neutral at 7.4% | Negative profitability: net margin -414%, ROE -192%, ROIC -68% |
| Innovation | Strong cloud platform growth, high fixed asset turnover (14.36) indicates efficient use | Emerging AI technology focus but financial strain limits innovation investment |
| Global presence | Established global client base with diverse service offerings | Smaller scale, less global reach with niche AI voice recognition services |
| Market Share | Solid presence in enterprise software with growing cloud revenues | Early-stage market penetration with limited scale and high losses |
Key takeaways: Pegasystems shows a well-diversified business with steady profitability and growing cloud revenues, making it a relatively stable investment. SoundHound AI, while innovative in AI voice technology, faces significant profitability challenges and limited diversification, increasing investment risk.
Risk Analysis
Below is a comparison of key risks facing Pegasystems Inc. (PEGA) and SoundHound AI, Inc. (SOUN) as of 2024.
| Metric | Pegasystems Inc. (PEGA) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| Market Risk | Moderate (Beta 1.08) | High (Beta 2.88) |
| Debt level | Moderate (Debt/Equity ~0.94) | Low (Debt/Equity ~0.02) |
| Regulatory Risk | Moderate (Tech sector exposure) | Moderate (AI industry evolving) |
| Operational Risk | Moderate (Large workforce, 5.4K employees) | Elevated (Smaller scale, 842 employees) |
| Environmental Risk | Low (Software-focused) | Low (Software-focused) |
| Geopolitical Risk | Moderate (Global markets) | Moderate (Global markets) |
The most impactful risks differ: Pegasystems faces moderate market risk with a high valuation and operational complexity, while SoundHound contends with higher market volatility and significant profitability challenges, despite low debt. SoundHound’s negative margins and weaker financial ratios make its operational and market risks the most pressing.
Which Stock to Choose?
Pegasystems Inc. (PEGA) shows a favorable income evolution with a 47.14% revenue growth over five years and a 261.62% net income increase. Financial ratios are slightly favorable, highlighted by a strong 16.94% ROE and good interest coverage, despite high PE and PB ratios. Profitability is improving with a 6.63% net margin, moderate debt levels, and a very favorable B+ rating.
SoundHound AI, Inc. (SOUN) reports strong revenue growth of 550.63% over five years but weak profitability, with a negative 414.06% net margin and unfavorable financial ratios overall. It maintains low debt and a high current ratio but suffers from poor returns and a C- rating. Its income statement and ratios are globally unfavorable despite some positive cash flow figures.
For investors, PEGA’s slightly favorable financial ratios, improving profitability, and solid rating may appeal to those prioritizing quality and moderate risk. SOUN’s rapid revenue growth but unfavorable profitability and ratings might attract risk-tolerant growth investors willing to accept volatility and operational challenges. Thus, choice could depend on whether an investor favors stability and quality or aggressive growth potential.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Pegasystems Inc. and SoundHound AI, Inc. to enhance your investment decisions:
