SOUNDHOUND AI, INC.SOUN
SOUNDHOUND AI, INC. Income Taxes Disclosure
INCOME TAXES
The following is a geographical breakdown of income (loss) before income taxes (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (15,244) | $ | (363,347) | $ | (86,724) | |||||||||||
| Foreign | 5,970 | 3,419 | 1,701 | ||||||||||||||
| $ | (9,274) | $ | (359,928) | $ | (85,023) | ||||||||||||
The provision (benefit) for income taxes consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current provision: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | — | 2 | 3 | ||||||||||||||
| Foreign | 3,394 | 2,934 | 3,881 | ||||||||||||||
| Total current provision | $ | 3,394 | $ | 2,936 | $ | 3,884 | |||||||||||
| Deferred provision: | |||||||||||||||||
| Federal | $ | — | $ | (10,492) | $ | — | |||||||||||
| State | — | (1,701) | — | ||||||||||||||
| Foreign | 1,338 | 10 | 30 | ||||||||||||||
| Total deferred provision | $ | 1,338 | $ | (12,183) | $ | 30 | |||||||||||
| Total provision (benefit) for income taxes | $ | 4,732 | $ | (9,247) | $ | 3,914 | |||||||||||
| Effective tax rate | (51.0) | % | 2.6 | % | (4.6) | % | |||||||||||
The Company has incurred net pre-tax losses in the United States only for all periods presented. The Company recorded an income tax expense (benefit) of $4.7 million, $(9.2) million, and $3.9 million for the years ended December 31, 2025, 2024, and 2023, respectively. The 2024 tax benefit relates to tax benefits from acquisitions, partially offset by withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries. The 2023 and 2025 tax expense relates to withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries.
The following table is a reconciliation of the U.S. federal statutory tax rate of 21% to the Company’s effective tax rate and the provision for (benefit from) income taxes for the years ended December 31, 2025, 2024, and 2023 after adoption of ASU 2023-09 (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Total | % | Total | % | Total | % | |||||||||||||||||||||
| Tax at the U.S. federal statutory rate | (1,948) | 21.0 | % | (75,585) | 21.0 | % | (17,855) | 21.0 | % | |||||||||||||||||
| State and local income taxes, net of federal income tax effects | — | — | % | 2 | — | % | 3 | — | % | |||||||||||||||||
| Foreign tax effects: | ||||||||||||||||||||||||||
| South Korea | ||||||||||||||||||||||||||
| Withholding tax | 1,600 | (17.3) | % | 1,851 | (0.5) | % | 3,689 | (4.3) | % | |||||||||||||||||
| Other | (4) | — | % | (4) | — | % | (7) | — | % | |||||||||||||||||
| China | ||||||||||||||||||||||||||
| Other | 485 | (5.2) | % | (84) | — | % | (21) | — | % | |||||||||||||||||
| Peru | ||||||||||||||||||||||||||
| Withholding tax | 1,121 | (12.1) | % | 501 | (0.1) | % | — | — | % | |||||||||||||||||
| Other | (62) | 0.7 | % | (1) | — | % | — | — | % | |||||||||||||||||
| Netherlands | ||||||||||||||||||||||||||
| Unrealized FX gain/loss | 565 | (6.1) | % | — | — | % | — | — | % | |||||||||||||||||
| Other | (308) | 3.3 | % | (24) | — | % | — | — | % | |||||||||||||||||
| Other foreign jurisdictions | 81 | (0.9) | % | (16) | — | % | (108) | 0.1 | % | |||||||||||||||||
| Tax credits: | ||||||||||||||||||||||||||
| Research & development tax credits | (4,061) | 43.8 | % | (4,881) | 1.4 | % | (2,302) | 2.7 | % | |||||||||||||||||
| Changes in valuation allowance | 43,550 | (469.6) | % | 39,083 | (10.9) | % | 18,604 | (21.9) | % | |||||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||||||||
| Stock based compensation | (12,233) | 131.9 | % | (15,224) | 4.2 | % | 2,289 | (2.7) | % | |||||||||||||||||
| Sec. 162(m) disallowance | 8,461 | (91.2) | % | 9,457 | (2.6) | % | 270 | (0.3) | % | |||||||||||||||||
| Change in fair value of contingent acquisition liabilities | (34,257) | 369.4 | % | 46,761 | (13.0) | % | — | — | % | |||||||||||||||||
| Withholding tax deduction | (348) | 3.8 | % | (441) | 0.1 | % | (775) | 0.9 | % | |||||||||||||||||
| Transaction costs | 590 | (6.4) | % | 1,451 | (0.4) | % | (733) | 0.9 | % | |||||||||||||||||
| Remeasurement gain/loss | (968) | 10.4 | % | 11 | — | % | — | — | % | |||||||||||||||||
| Other | 80 | (0.9) | % | 159 | — | % | 799 | (0.9) | % | |||||||||||||||||
| Changes in unrecognized tax benefits | 8 | (0.1) | % | (7) | — | % | 197 | (0.2) | % | |||||||||||||||||
| Other adjustments: | ||||||||||||||||||||||||||
| Acquisition | 2,158 | (23.3) | % | (12,189) | 3.4 | % | — | — | % | |||||||||||||||||
| Other deferred adjustments | 222 | (2.4) | % | (67) | — | % | (136) | 0.2 | % | |||||||||||||||||
| Effective tax rate | $ | 4,732 | (51.0) | % | $ | (9,247) | 2.6 | % | $ | 3,914 | (4.6) | % | ||||||||||||||
The components of our deferred tax assets and liabilities were as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 210,500 | $ | 127,680 | |||||||
| Research and development credits | 29,476 | 23,934 | |||||||||
| Property and equipment | 1,955 | 1,936 | |||||||||
| Deferred revenue | 4,873 | 5,260 | |||||||||
| Interest expense | 3,485 | 5,484 | |||||||||
| Stock-based compensation | 3,497 | 2,704 | |||||||||
| Operating lease liabilities | 958 | 1,014 | |||||||||
| Section 174 research and development capitalization | 41,922 | 40,648 | |||||||||
| Accruals and reserves | 2,530 | 2,780 | |||||||||
| Other | — | 2 | |||||||||
| Total deferred tax assets | 299,196 | 211,442 | |||||||||
| Valuation allowance | (260,164) | (170,219) | |||||||||
| Total deferred tax assets, net | 39,032 | 41,223 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right-of-use assets | (936) | (1,017) | |||||||||
| Intangible assets | (39,430) | (40,202) | |||||||||
| Total deferred tax liabilities | (40,366) | (41,219) | |||||||||
| Net deferred tax assets | $ | (1,334) | $ | 4 | |||||||
Based on available objective evidence, management believes it is more-likely-than-not that the domestic federal and state deferred tax assets; and excess Canadian SR&ED tax credits will not be fully realized due to the Company’s cumulative losses arising in the United States, and its inability to utilize excess tax credits in Canada. Accordingly, the Company has recorded a valuation allowance on deferred tax assets in excess of deferred tax liabilities against its federal and state deferred tax assets and excess Canadian SR&ED tax credits as of December 31, 2025 and 2024. The valuation allowance increased by $90.0 million from the year ended December 31, 2024 to December 31, 2025.
The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2025 because it intends to indefinitely reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will not be material.
As of December 31, 2025, the Company had net operating loss carryforwards of $892.9 million of U.S. federal and $379.7 million of state net operating loss carryforwards available to reduce future taxable income. The federal and state net operating loss carryforwards will start to expire in 2026 with the exception of $691.0 million federal net operating loss carryforwards and $18.5 million state net operating loss carryforwards, which can be carried forward indefinitely.
The Company had federal and state research and development credit carryforwards of $27.2 million and $15.4 million, respectively, as of December 31, 2025. The federal credits will expire starting in 2029 if not utilized. The state credits can be carried forward indefinitely. The Company also had Canadian SR&ED tax credits of $1.9 million, which will expire starting in 2039 if not utilized.
Under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state tax laws, utilization of net operating loss carryforwards and tax credits may be subject to annual limitations due to certain ownership changes. The Company’s net operating loss carryforwards and tax credits could expire before utilization if subject to annual limitations.
The Company files U.S. federal income tax returns as well as income tax returns in many U.S. states and foreign jurisdictions. As of December 31, 2025, the tax years 2005 through the current period remain open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.
Changes in gross unrecognized tax benefits during the periods presented were as follows (in thousands):
| Balance as of December 31, 2022 | $ | 6,130 | |||
| Increase for tax positions of prior years | 370 | ||||
| Increase for tax positions of current year | 1,095 | ||||
| Balance as of December 31, 2023 | $ | 7,595 | |||
| Increase for tax positions of prior years | 877 | ||||
| Decrease for tax positions of prior years | (4) | ||||
| Increase for tax positions of current year | 2,784 | ||||
| Balance as of December 31, 2024 | $ | 11,252 | |||
| Increase for tax positions of prior years | 408 | ||||
| Decrease for tax positions of prior years | (708) | ||||
| Increase for tax positions of current year | 2,402 | ||||
| Balance as of December 31, 2025 | $ | 13,354 | |||
$0.6 million of the unrecognized tax benefits, if recognized, would affect the effective tax rate. $12.8 million of the unrecognized tax benefits, if recognized, would not affect the effective tax rate and would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. As of December 31, 2025, the Company has accrued $0.1 million interest and penalties related to unrecognized tax benefits.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses and acceleration of tax deductions for qualified capital expenditures acquired and placed into service after January 19, 2025, and other changes to the U.S. taxation of profits derived from foreign operations. The legislation has multiple effective dates, with various effective dates between 2025 and 2027. The Company evaluated the OBBBA and included its impact within our consolidated financial statements. The Company will continue to assess the full impact of these legislative changes as additional guidance becomes available.
The amount of cash paid for income taxes, net of refunds, is as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. federal | $ | — | $ | — | $ | — | |||||||||||
| State and local | — | 15 | 3 | ||||||||||||||
| Total U.S. | $ | — | $ | 15 | $ | 3 | |||||||||||
| Foreign | |||||||||||||||||
| South Korea | $ | 2,262 | $ | 1,628 | $ | 1,694 | |||||||||||
| Peru | 712 | 523 | — | ||||||||||||||
| Netherlands | 687 | — | — | ||||||||||||||
| Germany | * | * | 404 | ||||||||||||||
| India | * | 332 | — | ||||||||||||||
| France | * | * | 226 | ||||||||||||||
| Japan | — | 140 | * | ||||||||||||||
| Other | 709 | 79 | 29 | ||||||||||||||
| Total foreign | $ | 4,370 | $ | 2,702 | $ | 2,353 | |||||||||||
| Total income taxes paid, net of refunds | $ | 4,370 | $ | 2,717 | $ | 2,356 | |||||||||||
*Income taxes paid, net of refunds do not meet the disaggregation threshold in years 2025, 2024 and 2023. Such amounts are not presented as comparative disclosures because such disclosures are not required.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Mar 1, 2024 | |
| 2022 | Mar 28, 2023 | |
| 2021 | Mar 9, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.