3 AI Stocks Primed for Profit After the Pullback


  • These companies focus on securing multi-year deals, driving upsells and cross-sells, or expanding into new market segments. 
  • Innodata (INOD): Achieves rapid revenue growth, exceeding guidance, despite challenges from losing a major client.
  • Palo Alto (PANW): Reports solid ARR growth in its SASE business for five consecutive quarters, reflecting high demand for platform-based solutions.
  • SoundHound (SOUN): Leads in automotive integration and strengthens its presence in the restaurant AI space through strategic acquisitions.
AI Stocks to Buy - 3 AI Stocks Primed for Profit After the Pullback

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As the investing options continue to change, the market is paying close attention to the steady growth potential of AI stocks. Three exceptional businesses emerge as bright spots amid market volatility, each offering special prospects.

The allure of AI stocks is their ability to overcome challenges and seize opportunities and their strategic positioning for long-term success in volatile market conditions. The first company, for instance, has demonstrated resilience in the face of client migrations, leading to solid revenue growth from diverse sources and strategic collaborations. The second company’s significant increase in spending from loyal clients underscores its strong customer loyalty and potential for substantial upselling, paving the way for long-term revenue growth. 

In the meantime, the third company focuses on growing its market share and boosting income streams. This demonstrates its lead in automotive integration and smart acquisitions in the restaurant AI sector. Finally, these businesses’ proactive approaches to diversification and growth — two crucial tactics that support their resilience and adaptability — are what binds them together.

Innodata (INOD)

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A sizable amount of Innodata’s (NASDAQ:INOD) income in 2022 ($8.5 million) came from a major social media business. However, Innodata was able to lessen the impact of losing this client by increasing its revenue streams from other sources. 

Moreover, the company is effective in maintaining revenue stability and retaining customers. This is demonstrated in its ability to strike multi-year agreements with important clients, like the three-year contract it signed in late Q4 2023. Innodata collaborates with well-known tech companies, including three of the “Magnificent Seven” companies. This showcases Innodata’s capacity to break into important areas, such as generative artificial intelligence (AI), and use strategic alliances to boost revenue. 

Furthermore, Innodata demonstrated strong revenue growth, especially in 2023’s Q4. Revenue for the fourth quarter of 2023 totaled $26.1 million, a significant 35% increase over the previous year and 18% sequentially. Notably, the business raised $24.5 million over its projected guidance by 6.5%, demonstrating a high demand for its generative AI services. 

In summary, the big social media company’s decision to terminate services presented difficulties, yet revenue growth was remarkable. Lastly, the revenue increase for 2023 was 10% annually, indicating a stable performance.

Palo Alto (PANW)

Palo Alto Networks (PANW) logo on corporate building
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The top 10 highest-spending Palo Alto (NASDAQ:PANW) clients saw a 36% rise in expenditures. This suggests that Palo Alto Networks has a devoted customer base and can effectively promote upsells and cross-sells to its clientele. Increased spending and high customer retention are indicators of the value that clients place on the company’s goods and services. This supports long-term expansion and recurrent income streams.

The Secure Access Service Edge (SASE) business also saw a 50% annual recurring revenue (ARR) gain for the sixth consecutive quarter in Q2. Strong demand for Palo Alto Networks’ platform-based solutions is reflected in the steadily increasing ARR, especially in the quickly developing SASE market. Growth in ARR reflects both the stickiness of the company’s products and the development of its subscription-based revenue model.

Lastly, the number of customers who own two or more Prisma Cloud modules has increased by around 30%. Meanwhile, the number of those who own three or more modules increased by about 60%. The growing number of Prisma Cloud modules being adopted shows how much emphasis users place on unifying their security solutions on a single platform. Hence, adopting many modules increases the addressable market, increases client stickiness, and generates more income through upselling.

SoundHound AI (SOUN)

SoundHound Inc.'s (SOUN) Headquarters exterior. The company develops voice-recognition, natural language understanding, sound-recognition and search technologies.
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With more than 20 car makers integrating its technology — representing more than 25% of the industry — SoundHound AI (NASDAQ:SOUN) has a substantial lead in the automotive market. The company’s ability to form alliances with top automakers demonstrates its legitimacy and establishes it as a major participant in this profitable market. SoundHound has demonstrated its ability to diversify by growing its brand across a number of industries, such as restaurants, smart TVs, cars and Internet of Things devices. 

Moreover, with the purchase of SYNQ3, SoundHound becomes the biggest voice AI supplier for restaurants, solidifying its leadership in the restaurant AI market. By utilizing this calculated maneuver, SoundHound increases its clientele and sources of income while leveraging the restaurant industry’s increasing need for AI-driven solutions. In addition, integrating SYNQ3’s expertise and customer portfolio expands SoundHound’s market reach and accelerates its growth trajectory.

Finally, SoundHound’s robust client base and revenue visibility are demonstrated by the company’s cumulative subscriptions and bookings backlog indicator, which increased to $661 million. With committed client contracts spanning Pillars 1 and 2, this backlog shows that SoundHound’s goods and services are in high demand and lays the groundwork for topline growth.

On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Yiannis Zourmpanos is the founder of Yiazou Capital Research, a stock-market research platform designed to elevate the due diligence process through in-depth business analysis.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/3-ai-stocks-primed-for-profit-after-the-pullback/.

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