Teradata Q2 Earnings Call Highlights

Key Points

• Teradata exceeded second-quarter expectations: Revenue was $410 million, recurring revenue rose 3% to $363 million, non-GAAP operating margin expanded to 21.5%, and diluted EPS reached $0.69. Adjusted free cash flow totaled $127 million, while the company ended the quarter with $323 million in net cash after repaying its term loan.
• AI platform expansion is central to Teradata’s strategy: The company launched its Autonomous Knowledge Platform, spanning cloud, on-premise and hybrid environments, as customers seek to move AI projects into production. Early customer deployments include telecommunications, banking and healthcare organizations.
• Teradata raised profitability and cash-flow guidance but expects near-term revenue declines: Full-year non-GAAP EPS guidance increased to $2.65–$2.73 and adjusted free-cash-flow guidance to $330–$350 million. Third-quarter revenue and recurring revenue are expected to decline year over year because of on-premise subscription revenue-recognition timing, not weaker annual demand.

Teradata NYSE: TDC reported second-quarter results marked by growth in recurring revenue, expanded operating margins and higher free cash flow, while reaffirming its full-year outlook for total annual recurring revenue, total revenue and recurring revenue. The company raised its full-year non-GAAP earnings-per-share guidance and adjusted free-cash-flow forecast.

President and Chief Executive Officer Steve McMillan said the company’s first-half performance reflected demand for its hybrid data platform as enterprises work to move artificial intelligence initiatives into production. “Our hybrid capabilities and our on-prem strength in particular, continue to resonate with customers running the most demanding and regulated workloads,” McMillan said.

Second-Quarter Financial Results

Chief Financial Officer John Ederer said total ARR rose 1% year over year as reported, or 2% in constant currency. Cloud ARR increased 8% as reported and 9% in constant currency. Ederer said Teradata remains focused on total ARR growth, noting that the mix between cloud and on-premise subscriptions can vary by quarter.

• Total revenue was $410 million, flat year over year, exceeding the high end of company guidance by two percentage points.
• Recurring revenue rose 3% as reported to $363 million, or 2% in constant currency, and exceeded the high end of guidance by three percentage points.
• Consulting services revenue fell 24% year over year to $39 million, although the company said bookings improved and project backlog increased.
• Non-GAAP operating margin expanded to 21.5% from 16.4% a year earlier.
• Non-GAAP diluted EPS was $0.69, exceeding the top end of Teradata’s outlook by $0.12.
• Adjusted free cash flow was $127 million for the quarter.

Ederer attributed the revenue outperformance primarily to the timing of revenue recognition in the on-premise business. Total gross margin increased 220 basis points year over year to 60.5%, aided by a greater mix of recurring revenue. Recurring revenue gross margin rose 30 basis points to 67.8%.

Teradata ended the quarter with a net cash position of $323 million, an increase of $528 million from a year earlier. The company repurchased approximately $40 million of stock, or about 1.3 million shares, during the quarter and paid off the remaining $450 million balance on its term loan.

AI Platform Rollout and Customer Activity

McMillan highlighted the company’s May launch of the Teradata Autonomous Knowledge Platform, which is intended to support enterprise agentic AI deployments across cloud, on-premise and hybrid environments. He said the platform, including its AI Studio component, reached general availability in early in the third quarter.

The platform includes Teradata Cloud capabilities designed to support always-on and elastic compute needs; Teradata Factory, an on-premise offering developed with Dell Technologies that combines CPUs and GPUs; Teradata AI Studio; and Tera, a natural-language interface for data analysis, coding and multi-agent orchestration.

McMillan said enterprises are contending with production challenges in AI. Citing a company survey of 1,000 senior technology and data leaders, he said 90% expect to increase agentic AI investment over the next year, while nearly two-thirds have seen only small or emerging positive returns so far. He said 40% of surveyed technology leaders reported that more than 40% of their AI pilots had not reached production because their infrastructure was not designed to support them.

The company also made its data analyst agent available through AWS Marketplace and expanded support for native open table formats. Teradata has joined the Agentic AI Foundation and said its Enterprise Model Context Protocol server is already in use with customers.

McMillan cited several early customer engagements, including a South Asian telecommunications company that selected Teradata Factory for an AI modernization project; a Japanese banking group implementing Teradata Cloud, AI Studio and AI Services; and an expansion with a North American financial institution using AI Studio. He also said a U.S. healthcare company expanded its on-premise production system to support government regulations.

Gartner named Teradata a “visionary” in its 2026 Magic Quadrant for AI platforms for data science and machine learning, according to McMillan.

Outlook and Revenue Timing

Teradata reaffirmed its full-year outlook ranges for total ARR, total revenue and recurring revenue. It increased its full-year non-GAAP diluted EPS outlook to $2.65 to $2.73 and raised adjusted free cash flow guidance to $330 million to $350 million.

For the third quarter, the company expects recurring revenue to decline 4% to 2% year over year and total revenue to decline 6% to 4%. Teradata forecast non-GAAP diluted EPS of $0.55 to $0.59 for the quarter.

Ederer said the anticipated second-half revenue declines reflect the accounting timing of on-premise subscriptions under ASC 606 rather than a change to the company’s annual expectations. More revenue from on-premise subscriptions was recognized upfront during the first half, leaving less revenue to recognize in the third and fourth quarters.

Management said it expects modest sequential dollar growth in ARR from the second to third quarter and continues to anticipate that most of its annual ARR growth will occur in the fourth quarter. McMillan said the company has not included substantial upside from its newly launched products in its current guidance.

Capital Allocation and Hardware Costs

Ederer said Teradata’s current capital-allocation priorities are organic research and development, followed by share repurchases and strategic mergers and acquisitions. The company continues to target 50% of adjusted free cash flow for buybacks, excluding the benefit from the SAP settlement.

On hardware availability and pricing, Ederer said Teradata has sufficient inventory for its existing platform through 2026. He said potential supply-chain and pricing pressure could affect the newer Teradata AI Factory offering, but the company is focused on pricing the product to protect margins. McMillan added that the Dell partnership provides access to Dell’s purchasing capabilities and has helped expedite deliveries for some early AI Factory orders.

About Teradata (NYSE:TDC)

Teradata Corporation is a global provider of enterprise analytics and data management solutions designed to help organizations unlock value from their data assets. The company offers both cloud-based and on-premises platforms that support data warehousing, big data analytics, and machine learning. Through its flagship analytics ecosystem, Teradata enables businesses to integrate, analyze, and manage large volumes of structured and unstructured data at scale.

Central to Teradata's product suite is the Teradata Vantage analytics platform, which unifies diverse data types across multiple environments—including public and private clouds—into a single, coherent architecture.

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