What Teradata (TDC) Said on Its Q3 Earnings Call

Key Points

• Teradata raised its 2026 earnings outlook to $2.86–$2.90 per share and expects roughly 200 basis points of operating margin expansion. It narrowed revenue forecasts toward the high end of prior ranges and maintained its 2%–4% total ARR growth target.
• Third-quarter revenue was $399 million, with non-GAAP earnings of $0.70 per share beating the top of guidance. Adjusted free cash flow rose 9% to $96 million, while cloud ARR grew 11%.
• Teradata is expanding its AI offerings and deployment options, including new agentic AI capabilities and integration with Microsoft OneLake. Management sees AI and hybrid, sovereign, and on-premise deployments as potential growth areas for 2027.

Teradata NYSE: TDC reported third-quarter revenue of $399 million and raised its full-year earnings outlook, while reaffirming its annual recurring revenue growth target as it enters its largest selling quarter.

Chief Executive Officer Steve McMillan said the company had already closed the largest expansion deal in its fourth-quarter plan. The deal was with a government customer in the Pacific region and will begin as a hybrid deployment, he said.

Teradata continues to expect total annual recurring revenue, or ARR, to grow 2% to 4% for 2026. McMillan said the company has a strong pipeline for the fourth quarter, which is typically its largest period for renewals and major deals.

Revenue and cash flow

Third-quarter total ARR grew 1% as reported and 2% in constant currency, while cloud ARR rose 11% by both measures. CFO John Ederer said the company continues to expect most of its ARR expansion for the year to come in the fourth quarter.

Quarterly recurring revenue was $359 million, at the high end of Teradata’s outlook but down from a year earlier. Ederer attributed the quarterly pattern to upfront revenue recognition on on-premise subscriptions earlier in the year. Recurring revenue rose 4% over the first nine months of 2026.

Consulting services revenue fell year over year to $37 million as Teradata shifted the business from cloud migration work toward AI services. Ederer said the company has been optimizing the unit during the transition.

Non-GAAP diluted earnings were $0.70 per share, exceeding the top of the company’s outlook by $0.11. Ederer attributed the outperformance primarily to lower operating expenses and revenue at the high end of the forecast.

Adjusted free cash flow rose 9% to $96 million in the quarter. For the first nine months, it increased to $254 million from $134 million a year earlier. The measure excludes impacts related to the SAP settlement earlier in 2026, Ederer said. Teradata repurchased $57 million of shares in the third quarter, bringing year-to-date repurchases to $131 million.

Full-year outlook

Teradata raised its 2026 non-GAAP earnings forecast to $2.86 to $2.90 per share and narrowed its revenue outlooks to the high ends of their previous ranges. It now expects total revenue to decline 1% to be flat and recurring revenue to grow 1% to 2%.

For the fourth quarter, the company forecast a 4% to 6% decline in total revenue and a 2% to 4% decline in recurring revenue, with non-GAAP earnings of $0.58 to $0.62 per share. Ederer said the expected declines reflect the timing of upfront revenue recognition earlier in the year.

Teradata now expects approximately 200 basis points of non-GAAP operating margin expansion for 2026, double its initial expectation. It reaffirmed its adjusted free cash flow outlook; Ederer said the current midpoint is $340 million, up from $320 million at the start of the year.

AI products and deployment choices

McMillan highlighted new capabilities intended to help customers move AI projects into production. Teradata’s Tera agentic coworker is generally available, while three additions—Tera Context Engine, Tera Harness and Agent Skills—are expected before year-end.

The company also announced an integration with Microsoft OneLake that allows customers running AI on Teradata to use data stored in OneLake without duplicating or migrating it. Its Elastic Python Compute offering in AI Studio is available on AWS, Azure and on-premise through Teradata Factory, McMillan said.

McMillan identified AI capabilities and Teradata Factory, including sovereign and on-premise deployments, as potential growth areas for 2027. Customers are making more deliberate choices about where to run workloads rather than rushing to the cloud, he said.

Asked about services, McMillan said the business supports Teradata’s technology mission by helping customers get value from AI more quickly and manage those environments over time.

About Teradata (NYSE:TDC)

Teradata Corporation NYSE: TDC is a data and analytics technology company that helps organizations collect, manage, analyze and govern large volumes of enterprise data. Its offerings are designed to support business intelligence, advanced analytics, artificial intelligence and machine learning across complex data environments.

The company's portfolio includes Teradata VantageCloud, a cloud analytics platform available through public-cloud and hybrid deployment models, as well as ClearScape Analytics, which provides tools for developing and deploying advanced analytics and AI workloads.

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