Core Insights - Teradata (TDC) reported second-quarter 2025 non-GAAP earnings of 47 cents per share, exceeding the Zacks Consensus Estimate by 14.63%, but down 26.6% year over year [1][7] - Revenues for the quarter were $408 million, surpassing the Zacks Consensus Estimate by 1.91%, but reflecting a decline of 6.4% year over year on a reported basis and 7% on a constant-currency basis [1][7] - Total annual recurring revenues (ARR) increased by 2% year over year to $1.489 billion, remaining unchanged on a constant-currency basis [1] Revenue Breakdown - Public cloud ARR rose by 17% on a reported basis and 15% at constant currency to $634 million, driven by strong demand for cloud solutions, with a cloud net expansion rate of 112% [3] - Recurring revenues, which account for 86.8% of total revenues, decreased by 4% year over year to $354 million [3] - Perpetual software license and hardware revenues dropped 40% year over year to $3 million [3] - Consulting services revenues fell 19% year over year to $51 million, while product sales decreased by 4% year over year to $357 million [4] Operating Performance - The gross margin on a non-GAAP basis was 58.3%, down 380 basis points year over year [5] - Selling, general & administrative (SG&A) expenses increased by 3.1% year over year to $135 million, while research & development (R&D) expenses rose by 4.4% to $71 million [5] - The non-GAAP operating margin was 16.4%, a decline of 560 basis points year over year [5] Financial Position - As of June 30, 2025, Teradata had cash and cash equivalents of $369 million, slightly up from $368 million as of March 31 [6] - Long-term debt decreased to $443 million from $449 million as of March 31 [8] - The company generated $43 million in cash from operating activities in the second quarter, compared to $8 million in the previous quarter, and reported a free cash flow of $39 million [8] Guidance - For Q3 2025, non-GAAP earnings are expected to be between 51 and 55 cents per share, with recurring revenues projected to decline by 4% to 6% year over year [9] - Total revenues are anticipated to decrease by 7% to 9% year over year [9] - For the full year 2025, non-GAAP earnings are expected to be between $2.17 and $2.25 per share, with public cloud ARR growth projected between 14% and 18% [10]

Core Insights - Teradata reported revenue of $408 million for the quarter ended June 2025, a decrease of 6.4% year-over-year, with EPS at $0.47 compared to $0.64 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $400.36 million by 1.91%, while the EPS surpassed the consensus estimate of $0.41 by 14.63% [1] Financial Performance Metrics - Annual recurring revenue (ARR) totaled $1.49 billion, exceeding the average estimate of $1.41 billion from two analysts [4] - Public Cloud ARR was reported at $634 million, slightly above the estimated $614.66 million [4] - Revenue from perpetual software licenses and hardware was $3 million, significantly below the average estimate of $4.7 million, reflecting a 40% year-over-year decline [4] - Recurring revenue was $354 million, slightly above the average estimate of $346.69 million, representing a year-over-year decrease of 3.8% [4] - Revenue from consulting services was $51 million, surpassing the average estimate of $48.96 million, but showing a year-over-year decline of 19.1% [4] - Gross profit from consulting services was reported at -$5 million, compared to an estimated profit of $0.23 million [4] - Gross profit from recurring revenue was $235 million, slightly above the estimated $232.94 million [4] Stock Performance - Teradata's shares have returned -10.8% over the past month, contrasting with a +1% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Teradata (TDC) reported quarterly earnings of $0.47 per share, exceeding the Zacks Consensus Estimate of $0.41 per share, but down from $0.64 per share a year ago, representing an earnings surprise of +14.63% [1] - The company posted revenues of $408 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.91%, but down from $436 million year-over-year [2] - Teradata has outperformed consensus EPS estimates in all four of the last quarters and has topped revenue estimates twice in the same period [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.59 on revenues of $416.23 million, and for the current fiscal year, it is $2.16 on revenues of $1.63 billion [7] - The estimate revisions trend for Teradata was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Computer-Storage Devices industry, to which Teradata belongs, is currently ranked in the top 21% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Total ARR for Q2 2025 was $1,490,000,000, representing a 2% year-over-year increase as reported [6] - Total revenue was $408,000,000, down 6% year-over-year as reported and 7% in constant currency [24] - Non-GAAP diluted earnings per share was $0.47, exceeding the top end of the outlook range [26] - Free cash flow generated in the quarter was $39,000,000, flat year-over-year [27] Business Line Data and Key Metrics Changes - Cloud ARR grew 17% reported and 15% in constant currency, with a net expansion rate of 112% [23] - Services revenue was $51,000,000, down 19% year-over-year as reported and 20% in constant currency [25] - Recurring revenue as a percentage of total revenue increased to 87%, up from 84% in Q2 last year [25] Market Data and Key Metrics Changes - The company experienced better deal execution in Q2, with some deals closing earlier than expected [7] - The cloud segment showed solid growth, with a 15% constant currency growth rate aligning with full-year guidance of 14% to 18% [8] Company Strategy and Development Direction - The company is focusing on integrating its marketing function into go-to-market and product organizations to enhance operational efficiency [10] - New executive leadership has been brought on to support strategic execution and drive long-term returns for investors [8] - The company is positioning itself to leverage AI as a value driver, emphasizing the importance of strong data management capabilities [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year targets due to improved execution and retention rates [6][22] - The company anticipates a modest sequential decline in total ARR from Q2 to Q3 but reaffirms its full-year guidance for total ARR and cloud ARR [29] - Management noted that the interest in AI and GenAI is driving growth across the industry, with a focus on hybrid deployment options [11] Other Important Information - The company announced new partnerships, including one with Fivetran to simplify data integration for AI insights [21] - The introduction of the Teradata AI factory aims to bring AI and machine learning capabilities on-premises, enhancing customer control over AI deployments [12] Q&A Session Summary Question: What does the company see as the opportunity for greater operating leverage and free cash flow? - Management indicated that optimizing costs and returning to growth are key drivers for future free cash flow growth [36][38] Question: What is the outlook for demand and client engagement moving forward? - Management highlighted solid execution and the importance of AI workloads in driving future growth [41][43] Question: What factors contributed to the outperformance in ARR for Q2? - The outperformance was attributed to better deal execution and customer demand for the Teradata platform [46][48] Question: How does the company view the impact of recent R&D tax changes? - Management acknowledged potential positive impacts on cash flow from the recent R&D tax changes [78] Question: How is the company monitoring success in AI initiatives? - Success is defined through partnerships, proof of concept engagements, and the opportunity pipeline influenced by AI workloads [73][75]

Financial Highlights - Public Cloud ARR reached $634 million, a 17% year-over-year increase, comprising 43% of Total ARR[9] - Total ARR increased by 2% year-over-year to $1.489 billion[9] - Q2'25 Recurring Revenue was $354 million, a 4% year-over-year increase[13] - Q2'25 Total Revenue was $408 million, a 6% year-over-year decrease[13] - Q2'25 GAAP Diluted EPS was $0.09, down from $0.38 in Q2'24[13] - Q2'25 Non-GAAP Diluted EPS was $0.47, down from $0.64 in Q2'24[13] - Q2'25 Cash Flow from Operations was $43 million, consistent with Q2'24[13] - Q2'25 Free Cash Flow was $39 million, consistent with Q2'24[13] Financial Outlook - The company projects FY25 Public cloud ARR growth of 14% to 18% YoY in CC[43] - The company projects FY25 Total ARR growth of flat to 2% YoY in CC[43]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Teradata's Q2 2025 performance exceeded expectations, driven by strong public cloud ARR growth and outperforming EPS, despite overall revenue declines, with full-year outlook reaffirmed - CEO Steve McMillan highlighted strong execution in Q2, building on cloud growth and on-premise strength to support customers' hybrid data and analytics environments for AI implementation[2](index=2&type=chunk) Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change (Reported) | Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Public Cloud ARR | $634M | $542M | +17% | +15% | | Total ARR | $1.489B | $1.465B | +2% | 0% | | Recurring Revenue | $354M | $368M | -4% | -4% | | Total Revenue | $408M | $436M | -6% | -7% | | GAAP Diluted EPS | $0.09 | $0.38 | -76% | N/A | | Non-GAAP Diluted EPS | $0.47 | $0.64 | -27% | N/A | - The company reiterated its full-year 2025 outlook for Total ARR, Cloud ARR, and Free Cash Flow[3](index=3&type=chunk) [Business Outlook](index=2&type=section&id=Business%20Outlook) Teradata provided its Q3 and updated full-year 2025 financial outlook, projecting continued revenue declines for Q3, narrowing full-year revenue guidance, and reaffirming ARR and free cash flow targets Q3 2025 Outlook | Metric | Expected Range (YoY Growth, Constant Currency, %) | | :--- | :--- | | Recurring Revenue | -4% to -6% | | Total Revenue | -7% to -9% | | **Metric** | **Expected Range (USD)** | | GAAP Diluted EPS | $0.24 to $0.28 | | Non-GAAP Diluted EPS | $0.51 to $0.55 | Full-Year 2025 Updated & Reaffirmed Outlook | Metric | Updated Range | Reaffirmed Range | | :--- | :--- | :--- | | Total Revenue (YoY, CC, %) | -5% to -7% | - | | GAAP Diluted EPS (USD) | $1.04 to $1.12 | - | | Non-GAAP Diluted EPS (USD) | $2.17 to $2.25 | - | | Public Cloud ARR (YoY, CC, %) | - | 14% to 18% | | Total ARR (YoY, CC, %) | - | 0% to 2% | | Recurring Revenue (YoY, CC, %) | - | -3% to -5% | | Free Cash Flow (million USD) | - | $250 to $280 | [Financial Performance Analysis](index=3&type=section&id=Financial%20Performance%20Analysis) This section details Teradata's financial results, highlighting strong public cloud ARR growth amidst overall revenue and profitability declines for Q2 and the first six months of 2025 [Revenue and Annual Recurring Revenue (ARR)](index=3&type=section&id=Revenue%20and%20Annual%20Recurring%20Revenue%20(ARR)) Q2 2025 total revenue decreased, driven by declines in recurring revenue and consulting services, contrasting with strong growth in Public Cloud ARR and a modest increase in Total ARR Revenue Breakdown | Revenue Type | Q2 2025 (million USD) | Q2 2024 (million USD) | % Change (Reported) | | :--- | :--- | :--- | :--- | | Recurring revenue | 354 | 368 | -4% | | Consulting services | 51 | 63 | -19% | | **Total revenue** | **408** | **436** | **-6%** | Annual Recurring Revenue (ARR) as of June 30 | ARR Type | 2025 (USD) | 2024 (USD) | % Change (Reported) | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Public cloud ARR | $634M | $542M | 17% | 15% | | Total ARR | $1.489B | $1.465B | 2% | 0% | [Profitability Analysis (GAAP vs. Non-GAAP)](index=4&type=section&id=Profitability%20Analysis%20(GAAP%20vs.%20Non-GAAP)) Q2 2025 profitability significantly declined across both GAAP and Non-GAAP measures, with GAAP Net Income experiencing a steep **76%** drop to **$9 million** Q2 Profitability Comparison | Metric | Q2 2025 (GAAP, million USD) | Q2 2024 (GAAP, million USD) | Q2 2025 (Non-GAAP, million USD) | Q2 2024 (Non-GAAP, million USD) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | 230 | 265 | 238 | 271 | | Operating Income | 24 | 66 | 67 | 96 | | Net Income | 9 | 37 | 45 | 62 | Q2 Margin Comparison | Margin | Q2 2025 (GAAP, %) | Q2 2024 (GAAP, %) | Q2 2025 (Non-GAAP, %) | Q2 2024 (Non-GAAP, %) | | :--- | :--- | :--- | :--- | :--- | | Gross Margin | 56.4 | 60.8 | 58.3 | 62.2 | | Operating Margin | 5.9 | 15.1 | 16.4 | 22.0 | [Earnings Per Share (EPS) Analysis](index=5&type=section&id=Earnings%20Per%20Share%20(EPS)%20Analysis) Q2 2025 saw a significant decrease in both GAAP and Non-GAAP diluted EPS, with the company providing Q3 and full-year 2025 guidance Diluted Earnings Per Share (EPS) Comparison | Period | GAAP EPS (USD) | Non-GAAP EPS (USD) | | :--- | :--- | :--- | | Q2 2025 | 0.09 | 0.47 | | Q2 2024 | 0.38 | 0.64 | | Q3 2025 Outlook | 0.24 - 0.28 | 0.51 - 0.55 | | FY 2025 Outlook | 1.04 - 1.12 | 2.17 - 2.25 | [Cash Flow Analysis](index=5&type=section&id=Cash%20Flow%20Analysis) Q2 2025 cash flow from operations and free cash flow remained flat year-over-year, while both metrics decreased for the first six months of 2025 Cash Flow Summary | Metric | Q2 2025 (million USD) | Q2 2024 (million USD) | Six Months 2025 (million USD) | Six Months 2024 (million USD) | | :--- | :--- | :--- | :--- | :--- | | Cash from Operations (GAAP) | 43 | 43 | 51 | 70 | | Free Cash Flow (Non-GAAP) | 39 | 39 | 46 | 60 | - The company reaffirmed its full-year 2025 free cash flow outlook of **$250 million to $280 million**[7](index=7&type=chunk) [Consolidated Financial Statements](index=7&type=section&id=Consolidated%20Financial%20Statements) The unaudited consolidated financial statements reflect lower Q2 and six-month revenue and net income, an increase in total assets, and decreased net cash from operations for the six-month period [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2025 income statement highlights include a decrease in total revenue to **$408 million**, a decline in gross profit, and a sharp fall in net income to **$9 million** Q2 2025 Income Statement Highlights | Line Item | Q2 2025 (million USD) | Q2 2024 (million USD) | | :--- | :--- | :--- | | Total Revenue | 408 | 436 | | Total Gross Profit | 230 | 265 | | Income from Operations | 24 | 66 | | Net Income | 9 | 37 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Teradata's balance sheet shows total assets of **$1.737 billion**, total liabilities of **$1.561 billion**, and an increase in total stockholders' equity Balance Sheet Summary | Account | June 30, 2025 (USD) | Dec 31, 2024 (USD) | June 30, 2024 (USD) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $369M | $420M | $301M | | Total Current Assets | $757M | $749M | $665M | | Total Assets | $1.737B | $1.704B | $1.622B | | Total Current Liabilities | $898M | $930M | $889M | | Total Liabilities | $1.561B | $1.571B | $1.547B | | Total Stockholders' Equity | $176M | $133M | $75M | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities decreased, with significant cash used for stock repurchases and debt repayments, resulting in a net decrease in cash Six Months 2025 Cash Flow Highlights | Line Item | Six Months 2025 (million USD) | Six Months 2024 (million USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | 51 | 70 | | Net cash used in investing activities | (6) | (13) | | Net cash used in financing activities | (119) | (220) | | Net decrease in cash | (51) | (185) | [Segment Information](index=10&type=section&id=Segment%20Information) Teradata's Q2 2025 segment performance shows a **4%** decrease in Product Sales revenue and a **19%** decline in Consulting Services revenue, with the latter operating at a negative gross margin Q2 2025 Segment Performance | Segment | Revenue (million USD) | % Change (Reported) | Gross Profit (million USD) | Gross Margin % | | :--- | :--- | :--- | :--- | :--- | | Product Sales | 357 | -4% | 239 | 66.9 | | Consulting Services | 51 | -19% | (1) | -2.0 | | **Total** | **408** | **-6%** | **238** | **58.3** | [Notes and Disclosures](index=4&type=section&id=Notes%20and%20Disclosures) This section provides supplemental information, including the rationale for using non-GAAP financial measures and a disclaimer regarding forward-looking statements and associated risks - The company believes non-GAAP measures are useful for investors as they provide insight into underlying business trends, facilitate period-over-period comparisons, and offer consistency with past reports and future projections[11](index=11&type=chunk) - The forward-looking statements highlight risks including the global economic environment, supply chain issues, competitive pressures in the IT and AI industries, and risks associated with data privacy and cyberattacks[15](index=15&type=chunk)

Industry Overview - The artificial intelligence (AI) infrastructure space is gaining momentum, with previous concerns about DeepSeek being overstated. The global trend towards digitization is creating opportunities in markets such as 5G, blockchain, and AI. Companies are rapidly adopting generative AI, machine learning (ML), blockchain, and data science to secure a competitive edge [1] Company Recommendations - Five AI-focused stocks with favorable Zacks Ranks that have potential for double-digit returns in the short term are HubSpot Inc. (HUBS), Okta Inc. (OKTA), Adobe Inc. (ADBE), NICE Ltd. (NICE), and Teradata Corp. (TDC). Each stock carries either a Zacks Rank 1 (Strong Buy) or 2 (Buy) [2] HubSpot Inc. (HUBS) - HubSpot provides a cloud-based customer relationship management platform and is experiencing steady multi-hub adoption from enterprise customers. Pricing optimization in its starter edition is leading to solid client additions [5][6] - The integration of HubSpot AI features is enhancing customer value, and its seat pricing model reduces barriers for customer engagement. The growing adoption of inbound applications is a positive factor [6] - Expected revenue and earnings growth rates for HubSpot are 15.4% and 15%, respectively, for the current year, with a slight improvement in earnings estimates [7] - The short-term average price target for HUBS indicates a potential increase of 39.7% from the last closing price of $542.41, with a maximum upside of 71.5% [8] Okta Inc. (OKTA) - Okta operates as an identity partner, offering a suite of products for identity management and security. The company leverages AI to enhance security and user experience [10][11] - Expected revenue and earnings growth rates for Okta are 9.4% and 16.7%, respectively, for the current year, with an improvement in earnings estimates [13] - The average short-term price target for OKTA suggests a potential increase of 29.9% from the last closing price of $95.43, with a maximum upside of 55.1% [14] Adobe Inc. (ADBE) - Adobe has integrated AI applications across its flagship products and introduced generative AI-driven tools like Adobe Firefly. The company is diversifying into digital marketing services [15][16] - Expected revenue and earnings growth rates for Adobe are 9.5% and 11.8%, respectively, for the current year, with a recent improvement in earnings estimates [17] - The average short-term price target for ADBE indicates a potential increase of 35.2% from the last closing price of $365.79, with a maximum upside of 65.4% [18] NICE Ltd. (NICE) - NICE is benefiting from the strength of its cloud business and the adoption of AI-powered solutions, enhancing customer experience through its CXone platform [19][20] - Expected revenue and earnings growth rates for NICE are 7% and 11.2%, respectively, for the current year, with an improvement in earnings estimates [21] - The average short-term price target for NICE suggests a potential increase of 33.9% from the last closing price of $153.41, with a maximum upside of 95.6% [22] Teradata Corp. (TDC) - Teradata is experiencing strong cloud annual recurring revenue (ARR) growth, supported by strategic partnerships and demand for its AI solutions [23][24] - Expected revenue and earnings growth rates for Teradata are 2% and 8.3%, respectively, for the next year, with a slight improvement in earnings estimates [24] - The average short-term price target for TDC indicates a potential increase of 19.5% from the last closing price of $21.59, with a maximum upside of 62.1% [25]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Teradata (TDC) as a strong candidate for value investors due to its favorable valuation metrics and earnings outlook [2][4][7]. Group 1: Value Investing Strategy - Value investing is a popular strategy that relies on traditional analysis of key valuation metrics to identify undervalued stocks [2]. - The Zacks Rank and Style Scores system can help investors find stocks with specific traits, particularly those with high value grades [3]. Group 2: Teradata's Valuation Metrics - Teradata (TDC) has a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential for value investors [4]. - TDC's current P/E ratio is 9.88, significantly lower than the industry average of 18.50 [4]. - The P/S ratio for TDC is 1.2, compared to the industry's average P/S of 1.49, suggesting it is undervalued [5]. - TDC's P/CF ratio stands at 9.39, well below the industry average of 21, indicating a solid cash outlook [6]. Group 3: Earnings Outlook - The combination of TDC's favorable valuation metrics and strong earnings outlook positions it as one of the market's strongest value stocks [7].

Core Insights - Teradata Corporation (NYSE: TDC) is viewed as a value investment opportunity despite increasing competition from Databricks and a decrease in Annual Recurring Revenue (ARR) [1] Company Analysis - The article highlights a cautious optimism regarding Teradata's prospects as a value investment [1] - The company faces growing competition, particularly from Databricks, which may impact its market position [1] - There is a noted decline in ARR, which could be a concern for investors [1] Industry Context - The financial landscape is characterized by volatility, with historical references to market extremes such as the dot-com bubble, financial crisis, and the coronavirus pandemic [1] - The article emphasizes the importance of understanding market behavior and the potential for trading and investing around these extremes [1]

Industry Overview - The Zacks Computer-Storage Devices industry is expected to experience robust growth due to factors such as digital transformation, edge computing, AI workloads, and enterprise cloud adoption [1] - The increasing demand for secure storage solutions driven by rising cyberattacks will further enhance the need for sophisticated data storage [1] - Major players in the industry include Western Digital Corporation (WDC), NetApp, Inc. (NTAP), and Teradata Corporation (TDC) [1] Trends Impacting the Industry - The rapid proliferation of AI is reshaping the tech landscape, leading to increased demand for high-speed, high-capacity, and low-latency storage solutions [3] - Traditional storage architectures are being replaced by NVMe-based SSDs and software-defined storage to meet the data throughput required by AI applications [3] - Cloud storage technologies are evolving, with companies leveraging AI and machine learning to optimize storage solutions and manage increasing data complexity [4] Market Conditions - Worldwide IT spending is projected to reach $5.61 trillion in 2025, reflecting a 9.8% increase from 2024, with the Devices segment expected to grow by 10.4% [5] - Despite positive IT spending forecasts, escalating trade tensions and macroeconomic uncertainties pose challenges to the industry [5] - The Zacks Computer-Storage Devices industry has underperformed the S&P 500, declining 32.4% over the past year compared to the S&P 500's gain of 9.7% [10] Company Highlights - **Western Digital (WDC)**: Focused on cloud end-markets, WDC is addressing supply chain challenges and expects strong data center demand to drive sales. The company has secured long-term deals through mid-2026 [17][18] - **Teradata (TDC)**: TDC's innovations in AI and hybrid cloud are gaining traction, with partnerships with major cloud service providers enhancing its offerings. The company has launched the Enterprise Vector Store to support AI applications [21][22] - **NetApp (NTAP)**: NTAP is experiencing increased demand for its all-flash arrays and expects to capture more market share. The company reported five-fold year-over-year growth in its AI business for the fiscal fourth quarter of 2025 [27][29]