Why Teradata Plunged Today

Core Viewpoint - Teradata's shares fell significantly after the third-quarter earnings report, despite beating revenue and adjusted EPS estimates, due to conservative guidance on cloud business growth [1][2]. Financial Performance - For Q3, Teradata reported revenue of $440 million, nearly unchanged from $438 million in the same quarter last year [2]. - Adjusted EPS was $0.69, surpassing analyst expectations of $0.53 [2]. Business Transition - Teradata is transitioning from an on-premises perpetual license model to a recurring cloud subscription model, which typically results in flat or declining revenue as upfront licenses are replaced by ongoing subscriptions [3]. - Public cloud annualized recurring revenue (ARR) increased by 26%, aligning with expectations for an enterprise software-as-a-service business [4]. Future Guidance - Management forecasted a deceleration in public cloud ARR growth to between 18% and 22% for Q4, indicating a slower migration of workloads to the cloud [5]. - Total ARR guidance for the year remains unchanged, projecting a decline of 2% to 4% [5]. Market Position - Following the recent decline, Teradata's shares are considered somewhat cheap, trading at approximately 12.2 times the forecasted 2024 adjusted EPS [6]. - Despite the potential for growth in hybrid cloud data management, the current competitive environment suggests that investors may want to wait for clearer signals before making purchases [6].