Teradata Q2 Earnings Beat Estimates, Revenues Fall Y/Y, Shares Up

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]