Teradata (TDC) Down 28% Since Last Earnings Report: Can It Rebound?

Core Viewpoint - Teradata's recent earnings report shows a mixed performance, with a significant drop in share price and a positive earnings beat, indicating potential volatility ahead of the next earnings release [1]. Financial Performance - Teradata reported Q4 2025 non-GAAP earnings of 74 cents per share, exceeding the Zacks Consensus Estimate by 35.04% and reflecting a year-over-year increase of 39.6% [2]. - Revenues for the quarter reached $421 million, surpassing the Zacks Consensus Estimate by 6.52%, with a 3% year-over-year increase on a reported basis and 1% on a constant-currency basis [3]. - Total annual recurring revenues (ARR) at the end of Q4 increased 3% year over year to $1.52 billion, with a 1% increase on a constant-currency basis [3]. Revenue Breakdown - Public cloud ARR grew 15% year over year to $701 million, driven by rising demand for cloud solutions, with a cloud net expansion rate of 108% [4]. - Recurring revenues, which constitute 87.2% of total revenues, rose 5% year over year to $367 million [5]. - Perpetual software license and hardware revenues dropped 67% year over year to $1 million, while consulting services revenues fell 4% to $53 million [5]. Operating Metrics - The gross margin for Q4 on a non-GAAP basis was 62%, an increase of 110 basis points year over year [6]. - Selling, general & administrative (SG&A) expenses decreased by 5.1% year over year to $129 million, while research & development (R&D) expenses rose 7.4% to $73 million [6]. - The non-GAAP operating margin improved to 22.8%, up 520 basis points year over year [6]. Balance Sheet Strength - As of December 31, 2025, Teradata had cash and cash equivalents of $493 million, up from $406 million as of September 30 [7]. - Long-term debt decreased slightly to $431 million from $437 million [7]. - The company generated $160 million in cash from operating activities in Q4, compared to $94 million in the previous quarter [7]. Guidance and Outlook - For Q1 2026, Teradata expects non-GAAP earnings to be between 75 cents and 79 cents per share [8]. - The company anticipates recurring revenues to grow between 6% and 8% year over year, with total revenues expected to increase by 1-3% [9]. - For the full year 2026, non-GAAP earnings are projected to be between $2.55 and $2.65 per share [9]. Market Sentiment - Since the earnings release, there has been an upward trend in estimates revision, with the consensus estimate shifting by 15.91% [11]. - Teradata holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [13].