Teradata(US:TDC)2026-02-10 22:30Financial Data and Key Metrics Changes - Total ARR grew by 3% on a reported basis and 1% in constant currency, marking a stabilization milestone for the business [15][16] - Fourth quarter total revenue was $421 million, up 3% year-over-year as reported and 1% in constant currency, exceeding expectations [16][17] - Free cash flow for the full year reached $285 million, surpassing the high end of the outlook [15][19] - Non-GAAP diluted earnings per share were $0.74, exceeding the top end of the outlook range by $0.17 [18] Business Line Data and Key Metrics Changes - Cloud ARR grew by 15% as reported and 13% in constant currency, now representing 46% of total ARR [16] - Consulting services revenue for the fourth quarter was $53 million, down 4% year-over-year as reported and down 6% in constant currency [17] Market Data and Key Metrics Changes - Customer engagement across all regions and industries shifted towards AI and Elastic Compute, indicating a growing interest in AI solutions [6][12] - The company saw a resurgence of interest in its hybrid model, with customers leveraging both on-prem and cloud deployment options [5][21] Company Strategy and Development Direction - The company is focused on harnessing Agentic AI systems to enable autonomous decision-making at enterprise scale [5] - A strong emphasis is placed on product development and innovation, with plans to invest more resources in this area to fuel future growth [15][26] - The company aims to maintain a hybrid deployment strategy to meet diverse customer needs driven by data sovereignty and regulatory environments [5][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 on solid footing, with expectations for continued growth in total ARR, operating margin, and free cash flow [15][23] - The company anticipates typical seasonality in ARR, with Q1 expected to be the largest renewal and highest erosion quarter [20][23] Other Important Information - The company announced a board refreshment initiative, with plans to add new independent directors to enhance governance [27] - A new partnership with Unstructured.io was established to automate the ingestion of unstructured content into analysis-ready data [10] Q&A Session Summary Question: On-premise AI materiality and customer investment - Management sees on-premise AI as a key growth driver, with increased POC activity leading to production deployments [30] Question: Free cash flow growth versus EPS guidance - The difference in guidance is attributed to a one-time tax benefit in Q4, affecting EPS but not free cash flow [32][33] Question: Drivers behind growth inflection - The AI marketplace is opening new opportunities, with improved retention rates and product announcements contributing to growth [36][38] Question: Visibility on migration versus expansion - Migration deals are complex and timing is hard to gauge, while expansions provide more consistent revenue growth [40][41] Question: Impact of new AI-related solutions on revenue - New product capabilities are expected to contribute to growth, but not heavily factored into current financial outlook [62] Question: Investments in headcount and sales hiring - The company plans to invest in forward-deployed engineering and product development to enhance AI solutions [68][70] Question: Seasonality and revenue growth expectations - Typical seasonality is expected, with Q1 showing erosion followed by growth in subsequent quarters [73][75] Question: Board refreshment and governance changes - The board refreshment process is ongoing, with a focus on enhancing skill mix and governance [77] Question: Characteristics of successful software companies in AI transition - The company emphasizes its role as a data layer for AI, positioning itself for growth in the autonomous AI space [81][82] Question: Operating margin expansion drivers - Expansion will be driven by gross margin improvements and efficiencies in operating expenses [84]