Teradata's Q2 Earnings Call: Mixed Growth Signals Amid Revenue Decline and Margin Pressures.

Teradata Corp reported a 2% YoY increase in Total ARR to $1.49 billion in Q2, driven by 17% growth in Cloud ARR. However, total revenue declined 6% to $408 million, and gross margin fell to 58.3% due to services revenue challenges. The company expects a 4-6% decline in recurring revenue and 7-9% decline in total revenue in Q3, with total ARR and free cash flow expected to meet full-year guidance.

Teradata Corporation (TDC) reported its fiscal 2025 Q2 earnings on August 5, 2025, with mixed results across key metrics. The company reported a 2% year-over-year (YoY) increase in Total ARR to $1.49 billion, driven by a 17% growth in Cloud ARR. However, total revenue declined by 6% to $408 million, and gross margin fell to 58.3% due to challenges in services revenue [1].

The company's CEO, Stephen McMillan, attributed the results to improved execution across the company, particularly in sales and marketing. He highlighted the introduction of new executive leadership and a realignment of the marketing function to support growth objectives. McMillan also emphasized the launch of the Teradata AI factory and the general availability of the Enterprise Vector Store, which are designed to advance hybrid AI capabilities [1].

Despite the mixed performance, Teradata reaffirmed its full-year guidance for Total ARR, Cloud ARR, recurring revenue, and cash flow. The company expects a 14% to 18% growth in Cloud ARR and a non-GAAP EPS of $2.17 to $2.25 for the year. For Q3 2025, Teradata guided for recurring revenue in the range of minus 4% to minus 6% YoY on a constant currency basis, total revenue in the range of minus 7% to minus 9% YoY, and non-GAAP diluted EPS of $0.51 to $0.55 [1].

However, the company noted a shift in linearity in the business, with expectations for Q3 cloud ARR to dip below the annual target range but full-year guidance reaffirmed. This shift is attributed to lower services bookings and anticipated revenue. The company also acknowledged continued headwinds in the services business impacting total revenue and gross margin [1].

Teradata's stock price fell by 1.89% during the latest trading day following the earnings release, reflecting market disappointment over the earnings and revenue declines. The stock has declined 12.84% month-to-date post-earnings [2].

In summary, Teradata reported a mixed Q2 performance with a 2% YoY increase in Total ARR, driven by a 17% growth in Cloud ARR. However, total revenue declined by 6%, and gross margin fell due to services revenue challenges. The company maintained its full-year guidance but noted a shift in linearity in the business for Q3. The market reaction to the earnings release reflected market disappointment over the earnings and revenue declines.

References:
[1] https://seekingalpha.com/news/4479926-teradata-outlines-14-percentminus-18-percent-cloud-arr-growth-target-for-fy25-as-hybrid-ai
[2] https://www.ainvest.com/news/teradata-2025-q2-earnings-misses-targets-net-income-plummets-75-7-2508/