Teradata 2025 Q2 Earnings Strong Execution Despite Revenue and Earnings Declines

Teradata reported its fiscal 2025 Q2 earnings on August 6, 2025. The company delivered performance above the high end of recurring revenue guidance and met total revenue expectations, with EPS outperforming forecasts. However, both revenue and net income declined year-over-year, reflecting ongoing challenges in certain segments. The CEO emphasized progress in cloud growth and hybrid data environments for AI, but forward-looking guidance anticipates continued revenue declines.

Revenue
Teradata’s total revenue fell by 6.4% year-over-year to $408 million, driven by declines across most segments. Recurring revenue, which constitutes the bulk of the company’s income, decreased slightly to $354 million from $368 million, representing a 4% drop. Perpetual software licenses, hardware, and other segments experienced a sharper decline of 40% to $3 million. Consulting services also slid by 19% to $51 million. Notably, recurring revenue accounted for 87% of total revenue, up from 84% in the prior year, highlighting a shift toward more predictable income streams.

Earnings/Net Income
Earnings per share (EPS) fell significantly, with GAAP diluted EPS dropping 76.3% to $0.09 compared to $0.38 in the prior-year period. Net income also saw a steep decline to $9 million, a 75.7% decrease from $37 million. This downturn reflects a broader trend of declining profitability across both GAAP and non-GAAP metrics, with operating margins contracting significantly year-over-year.

Price Action
Following the earnings report, the stock price of Teradata (TDC) edged up 1.02% during the latest trading day and 0.88% over the most recent full trading week. However, it has declined 4.29% month-to-date, indicating mixed investor sentiment in the short term.

Post Earnings Price Action Review
The strategy of buying Teradata shares following a revenue raise quarter-over-quarter and holding for 30 days resulted in a -30.14% return, significantly underperforming the benchmark return of 48.58%. The excess return of -78.72% and a CAGR of -11.65% indicate poor performance. While the strategy had a maximum drawdown of 0.00%, the Sharpe ratio of -0.31 suggests it is a low-risk but underperforming investment approach.

CEO Commentary
Steve McMillan, President and CEO of Teradata, highlighted strong execution in Q2, noting performance above the high-end of recurring revenue guidance and at the top of total revenue expectations, with EPS exceeding forecasts. He emphasized Teradata’s cloud growth and on-prem strength in delivering hybrid data and analytics environments for AI, citing the company’s capability to support high-quality, well-governed data foundations for successful AI outcomes.

Guidance
For Q3 2025, Teradata expects recurring revenue to decline -4% to -6% and total revenue to decrease -7% to -9%, both in constant currency. GAAP diluted EPS is forecasted at $0.24 to $0.28, while non-GAAP diluted EPS is expected to range between $0.51 and $0.55. For full-year 2025, the company anticipates total revenue to decline -5% to -7% in constant currency, with GAAP diluted EPS expected between $1.04 and $1.12 and non-GAAP diluted EPS between $2.17 and $2.25. Public cloud ARR is projected to grow 14% to 18%, while Total ARR is expected to remain flat to 2%. Free cash flow is forecasted at $250 million to $280 million.

Additional News
Teradata’s recent 8-K filing on August 5, 2025, detailed Q2 financial results, highlighting a 17% increase in public cloud ARR to $634 million and a 2% increase in total ARR to $1.489 billion. The company reiterated its full-year outlook for Total ARR, Cloud ARR, and Free Cash Flow, maintaining growth expectations for its cloud segment despite anticipated declines in overall revenue. The CEO reiterated confidence in the company’s hybrid data platform for AI, reinforcing its long-term strategic direction.