Teradata’s second quarter results were well received by the market, as the company surpassed Wall Street expectations on both revenue and non-GAAP profit despite a year-over-year revenue decline. Management credited improved sales execution and early deal closings for the outperformance, pointing to stronger customer adoption of hybrid data platforms and advances in AI-driven solutions. CEO Stephen McMillan highlighted the company’s ability to serve clients needing both on-premises and cloud solutions for their evolving analytics needs, stating, “We are building on our cloud growth and leveraging our strength in on-prem to provide customers with the hybrid data and analytics environments they need.”
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Teradata (TDC) Q2 CY2025 Highlights:
- Revenue: $408 million vs analyst estimates of $402 million (6.4% year-on-year decline, 1.5% beat)
- Adjusted EPS: $0.47 vs analyst estimates of $0.40 (16.9% beat)
- Adjusted Operating Income: $67 million vs analyst estimates of $64.35 million (16.4% margin, 4.1% beat)
- Revenue Guidance for Q3 CY2025 is $404.8 million at the midpoint, below analyst estimates of $408.3 million
- Management slightly raised its full-year Adjusted EPS guidance to $2.21 at the midpoint
- Operating Margin: 5.9%, down from 15.1% in the same quarter last year
- Annual Recurring Revenue: $1.49 billion at quarter end, up 1.6% year on year
- Billings: $380 million at quarter end, down 2.3% year on year
- Market Capitalization: $1.91 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Teradata’s Q2 Earnings Call
- Erik Woodring (Morgan Stanley) probed the company’s approach to achieving greater operating leverage and free cash flow, to which CEO Stephen McMillan and CFO John Ederer emphasized ongoing expense optimization and a focus on ARR growth.
- Tyler Radke (Citi) questioned the drivers behind the outperformance in ARR and whether early deal closures would create headwinds for the next quarter; McMillan mentioned improved sales execution and balanced demand across on-prem and cloud.
- Radi Sultan (UBS) asked about catalysts for migrations to the Vantage platform and GenAI use cases, with McMillan pointing to a significant pipeline of AI-influenced workloads and the unique value of Teradata’s hybrid capabilities.
- Chirag Ved (Evercore ISI) inquired about trends in on-prem versus cloud deployments as AI adoption grows, and Ederer clarified that cloud ARR growth is roughly evenly split between migrations and expansions, with new products fueling interest.
- Wamsi Mohan (BofA) examined the revenue potential of the Teradata AI Factory and the impact of deals pulled forward from Q3 to Q2; McMillan described strong interest in early AI Factory deployments, while Ederer outlined expected variability in ARR growth due to timing.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will closely watch (1) the pace of AI-driven customer migrations and expansion on both cloud and on-prem platforms, (2) the effectiveness of recent cost optimization efforts in stabilizing service margins and supporting free cash flow, and (3) the uptake and monetization of new AI product offerings such as the AI Factory and Enterprise Vector Store. Progress on major customer renewals and successful execution of hybrid deployments will also be critical indicators of sustained growth.
Teradata currently trades at $20.16, in line with $20.23 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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