Teradata Q2 Earnings Beat Estimates, Revenues Fall Y/Y, Shares Up

Teradata TDC reported second-quarter 2025 non-GAAP earnings of 47 cents per share, which beat the Zacks Consensus Estimate by 14.63%. The bottom line dropped 26.6% year over year.

Revenues of $408 million beat the Zacks Consensus Estimate by 1.91%. The figure declined 6.4% year over year on a reported basis and 7% on a constant-currency (cc) basis.

Total annual recurring revenues (ARR) at the second-quarter end increased 2% year over year to $1.489 billion. The figure was unchanged at cc.

Teradata shares were up 3.36% in pre-market trading. The company’s shares have returned 35.1% year to date, underperforming the Zacks Computer & Technology sector’s appreciation of 11.8%.

TDC Top Line in Detail

Public cloud ARR increased 17% on a reported basis and 15% at cc year over year to $634 million. The growth was driven by increasing demand for its cloud solutions. The cloud net expansion rate was 112% in the reported quarter.

Recurring revenues (86.8% of total revenues) decreased 4% year over year, both on a reported basis and cc to $354 million. Perpetual software license and hardware revenues (0.7% of total revenues) dropped 40% year over year (down 62% at cc) to $3 million.

Consulting services’ revenues (12.5% of revenues) fell 19% year over year (down 20% at cc) to $51 million. Product Sales decreased 4% year over year on a reported basis (down 5% at cc) to $357 million.

TDC Operating Details

Second-quarter gross margin on a non-GAAP basis was 58.3%, contracting 380 basis points (bps) year over year.

Selling, general & administrative (SG&A) expenses increased 3.1% year over year to $135 million. Research & development (R&D) expenses were $71 million, up 4.4% year over year.

As a percentage of revenues, SG&A increased 300 bps year over year to 33.1%, whereas R&D declined 180 bps year over year to 17.4%.

The non-GAAP operating margin was 16.4%, down 560 bps year over year.

TDC Balance Sheet

As of June 30, 2025, Teradata had cash and cash equivalents of $369 million compared with $368 million as of March 31.

Long-term debt as of June 30, 2025, was $443 million compared with $449 million as of March 31.

In the second quarter, TDC generated $43 million in cash from operating activities compared with the previous quarter’s $8 million.

The company generated a free cash flow of $39 million in the reported quarter.

TDC Offers Q3 and 2025 Guidance

For third-quarter 2025, non-GAAP earnings are expected to be between 51 and 55 cents per share. 

Teradata expects recurring revenues to decline between 4% and 6% year over year, at cc. The company expects total revenues to be down 7-9% year over year. 

For 2025, TDC expects non-GAAP earnings between $2.17 and $2.25 per share. 

Public cloud ARR growth is projected to be between 14% and 18% on a year-over-year basis, at cc. Total ARR growth is expected between flat and up 2% year over year, at cc.

Teradata expects recurring revenues to decline in the 3% to 5% range, year over year, at cc. The company expects total revenues to be down 5-7% at cc from 2024. 

Cash flow from operations is expected to be between $270 million and $300 million. Free cash flow is anticipated to be in the $250-$280 million range.

Zacks Rank & Stocks to Consider

Currently, Teradata has a Zacks Rank #4 (Sell). 

MKS Inc. MKSI, DoorDash DASH and Lumentum LITE are some better-ranked stocks in the broader Zacks Computer and Technology sector. Each of the three stocks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MKS shares have declined 11.8% year to date. MKS is set to report its second-quarter 2025 results on Aug. 6.

DoorDash shares have appreciated 52.3% year to date. DASH is set to report its second-quarter 2025 results on Aug. 6.

Lumentum shares are up 28.8% year to date. LITE is set to report its fourth-quarter fiscal 2025 results on Aug. 12.

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This article originally published on Zacks Investment Research (zacks.com).

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