Teradata Q3 Earnings Beat Estimates, Revenues Fall Y/Y, Shares Rise

Teradata TDC reported third-quarter 2025 non-GAAP earnings of 72 cents per share, which beat the Zacks Consensus Estimate by 35.85%. The bottom line increased 4.3% year over year.

Revenues of $416 million beat the Zacks Consensus Estimate by 2.54%. The figure declined 5.5% year over year on a reported basis and 6% on a constant-currency (cc) basis.

Total annual recurring revenues (ARR) at the third-quarter end increased 1% year over year to $1.49 billion, flat at cc.

Teradata shares were up 21.1% at the time of writing this article. The company’s shares have dropped 33.6% year to date, underperforming the Zacks Computer & Technology sector’s appreciation of 29.4%.

TDC Q3 Top Line in Detail

Public cloud ARR increased 11% on a reported basis, as well as at cc year over year to $633 million. The growth was driven by increasing demand for its cloud solutions. The cloud net expansion rate was 112% in the reported quarter.
 

Teradata Corporation Price, Consensus and EPS Surprise

Teradata Corporation price-consensus-eps-surprise-chart | Teradata Corporation Quote

Recurring revenues (88% of total revenues) decreased 2% year over year on a reported basis and 3% in cc to $366 million. Perpetual software license and hardware revenues (0.7% of total revenues) dropped 57.1% year over year (down 44% at cc) to $3 million.

Consulting services’ revenues (11.3% of revenues) fell 23% year over year (down 22% at cc) to $47 million. Product Sales decreased 3% year over year on a reported basis (down 3% at cc) to $369 million.

TDC Operating Details

Third-quarter gross margin on a non-GAAP basis was 62.3%, expanding 70 basis points (bps) year over year.

Selling, general & administrative (SG&A) expenses decreased 11% year over year to $122 million. Research & development (R&D) expenses were $70 million, down 4.1% year over year.

As a percentage of revenues, SG&A decreased 180 bps year over year to 29.3%, whereas R&D inched up 20 bps year over year to 16.8%.

The non-GAAP operating margin was 23.6%, up 110 bps year over year.

TDC’s Balance Sheet Remains Strong

As of Sept. 30, 2025, Teradata had cash and cash equivalents of $406 million compared with $369 million as of June 30.

Long-term debt as of Sept. 30, 2025, was $437 million compared with $443 million as of June 30.

In the third quarter, TDC generated $94 million in cash from operating activities compared with the previous quarter’s $43 million.

The company generated a free cash flow of $88 million in the reported quarter.

TDC Offers Q4 and 2025 Guidance

For fourth-quarter 2025, non-GAAP earnings are expected to be between 53 and 57 cents per share. 

Teradata expects recurring revenues to decline between 1% and 3% year over year, at cc. The company expects total revenues to be down 2-4% year over year. 

For 2025, TDC expects non-GAAP earnings between $2.38 and $2.42 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 $280 million and $300 million. Free cash flow is anticipated to be in the $260-$280 million range.

Zacks Rank & Stocks to Consider

Currently, Teradata has a Zacks Rank #3 (Hold). 

Fair Isaac FICO, StoneCo STNE and Simulations Plus SLP are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector.

Fair Isaac shares have dropped 19.3% year to date. This Zacks Rank #1 (Strong Buy) company is scheduled to release fourth-quarter fiscal 2025 results on Nov. 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

StoneCo shares have returned 136.2% year to date. StoneCo is scheduled to release third-quarter 2025 results on Nov. 6. StoneCo sports a Zacks Rank #1.  
 
Simulations Plus shares have dropped 39% year to date. Simulations Plus is set to report its fourth-quarter fiscal 2025 results on Dec. 1. Simulations Plus currently flaunts a Zacks Rank #1. 

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

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