A month has gone by since the last earnings report for Teradata (TDC). Shares have added about 10.3% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Teradata due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.
Teradata 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.
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.
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.
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.
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.
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.
In the past month, investors have witnessed a upward trend in fresh estimates.
The consensus estimate has shifted 11.67% due to these changes.
Currently, Teradata has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock has a grade of C on the value side, putting it in the middle 20% for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Teradata has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
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