TDC Q1 Earnings Beat Estimates, Revenues Fall Y/Y, Stock Down

Teradata TDC reported first-quarter 2025 non-GAAP earnings of 66 cents per share, which beat the Zacks Consensus Estimate by 15.79%. The bottom line increased 15.8% year over year.

Revenues of $418 million missed the Zacks Consensus Estimate by 1.71%. The figure declined 10% year over year on a reported basis and 8% on a constant-currency (cc) basis.

Total annual recurring revenues (ARR) at the end of the first quarter declined 3% year over year to $1.442 billion. The figure fell 2% at cc. Public cloud ARR increased 15% on a reported basis and 16% at cc year over year to $606 million. The growth was driven by increasing demand for its cloud solutions.

The cloud net expansion rate was 115%, reflecting ongoing customer engagement and expansion within existing accounts.

Teradata Corporation Price, Consensus and EPS Surprise

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

Following the results, TDC shares lost 6.06% in the pre-market trading, likely due to the decline in revenues. The company’s shares have underperformed the Zacks Computer & Technology sector year to date. TDC shares have plunged 33.6% compared with the sector’s decline of 8.1%.

TDC’s Q1 Top Line in Detail

Recurring revenues (contributing 85.6% to revenues) declined 8% year over year on a reported basis (down 6% at cc) to $358 million.

Perpetual software license and hardware revenues (2.4% of revenues) increased 25% year over year (up 26% at cc) to $10 million.

Consulting services’ revenues (12% of revenues) fell 27.5% year over year (down 26% at cc) to $50 million.

Product Sales declined 7% year over year on a reported basis (down 5% at cc) to $368 million.

TDC Operating Details

The gross margin on a non-GAAP basis was 60.3%, contracting 190 basis points (bps) year over year.

Selling, general & administrative (SG&A) expenses declined 28% year over year to $116 million. Research & development (R&D) expenses were $66 million, down 12% year over year.

As a percentage of revenues, SG&A declined 690 bps year over year to 27.8%, whereas R&D fell 160 bps year over year to 15.8%.

The non-GAAP operating margin was 21.8%, up 270 bps year over year.

TDC Balance Sheet

As of March 31, 2025, Teradata had cash and cash equivalents of $368 million compared with $420 million as of Dec. 31, 2024.

Long-term debt as of March 31, 2025, was $449 million compared with $455 million as of Dec. 31, 2024.

In the first quarter, TDC generated $8 million in cash from operating activities compared with the previous quarter’s $156 million.

The company generated a free cash flow of $7 million in the reported quarter.

TDC Initiates Q2 Guidance

For the second quarter of 2025, Teradata expects non-GAAP earnings per share between 37 cents and 41 cents. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Total revenues are likely to decline 7-9% year over year in the second quarter of 2025.

For 2025, TDC expects non-GAAP earnings per share between $2.15 and $2.25. The company anticipates total revenues to be down 4-7% from the year-ago reported figure. 

Public cloud ARR growth is projected between 14% and 18% on a year-over-year basis.

Total ARR is anticipated to be flat to grow 2% year over year.

Teradata expects recurring revenues to decline 3-5% year over year at cc.

Cash flow from operations is expected to be between $270 million and $300 million.

The free cash flow is anticipated to be in the range of $250-$280 million. 

Zacks Rank & Stocks to Consider

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

StoneCo STNE, Affirm AFRM and Broadcom AVGO are some better-ranked stocks that investors can consider in the broader sector. Each stock presently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

StoneCo shares have appreciated 66.8% year to date. STNE is set to report its first-quarter 2025 results on May 8.

Affirm shares have plunged 18.2% year to date. AFRM is scheduled to report its fourth-quarter fiscal 2025 results on May 8.

Broadcom shares have plunged 14.3% year to date. AVGO is scheduled to report its second-quarter fiscal year 2025 results on June 5.

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