Teradata Corp ((TDC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Teradata Corp reflected a mixed sentiment, highlighting both achievements and challenges. While the company demonstrated solid execution in revenue and ARR growth, surpassing expectations, these positives were tempered by a decline in total revenue and cloud ARR growth falling short of targets. This resulted in a balanced outlook for the company.
Exceeded Revenue and Recurring Revenue Guidance
Teradata’s third-quarter performance was marked by revenue and recurring revenue figures that surpassed the guidance range. The company reported non-GAAP earnings per share of $0.72, exceeding expectations and showcasing its ability to deliver strong financial results.
Total ARR Growth Ahead of Schedule
The company achieved its second consecutive quarter of total Annual Recurring Revenue (ARR) growth ahead of its initial target, with a 1% increase as reported. This growth highlights Teradata’s successful execution in expanding its recurring revenue base.
Strong Free Cash Flow Performance
Teradata reported a robust free cash flow of $88 million for Q3, representing a 28% increase year-over-year. This performance has led to an adjusted full-year guidance of $260 million to $280 million, indicating strong cash generation capabilities.
AI and Knowledge Platform Leadership
The company was recognized as a leader in the Forrester Wave Data Management for Analytics platforms, underscoring its hybrid cloud capabilities. This recognition highlights Teradata’s strong position in the data management and analytics space.
Launch of AI Services
Teradata introduced new AI services aimed at transforming AI pilots into production-ready solutions. The company expects to complete over 150 AI engagements this year, demonstrating its commitment to advancing AI capabilities.
Decline in Total Revenue
Despite the positive developments, Teradata’s total revenue for Q3 was $416 million, reflecting a 5% decline year-over-year as reported and a 6% decline in constant currency. This decline poses a challenge to the company’s overall financial performance.
Cloud ARR Growth Below Expectations
Cloud ARR grew by 11%, which was below the target range due to the pull forward of deals from Q3 to Q2. The cloud net expansion rate stood at 109%, indicating some positive momentum despite the shortfall.
Revenue Guidance Indicates Decline
Looking ahead, Teradata’s guidance for Q4 suggests a decline in recurring revenue by 1% to 3% year-over-year in constant currency, with total revenue expected to decrease by 2% to 4%. This guidance reflects cautious expectations for the upcoming quarter.
Forward-Looking Guidance
Teradata remains optimistic about its future prospects, with expectations of continued ARR growth in 2026. The company anticipates meaningful free cash flow growth, supported by a mix of ARR growth and cost savings initiatives. This forward-looking guidance suggests confidence in overcoming current challenges and achieving long-term success.
In summary, Teradata’s earnings call presented a balanced outlook, with notable achievements in revenue and ARR growth tempered by challenges in total revenue and cloud ARR growth. The company’s leadership in AI and data management, along with its strong free cash flow performance, positions it well for future growth despite the near-term hurdles.