Teradata Q3 2025 presentation: EPS beat overshadowed by revenue decline

Introduction & Market Context

Teradata Corp (NYSE:TDC) reported its third-quarter 2025 results on November 4, beating earnings expectations but disappointing investors with declining revenue figures. Despite delivering an EPS of $0.72 that exceeded forecasts by 24.14%, Teradata’s stock fell 4.08% in after-hours trading, closing at $21.59, as the market reacted to a 5% year-over-year revenue decline and cautious forward guidance.

The data analytics company continues to navigate a challenging transition period, balancing its traditional business with strategic investments in cloud services and artificial intelligence solutions. This transition is reflected in the mixed performance metrics presented during the earnings call, with cloud annual recurring revenue (ARR) growing by 11% even as overall revenue contracted.

Quarterly Performance Highlights

Teradata’s Q3 2025 results revealed a company in transformation, with several key metrics highlighting both progress and ongoing challenges:

• Revenue reached $416 million, down 5% year-over-year but slightly above analyst expectations of $411.39 million
• EPS of $0.72 significantly outperformed the forecasted $0.58
• Cloud ARR grew by 11%, demonstrating traction in the company’s strategic growth area
• Free cash flow increased 28% year-over-year to $88 million
• Operating margin improved to 23.6%, up 110 basis points from the previous year
• Recurring revenue, which represents the bulk of Teradata’s business at $366 million, declined 2% year-over-year

The company’s performance reflects its ongoing transition from traditional on-premises solutions to cloud-based offerings, with the cloud segment showing promising growth despite overall revenue headwinds.

Detailed Financial Analysis

Teradata’s financial results reveal a company effectively managing costs while navigating revenue challenges. The significant EPS beat of 24.14% above forecasts indicates strong cost management and operational efficiencies that have helped maintain profitability despite top-line pressure.

The 28% increase in free cash flow to $88 million represents a bright spot in the company’s financial performance, providing Teradata with resources to continue investing in strategic growth initiatives while navigating the transition period.

However, the 5% year-over-year decline in total revenue and 2% drop in recurring revenue highlight the challenges Teradata faces as it shifts its business model. The market’s negative reaction to the earnings report, with the stock falling 4.08% in after-hours trading, suggests investors remain concerned about the pace of this transition and the company’s ability to return to overall growth.

Strategic Initiatives

During the earnings presentation, CEO Steve McMillan emphasized Teradata’s strategic positioning as "the best autonomous AI and knowledge platform for agentic workloads," highlighting the company’s focus on artificial intelligence and hybrid cloud solutions.

The company has been strengthening its hybrid cloud capabilities and expanding its AI services, areas that are becoming increasingly important in the technology industry. This strategic direction aims to capitalize on enterprise demand for flexible data analytics solutions that can operate across multiple environments.

Teradata’s 11% growth in cloud ARR provides evidence that this strategy is gaining traction, though the overall revenue decline indicates that the transition remains a work in progress. The company appears to be balancing investment in future growth areas while managing the decline of traditional revenue streams.

Forward-Looking Statements

Looking ahead, Teradata reaffirmed its 2025 total ARR growth outlook and projected continued ARR growth into 2026. The company raised its full-year non-GAAP EPS guidance to $2.38-$2.42, slightly above previous projections.

However, Teradata also provided more cautious guidance for the immediate future, anticipating a 1-3% decline in Q4 recurring revenue year-over-year. This outlook reflects the ongoing challenges in the company’s traditional business segments as it continues its strategic transition.

During the Q&A session, analysts focused on Teradata’s strategies for balancing cloud and on-premise services, as well as the expanding AI pipeline. Management indicated that external economic factors, such as a potential federal shutdown, would not significantly affect operations.

As Teradata trades near $21.59, well below its 52-week high of $33.20 but above its low of $18.43, investors appear to be taking a wait-and-see approach as the company continues its strategic transformation toward cloud and AI-focused services in an increasingly competitive market landscape.

Full presentation:

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