Teradata at Morgan Stanley Conference: Embracing Hybrid Cloud and AI

Published 06/03/2025, 14:20
Teradata at Morgan Stanley Conference: Embracing Hybrid Cloud and AI

On Tuesday, March 4, 2025, Teradata (NYSE: TDC) participated in the Morgan Stanley Technology, Media & Telecom Conference, unveiling its strategic shift towards hybrid cloud solutions and AI capabilities. CEO Steve McMillan discussed both opportunities and challenges, highlighting the company’s cloud-first transformation and addressing concerns about the on-premise business.

Key Takeaways

  • Teradata is undergoing a transformation called "Teradata 3.0," focusing on hybrid cloud and AI.
  • The company has achieved over $600 million in cloud ARR, comprising more than a third of its business.
  • Teradata aims for 14% to 18% constant currency cloud ARR growth this year, expecting acceleration later in the year.
  • A partnership with NVIDIA will integrate AI capabilities into Teradata’s technology.
  • Despite on-premise erosion, the company anticipates ARR growth in 2025 and revenue growth in 2026.

Financial Results

  • Cloud ARR has surpassed $600 million, representing a significant portion of Teradata’s business.
  • The company is targeting ARR growth in 2025, driven by cloud migrations and new customer acquisitions.
  • Guidance for cloud ARR growth is set at 14% to 18% for the year, with expectations of stronger performance in the latter half.
  • Teradata is committed to returning over 50% of free cash flow to shareholders while reinvesting in innovation.

Operational Updates

  • Teradata 3.0 positions the company as a hybrid data platform provider for AI applications.
  • More than 50% of Teradata’s cloud customers also maintain on-premise systems, highlighting the hybrid approach.
  • The company is rightsizing its consulting business to support its technology offerings and drive ARR growth.
  • New offerings, such as Enterprise Vector Store and AI Unlimited, are being integrated with Microsoft Fabric.

Future Outlook

  • Teradata is focusing on hybrid deployment methods, offering flexibility in data warehousing and data lake solutions.
  • The partnership with NVIDIA aims to enhance AI services, with a launch planned for Q2 2025.
  • The company is expanding its market reach by targeting workloads from competitors like Databricks.
  • Geographic expansion and improved deal visibility are expected to drive growth.

Q&A Highlights

  • The hybrid cloud strategy was emphasized as essential, with over half of cloud customers also using on-premise systems.
  • Details of the NVIDIA partnership were shared, highlighting the integration of NVIDIA’s hardware and software with Teradata’s technology.
  • Cost efficiencies and capital allocation were discussed, reinforcing a focus on profitable growth and innovation.
  • Competitive advantages include Teradata’s parallel architecture for processing vector stores and delivering AI solutions efficiently.

In conclusion, Teradata is leveraging its hybrid cloud and AI capabilities to navigate challenges and enhance financial performance. For more detailed insights, please refer to the full transcript below.

Full transcript - Morgan Stanley Technology, Media & Telecom Conference:

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: If you have any questions, please reach out to your Morgan Stanley sales representative. So thank you for joining us this morning. I’m delighted to be joined by Steve McMillan, CEO of Teradata. Steve is a recurring guest here at the TMT Conference. Just so everyone knows Steve’s background, spent a number of years within the tech world, has been at F5, been at Oracle, been at IBM.

He kind of joined Teradata to help build acceleration in this transformation. A lot of what we talk about will maybe get to that. So Steve, just thank you for

Steve McMillan, CEO, Teradata: joining us today. Thanks, Eric. Great to be here.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: So, yes, maybe let’s start with exactly what I said, which is maybe helping to elaborate on where Teradata is on its journey to kind of reinvent itself. When I started covering this company a decade ago, it was effectively a fully on prem hardware business. Prior to your arrival, there was kind of a big push to go cloud native. Now the message is hybrid. So maybe just help us better understand where you are in this kind of evolution and transformation of the company.

Steve McMillan, CEO, Teradata: Yes, I think hybrid and AI are really foundations of what we call and what we’re positioning with our customers as Teradata three point zero. When I joined Teradata, we embarked on a course Teradata one point zero of becoming cloud first and we pivoted a lot of the company towards cloud. We reinvigorated our investments in engineering and innovation, pivoted our sales force, built customer success motions. And that enabled us to enter into Teradata two point zero where we really accelerated our progress from a cloud perspective. Now we’re over $600,000,000 of ARR in the cloud, well over a third of our business is in the cloud.

And so we had some real success in terms of moving from that on prem perception to be seen truly as a capability that can be deployed both on prem and in the cloud. And now we’re into Teradata three point zero, which is how are we positioning ourselves from a trusted hybrid data platform that can serve the world of AI use cases and advanced analytical use cases.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: So there’s a lot underlying that. I’m going to kind of follow it up with two high level questions before we get into the specifics. The first one is just on the market. When you talk about a data platform, there’s a lot that underlies what Teradata does. There’s data warehousing, data lakes, lake houses, business analytics, etcetera.

Can you maybe just give us a high level overview about how you think about those markets right now? And then maybe we’ll dig into the Teradata side of what you do.

Steve McMillan, CEO, Teradata: Yes, I think one of the great things and how we approached our technology innovation was to give our customers real choice. So when they wanted to deploy a technology and their data structures in terms of a structured enterprise data warehouse to run some of their mission critical financial applications or manufacturing applications from a data and analytics perspective, a really high performance with some of the biggest data loads in the world, some of the highest performant data structures in the world. That was a deployment choice in terms of enterprise data warehousing that we enabled for our customers. But we also saw the growth of Lake. And so we also invested in technologies that enabled our query engine, which is a really differentiated capability from a massively parallel computing architecture to really query late data and enable our customers to deploy in a late methodology.

And the combination of those two in terms of a lake house. So we offer our customers the ability to utilize our technology in any of those three deployment methods from a data perspective, but also in the cloud and on prem. And when we talk about the cloud, we are clearly available across all three of the CSPs today, showing good growth from a cloud perspective. But the interesting thing is, we still probably have certainly more than 50 of our customers that are in the cloud with us are actually still on prem with us. So they operate in that hybrid environment and our technology is actually designed so that we can have a query fabric so that customers can actually deploy their data in the cloud or in an on prem solution and integrate that data together in a very smart way that enables them to do that without moving lots of data around.

So we call it take the query engine to the data, don’t take the data to the

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: query engine. Right. Okay. And that’s maybe a good transition to the kind of question about Teradata specific, which is, can you maybe walk us through the core offerings? And I know that’s maybe a bit siloed question, but that kind of core offering is most popular in the market for you today and really what the new capabilities are that you’re bringing to market that kind of ensures that you remained strongly competitively positioned?

Steve McMillan, CEO, Teradata: Yes. I think one of the key things from a Teradata perspective is focus. So we know that we serve enterprise customers. So the largest organizations in the world, that’s the real focus area for us. Organizations that have to store, process, get value from data at enormous scale is where the Teradata core technology offering really differentiates.

But over the past couple of years, we’ve actually increased the analytics capabilities of the platform quite significantly. So a number of years ago, we bought a company called Aster. We’ve actually taken all of

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: that analytical AI ML capabilities that that organization had and

Steve McMillan, CEO, Teradata: put them in database. AI ML capabilities that that organization had and put them in database. And what that enables us to do with our ClearScape offering is essentially deliver a set of analytic capabilities at enormous scale for the largest companies in the world. Combined with that, we have a very open and connected approach. So Teradata will never get into developing that language model capability, but we allow organizations to bring any of their models and language models into the Teradata ecosystem to actually get the benefits from either an AI or a Gen AI type solution, but inside the Teradata platform.

And we’re seeing a lot of interest just now in terms of organizations that want to utilize the right language model and it may be a small language model or a medium sized language model or a large language model, and say the Teradata environment. So a lot of interest around that and bring your own model. And then the core capabilities of the platform in terms of just providing the best query engine to enable our organizations around the world to get the best out of their data.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay. That’s perfect. And I want to kind of continue on the theme of competitive advantage. Something you’ve hammered home and that we as a firm have hammered home is the concept of hybrid cloud, multi cloud. You’re going to have both in your enterprise.

That gives you a competitive advantage over what would be cloud native customers, so to speak. But what other competitive advantages do you believe Teradata has today? What’s the competitive moat that you guys have in

Steve McMillan, CEO, Teradata: this market? Yes. I think there’s we’ve got a number of competitive moats, all protected by our patent portfolio actually. So if we think about it in terms of three dimensions, one is how do we differentiate in this AI world? And so what we found is that our massively parallel architecture is really good at processing vector stores.

And when you think about the foundations of AI and Gen AI solutions is based on vectors and the ability to store, process, query vectors at enormous scale. And our massively parallel architecture that we developed on prem and can deploy on prem and in the cloud actually enables us to process vectors at enormous scale and at an economic point, which is much better than our competitions. So we are starting a conversation with our customers around the economics of inference. If you think about inference being the underlying capability for AI and Gen AI, we can deliver a very economical solution for our customers in terms of that inference capability. A good example of that is we’ve been working with a number of banks around the world about deploying Hugging Face, a small language model, running inside the Teradata environment to do complaints analytics, analyzing complaints and then generating next best action in terms of the business process around customer management.

And that’s enabled us to really focus on voice or differentiated capability from an AI perspective. The next area of focus and for the company is AI on prem. So there’s a lot of deployment in terms of AI solutions in the cloud. But what we found is when they get to production or enterprise scale in terms of deployment, they become very expensive to run. And so we have a number of customers now that are thinking about if their data gravity, they’ve got a lot of data on prem.

They’ve got a lot of processing capability on prem. We’re actually able to deliver an integrated solution either using third party language models, but we’re also working with NVIDIA in terms of a complete AI on prem capability that’s going to be available generally in the end of Q2 this year. So that AI on prem is the second area of competitive differentiation that we’re focusing on. And then the third area really is about taking use cases that we’ve deployed with some of the largest organizations in the world and helping deploy those to other customers through the world. So taking financial services use cases around risk fraud, taking use cases around CX and managing customer relationships and then replicating those solutions with customers that can take advantage of the Teradata technology set.

So those three areas are the areas of focus for us in terms of how we plan to grow the business as we go through this year.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay. Something you mentioned which dovetails into my next question was just this partnership with NVIDIA. Can you maybe just expand? So it comes out in 2Q. What exactly is this partnership that you’ve kind of introduced or yet to launch?

Steve McMillan, CEO, Teradata: Yes, it was great at the most recent NVIDIA conference. Teradata was up behind Jensen as he was talking about strategic data platforms that are integrating with the NVIDIA environment and Teradata is certainly one of those. But that level of tight integration has been recognized by NVIDIA in terms of our enterprise vector store capability. So they as we did a technology briefing, this isn’t just a marketing partnership with NVIDIA. This is a technology partnership and technology development partnership where NVIDIA are looking at the technology that Teradata has in terms of operating vector stores and vector analysis at enormous scale.

And they saw the Teradata capability as something that was unique in the marketplace. And by taking the NVIDIA both hardware stack, but also software stack in terms of their NEMs capability, integrating that with their Teradata technology either in the cloud or on prem, we’re able to essentially offer a full set of AI services for customers that can be deployed in a consistent way across both cloud and on prem. Okay.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay. Let’s I think it’s a great start. Let’s now kind of delve into the business. So 2025, there were a number of kind of headwinds that you faced. There was unexpected on prem erosion, some deal slippage, some large deals that took longer to close.

Can you help give us an update just kind of where some of those headwinds stand today and almost a reassurance to the market that this isn’t about competitive losses. Some of these are related to unique factors that you can kind of claw back, so to speak? Yes. So

Steve McMillan, CEO, Teradata: yes, the difference for 2025 compared to 2024 is there’s going to be a material change in terms of our overall retention rates in 2025. That’s going to help us stabilize our base and have a foundation to our business that’s going to be a platform for growth as we go through the rest of the year. So a material change in terms of improvement to our retention rates is going to be a key difference in 2025 compared to 2024. The other element as we look at 2025 is we did see customers taking their large deal, what we would consider a large 8 figure deal. We usually do a handful of those deals in the year and last year we only did a couple of them.

I think that’s a fundamental change in terms of how organizations are thinking about whether they deploy on prem or whether they deploy in the cloud and how much to deploy in the cloud and how much to deploy on prem. So we saw a lot of big deals last year actually turn into some 8 figure deals turning into 7 figure deals where our customers are thinking about, okay, let’s be smart about what we put in the cloud and let’s be smart about what we keep on prem. And the great thing about Teradata is we enable that choice for our customers. So those customers are committing and recommitting to the Teradata technology set, but are changing the pattern from a deployment perspective. And I think that’s great for us because it’s going to give us opportunity to both grow in the cloud with these customers.

But I think what we’re going to see is a growth in our on prem business as we go through this year.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay, perfect. So maybe let’s dovetail into that. There’s a lot of moving pieces kind of underneath the Teradata business. There’s on prem expansions, there’s on prem migrations to the cloud, there’s cloud expansions, there’s new logos. Let’s just start high level kind of talking us through these different moving pieces and how you think each one of them maybe impact ’25 performance?

Steve McMillan, CEO, Teradata: I think they all give us opportunity for growth. So 2025 for us is a year where we’re going to return to ARR growth. And that’s going to be driven by all of the factors that you just mentioned. We’re going to have a balanced performance in terms of growth between migrating on prem technology and capabilities to the cloud and also expansions of our business both in the cloud and on prem. We’re going to continue to drive new logos and winning new logos.

We’re seeing great success in terms of some use case deployment. We can talk a lot about the new logos in a minute or two. But at our core, we have a very solid business that enables us to have the capability to continue to grow in the cloud and also continue to expand on prem.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Perfect. It’s almost as if the question, let’s maybe let’s talk about new logos. No, I know this is a smaller part of your business. It is a key focus area for you guys. I think the realization is it’ll take longer for those new logos to kind of spin up to become material.

But there was also a period of time where this uncertain macro environment made it harder to kind of close and onboard new logos. So just where do we stand with some of these new logos that might be smaller and maybe historically taken more of a cloud first approach?

Steve McMillan, CEO, Teradata: Yes. I think the key from a new logo perspective for us is to ensure that we’ve got some great differentiation. I think that’s going to come back to some of the earlier points in terms of we see real success from a new logo perspective when we sell a use case. And we’re seeing some real success from a new logo perspective actually on prem. So a number of the new logos that we’re running are in markets where the cloud might not be as mature or as highly regulated.

And so those organizations want to have that on prem capability. And then I think a new area for focus is around AI and taken to customers that message around enterprise vector store. And competing with organizations that you may not expect Teradata to compete with organizations like Paincone, which have a vector store capability just now, but we believe that we can have we have a technology that can deploy at enormous scale compared to that kind of offering. And then we’re seeing some great competitive win backs against IBM or traditional competitors like IBM and Oracle. And that’s really driven by the true hybrid nature of our cloud capability and also the fact that our integration with CSPs like Microsoft and AWS and Google is very advanced and our customers can take advantage of all of our capabilities on prem and also deploy exactly the same query engine to get the benefit of that in the cloud.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: So the next question to me is almost like the key question of everything, which is a persistent bear thesis is sure, you’ll have success migrating on premise workloads to the cloud, But what happens to the rest of that on premise business? Is that a melting ice cube or at least that’s the thesis? Help us understand why that’s not the case. And obviously, if we normalize for migrations to the cloud, it sounds like what you’re saying is this on premise business can actually grow, which would be which would refute that bear case. So let’s just dig into that, if you could, please.

Yes.

Steve McMillan, CEO, Teradata: And I think some of the messaging that you see from Teradata now is moving much more towards hybrid to one of the points that you made earlier. And I think that just reflects how organizations are thinking about their data estate, where their data is in the cyber environment, what data they want to have in the cloud, what workloads they want to have in the cloud and what workloads they want to have on prem. And I think organizations who may have had a cloud only approach are now rethinking that in terms of it may be from a scale or a cost perspective, but they are thinking about how can we smartly deploy workload across these environments. And I think that’s a key area of differentiation for Teradata. Because we have the same query engine that operates on prem as we do in the cloud, it enables us to seamlessly provide that environment across both cloud and on prem for our customers.

I think as customers think about that balance, we see them thinking about, okay, what are we going to deploy on prem? And so one of the banks that we’ve been talking about actually when they deployed Hugging Face, they deployed it on prem inside the Teradata environment and our massively parallel architecture actually enabled them to run Hugging Face and an Intel CPU architecture just as efficiently more efficiently in fact than running it on an NVIDIA GPU. And so actually given our customers that choice of how they deploy these solutions

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: is a real opportunity for us in terms of future growth. Right, right. And so it feels like a complete you’re kind of refuting that in real time, which is maybe when the world thought everything was cloud only, cloud native, cloud everything, but that’s not the world today. Yes.

Steve McMillan, CEO, Teradata: I think that as just the statistic there’s no over 50% of the customers are with us in the cloud are also on prem. So hybrid is the world today and we are uniquely placed to serve that marketplace. Okay, perfect.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: You mentioned two questions ago, some customers that I guess I call them kind of boomerang customers. They were once with Teradata. They went off the platform, now they’ve come back. Why are they coming back? How common is that?

Is that becoming increasingly more common? Can you just add some context to that?

Steve McMillan, CEO, Teradata: Yes, I think there’s no better ratification of our strategy when a customer chooses to come back to the Terra and utilize the Terra data technology set. And that’s certainly one of the new logo motions that we have. And we do see that and usually it’s driven by customers recognizing the beneficial economics of utilizing the Teradata platform for their at scale enterprise wide workloads, because we are very efficient, very effective in terms of delivering those workloads at a competitive price point for our customers, in some case an order of magnitude cheaper. But some of the new capabilities and workload cases that we’re seeing just now are actually looking at workloads which would be more associated with Databricks as an example. So I mentioned about our technology innovation in Teradata two point zero in terms of building up ClearScape analytics.

That’s enabling us to deliver to our customers analytical capabilities that compete with Databricks at enormous scale and at a cost point and a price point that’s much less than utilizing those technologies for Databricks and we can do that both on prem and in the cloud.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Perfect. I’m going to quickly touch on consulting just to kind of get the question out of the way, which is 15% of your business still is consulting. The results there have been more inconsistent. Just maybe my question is, why still have this business? What does it enable?

What do you need to do to kind of get it to stabilize?

Steve McMillan, CEO, Teradata: Yes. When I first joined Teradata, I said at our core, we were going to be a technology company. And I think that was really important to set out in terms of we’re not going to be a consulting and services organization. I think at one point the consulting revenue streams for Teradata were up over $500,000,000 a year. But as a technology business, you do need a consulting capability to take these value propositions to the market and take our technology capability to the market and enable our partner focus in terms of working alongside partners to deliver a complete service to our end customer.

And that consulting capability enables us to deploy our technologies in unique and innovative ways, enables our customers to take advantage of the technologies to solve real business problems inside their environment every single day. And so I think we are we’ve been over the last four years been rightsizing our consulting business. And I think now it’s getting to the point where it’s the right size to enable our technology business and enable growth in our technology business. And that’s really the focus for our consulting organization. It’s not to be a consulting for the sake of consulting, it’s consulting to drive our technology and our ARR.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay, perfect. I want to go back to maybe what some of the earlier conversations. You have launched out of a lot of new offerings and products, so Enterprise Vector Store. A few years ago, it was Vantage Cloud Lake, the second half of last year, AI Unlimited. Can you talk about the relative areas of kind of success that you’ve had with these handful of offerings?

I’m kind of taking three different technologies, but bringing them together into one. Just where is the relative strength coming in? And how does that relative strength inform you where the next leg of innovation comes from?

Steve McMillan, CEO, Teradata: Yes, I think all of those innovations that you just mentioned have helped Teradata reposition ourselves in the minds of our existing customers, but also our new prospects. So if you just think about it, Vantage Cloud Lake was all about saying, hey, we’re not just an enterprise data warehouse company, you can use our query engine to solve and address all of your lake, all of your unstructured data and utilize the Teradata technology to process that. The innovations around AI Unlimited enabled us to be natively integrated into Microsoft Fabric. Satya stood up on stage last year, had the big Teradata logo behind them as one of the five ISVs that’s natively integrated into Microsoft Fabric. Again, a complete repossession of Teradata.

That technology actually is a serverless query engine and who four years ago when you were initially covering this, Eric, who would have thought that Teradata would come out with a serverless query engine given their integration with the server technology in the world. So again, it enables us to reposition the Teradata technology stack against a brand new set of use cases integrated into Microsoft’s data future in terms of data fabric. So all of these innovations are kind of building the foundation of a totally flexible data platform that can be deployed in a number of different ways. And then we are building on top of that now our AI capabilities. We just had a press release on Monday talking about some of our enterprise vector store and AI capabilities, our integration with NVIDIA, our AI Workbench capability that will enable customers to deploy AI solutions in a very effective way.

At the end of Q2, we’re coming out with that AI on prem offer, which will integrate together in an on prem packaged offer, NVIDIA capabilities, and Teradata technologies for a distinct solution set for our customers. And then in the third quarter that enterprise packaging of that entire enterprise vector store to offer an end to end management model around vector store for our customers. And if you think about the massive opportunity there is around vectors as AI starts to vectorize all of this unstructured data, documents, video, sound, they’re going to have to store those vectors and that’s going to be a huge opportunity for organizations that have a unique capability to store, analyze those vectors at enormous scale and that’s what our offer is going to enable in third quarter.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay, okay, exciting. And I want to talk about cloud ARR because it obviously has been a massive growth engine for you guys. You’re guiding to 14% to 18% constant currency growth this year, but what I hear from you guys is more kind of confidence in the back half of the year and actually the chance for this business to accelerate through the year. So one, where does the confidence come from? And two, would you say maybe you have more, I guess, improved visibility into this business and maybe you had a year ago?

Steve McMillan, CEO, Teradata: Yes. What gets you excited about that second half? Yes. I think 2024 was a year where we changed some of the fundamentals of our execution. We brought in a new Chief Revenue Officer.

We restructured our sales organization from a worldwide perspective. We put new leadership into our sales organization, both in terms of our new logo engine, but also in terms of globalizing some of our industries like financial services, which has really enabled us to take value propositions that we’re deploying in Europe, bring it to The Americas, things that we’re doing in The Americas, taking it to APJ and delivering a really focused set of offerings for those institutions. But as we’ve invested in our go to market operations, it has enabled us to get better insight into the deals that we’re doing. Certainly, we are not looking to depend on very, very large 8 figure deals as we have in the past in terms of execution. And so as we look at our outlook for 2025, we believe it’s very pragmatic.

We set a range which we think we can deliver and from a cloud perspective in every single quarter. We are very backend loaded as an organization. In terms of the interactions that we have with our existing customer base, they tend to be fourth quarter interactions. So that back end waiting is still there for us, but what we’re going to demonstrate as we go through Q1, Q2, Q3 as a consistent performance and a consistent cascade that gives us confidence in terms of executing in Q4.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay. That’s perfect. Let’s talk about the cost side of things. This is a CFO question, but I’m going to ask you the CEO, which is there has been a renewed focus over the last six plus months on kind of cost efficiencies. What actions have you taken?

What’s kind of the financial impact that we should expect and timing of that financial impact?

Steve McMillan, CEO, Teradata: Yes, I think since I joined Teradata, our focus has always been profitable growth. And so making sure that we are prudent with the investments that we’re making, we’re making targeted investments inside the business and that we continuously look at how can we operate more efficiently, more effectively to essentially ensure a good shareholder return. And so when we look at our investment envelope, we do that very judiciously in terms of ensuring that we’re continuing to drive efficiency and effectiveness, but we’re also investing in the right areas of the business for growth. Some of the actions that we took in 2024 were essentially to get the right financial foundation from a cost and expense perspective to deliver that shareholder return in 2025, But we’re also making sure that we’re investing in the innovation that we have inside Teradata.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: And maybe to that point, your like if I think about capital allocation, you’re committed to returning more than 50% of free cash flow to shareholders. That is a little bit lower than the target last year, but I do hear you talking about kind of areas of reinvestment to kind of continue the growth engine. Help us understand the capital allocation priorities and kind of the intensity of that reinvestment

Steve McMillan, CEO, Teradata: years? Yes. I think by taking that return from $75,000,000 to $50,000,000 it gives us more operating flexibility inside the business. And as we look at the balance sheet overall, we believe that that capital allocation will enable us to be more flexible in terms of our operating principle and operational execution for both this year, but also into next year. And so we actually returned, we set a target last year in 2024 of at least 75%.

We actually returned more than 75%. And but we see delivering more than 50% of free cash flow to our shareholders in 2024 as something that’s realistic and still gives us the operational flexibility from a balance sheet perspective.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay, perfect. I’m going to look kind of beyond 2025 because I realized 2025, there’s still a lot of moving pieces in the quest to get back to growth, you have ARR growth. If we look back there was once a time where Teradata had guided over $450,000,000 of kind of annual run rate free cash flow. Is there a path to that type of cash generation in this business? And is there any way that you can help us think about like if you had the Magic eight Ball kind of timing for that potential?

Because if you look at the stock price compared to what the forecast potential of this business could be, there could be a material difference in how we might think about things.

Steve McMillan, CEO, Teradata: Yes, I think if I look at the current store price and compare it just to today’s free cash flow and our free cash flow outlook for the year, there’s certainly opportunity in terms of from a value perspective and gaining value from a Teradata investment. What I would say is, this year we’re returning to ARR growth, which will return us to revenue growth in 2026. And that will enable us to significantly improve our free cash flow position as we go through the subsequent years. So that return to growth based on better retention rates, improved cloud mix and growth in the cloud and the strengthening of our on prem business will enable that growth and enable us to grow free cash flow into the future.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Okay. And maybe that’s a good way to end with my last question and maybe it’s repetitive, but I want to make sure it’s hammered home, which is help us all understand as we sit here with Teradata starting 2025, what’s most underappreciated about the story? A lot of moving pieces, a really exciting end market, but what should we all get excited about? And maybe what is the market not understanding or under appreciating?

Steve McMillan, CEO, Teradata: Yes, I think Teradata three point zero is all about innovation and an AI world. So we truly believe that we have the trusted hybrid data platform for AI. And that’s something that that level of innovation that will deliver to uniquely set us apart in the marketplace, I think it’s something that’s under appreciated, but our customers are starting to appreciate that right now.

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: Perfect. That’s a great way to end.

Steve McMillan, CEO, Teradata: Awesome. Thank you

Eric, Morgan Stanley Sales Representative/Analyst, Morgan Stanley: so much.

Steve McMillan, CEO, Teradata: Thank you, Eric. Thank you.

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