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TDC's Q3 earnings beat estimates by 20.69%, while revenues fell 4.1% year over year to $399 million.
TDC's public cloud ARR rose 11% to $700 million, while AI innovations strengthened its hybrid cloud offerings.
TDC raised its 2026 EPS outlook to $2.86-$2.90 and expects approximately 200 bps of margin expansion.
Teradata (TDC - Free Report) reported third-quarter 2026 non-GAAP earnings of 70 cents per share, down 2.8% year over year. The figure surpassed the Zacks Consensus Estimate by 20.69%.
Revenues of $399 million declined 4.1% from the year-ago quarter but beat the consensus by 0.99%. Total annual recurring revenue, or ARR, increased 1% as reported and 2% in constant currency (cc) to $1.512 billion.
TDC Cloud ARR Growth Remains Strong
Public cloud ARR advanced 11% year over year, both as reported and in cc, to $700 million. Cloud represented 46% of total ARR at quarter-end, compared with 42% in the year-ago period.
Subscription ARR reached $744 million, down from $765 million a year earlier and $750 million reported in the previous quarter.
Teradata Corporation Price, Consensus and EPS Surprise
Maintenance and software upgrade rights ARR declined to $68 million from $92 million. Management highlighted increased customer interest in hybrid deployments, reflecting enterprises' preference for flexibility across cloud and on-premises environments.
Teradata Q3 Top Line in Detail
Recurring revenues totaled $359 million, declining 2% year over year, both as reported and in cc. These revenues accounted for 90% of total revenues, compared with 88% in the year-ago quarter.
Product sales decreased 2% year over year to $362 million, representing approximately 91% of total revenues. Perpetual software licenses, hardware and other revenues remained flat at $3 million.
Consulting services revenues, accounting for approximately 9% of total revenues, declined 21% year over year to $37 million. The company attributed the weakness to the ongoing transition from cloud migration engagements toward advanced AI services.
Teradata Expands Agentic AI Capabilities
Teradata continued expanding its Autonomous Knowledge Platform, introducing new capabilities designed to help enterprises deploy artificial intelligence applications securely across cloud, hybrid and on-premises environments.
The company enhanced Tera, its agentic coworker, and introduced the Tera Context Engine and Tera Harness to improve AI execution, governance and business understanding. It also made Teradata Factory generally available, supporting AI workloads within customer-controlled infrastructure.
Management highlighted new customer wins across manufacturing, government and transportation. A Japanese electronics company selected Teradata's hybrid platform, while a Latin American transportation agency adopted its cloud and AI capabilities for predictive infrastructure analysis.
TDC Operating Margins Face Pressure
Non-GAAP gross margin contracted 160 basis points (bps) year over year to 60.7%. Recurring revenue gross margin narrowed 180 bps to 67.1%, reflecting the timing of upfront revenue recognition from on-premises subscriptions earlier in 2026.
Non-GAAP selling, general and administrative expenses declined 10.9% year over year to $90 million. Research and development expenses increased 8.3% to $65 million as Teradata accelerated investments in product innovation.
Non-GAAP operating margin declined to 21.8% from 23.6% in the year-ago quarter. However, the year-to-date operating margin expanded 300 bps to 23.6%, supported by operating expense discipline.
TDC Cash Flow and Balance Sheet Remain Solid
Teradata generated $91 million in operating cash flow during the quarter compared with $94 million a year earlier. Free cash flow declined to $85 million from $88 million, while adjusted free cash flow increased 9.1% to $96 million.
The company ended September with cash and cash equivalents of $432 million. Net cash stood at $343 million, with no outstanding debt excluding finance lease liabilities.
Teradata repurchased approximately 2 million shares for $57 million during the quarter, bringing year-to-date repurchases to $131 million. The company continues targeting the return of at least 50% of adjusted free cash flow through buybacks.
Teradata Raises 2026 Earnings Outlook
For the fourth quarter of 2026, Teradata expects non-GAAP earnings of 58-62 cents per share. Total revenues are projected to decline 4-6% year over year, while recurring revenues are expected to decrease 2-4%.
For 2026, Teradata raised its non-GAAP earnings outlook to $2.86-$2.90 per share from $2.65-$2.73. The company reaffirmed adjusted free cash flow guidance of $330-$350 million and total ARR growth expectations of 2-4%.
The company narrowed its recurring revenue growth forecast to 1-2% and total revenue expectations to a decline of 1% to flat. Teradata also expects approximately 200 bps of operating margin expansion for the year, double its initial forecast.
Zacks Rank & Upcoming Earnings to Consider
Teradata currently carries a Zacks Rank #3 (Hold).
Forgent Power, Telos and NVIDIA are expected to report their quarterly results on Nov. 12, 9 and 17, respectively. Forgent Power shares have dropped 37% year to date (YTD). Telos shares have declined 6.5% YTD, while NVIDIA shares have decreased 2.3% over the same timeframe.
View the Zacks #1 Rank List
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Teradata Q3 Earnings Surpass Estimates, Revenues Decrease Y/Y
Key Takeaways
Teradata (TDC - Free Report) reported third-quarter 2026 non-GAAP earnings of 70 cents per share, down 2.8% year over year. The figure surpassed the Zacks Consensus Estimate by 20.69%.
Revenues of $399 million declined 4.1% from the year-ago quarter but beat the consensus by 0.99%. Total annual recurring revenue, or ARR, increased 1% as reported and 2% in constant currency (cc) to $1.512 billion.
TDC Cloud ARR Growth Remains Strong
Public cloud ARR advanced 11% year over year, both as reported and in cc, to $700 million. Cloud represented 46% of total ARR at quarter-end, compared with 42% in the year-ago period.
Subscription ARR reached $744 million, down from $765 million a year earlier and $750 million reported in the previous quarter.
Teradata Corporation Price, Consensus and EPS Surprise
Teradata Corporation price-consensus-eps-surprise-chart | Teradata Corporation Quote
Maintenance and software upgrade rights ARR declined to $68 million from $92 million. Management highlighted increased customer interest in hybrid deployments, reflecting enterprises' preference for flexibility across cloud and on-premises environments.
Teradata Q3 Top Line in Detail
Recurring revenues totaled $359 million, declining 2% year over year, both as reported and in cc. These revenues accounted for 90% of total revenues, compared with 88% in the year-ago quarter.
Product sales decreased 2% year over year to $362 million, representing approximately 91% of total revenues. Perpetual software licenses, hardware and other revenues remained flat at $3 million.
Consulting services revenues, accounting for approximately 9% of total revenues, declined 21% year over year to $37 million. The company attributed the weakness to the ongoing transition from cloud migration engagements toward advanced AI services.
Teradata Expands Agentic AI Capabilities
Teradata continued expanding its Autonomous Knowledge Platform, introducing new capabilities designed to help enterprises deploy artificial intelligence applications securely across cloud, hybrid and on-premises environments.
The company enhanced Tera, its agentic coworker, and introduced the Tera Context Engine and Tera Harness to improve AI execution, governance and business understanding. It also made Teradata Factory generally available, supporting AI workloads within customer-controlled infrastructure.
Management highlighted new customer wins across manufacturing, government and transportation. A Japanese electronics company selected Teradata's hybrid platform, while a Latin American transportation agency adopted its cloud and AI capabilities for predictive infrastructure analysis.
TDC Operating Margins Face Pressure
Non-GAAP gross margin contracted 160 basis points (bps) year over year to 60.7%. Recurring revenue gross margin narrowed 180 bps to 67.1%, reflecting the timing of upfront revenue recognition from on-premises subscriptions earlier in 2026.
Non-GAAP selling, general and administrative expenses declined 10.9% year over year to $90 million. Research and development expenses increased 8.3% to $65 million as Teradata accelerated investments in product innovation.
Non-GAAP operating margin declined to 21.8% from 23.6% in the year-ago quarter. However, the year-to-date operating margin expanded 300 bps to 23.6%, supported by operating expense discipline.
TDC Cash Flow and Balance Sheet Remain Solid
Teradata generated $91 million in operating cash flow during the quarter compared with $94 million a year earlier. Free cash flow declined to $85 million from $88 million, while adjusted free cash flow increased 9.1% to $96 million.
The company ended September with cash and cash equivalents of $432 million. Net cash stood at $343 million, with no outstanding debt excluding finance lease liabilities.
Teradata repurchased approximately 2 million shares for $57 million during the quarter, bringing year-to-date repurchases to $131 million. The company continues targeting the return of at least 50% of adjusted free cash flow through buybacks.
Teradata Raises 2026 Earnings Outlook
For the fourth quarter of 2026, Teradata expects non-GAAP earnings of 58-62 cents per share. Total revenues are projected to decline 4-6% year over year, while recurring revenues are expected to decrease 2-4%.
For 2026, Teradata raised its non-GAAP earnings outlook to $2.86-$2.90 per share from $2.65-$2.73. The company reaffirmed adjusted free cash flow guidance of $330-$350 million and total ARR growth expectations of 2-4%.
The company narrowed its recurring revenue growth forecast to 1-2% and total revenue expectations to a decline of 1% to flat. Teradata also expects approximately 200 bps of operating margin expansion for the year, double its initial forecast.
Zacks Rank & Upcoming Earnings to Consider
Teradata currently carries a Zacks Rank #3 (Hold).
Forgent Power Solutions (FPS - Free Report) , Telos (TLS - Free Report) and NVIDIA (NVDA - Free Report) are some other top-ranked stocks in the broader Zacks Computer and Technology sector. While Forgent Power and Telos sport a Zacks Rank #1 (Strong Buy) each at present, NVIDIA carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Forgent Power, Telos and NVIDIA are expected to report their quarterly results on Nov. 12, 9 and 17, respectively. Forgent Power shares have dropped 37% year to date (YTD). Telos shares have declined 6.5% YTD, while NVIDIA shares have decreased 2.3% over the same timeframe.