Teradata — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue was $399 million for the quarter, a 4% decrease year-over-year (YoY) as reported and in constant currency.
• Recurring revenue was $359 million, a 2% decrease YoY as reported and in constant currency, representing 90% of total revenue.
• GAAP diluted EPS was $0.40, compared to $0.42 in the prior year period.
• Non-GAAP diluted EPS was $0.70, compared to $0.72 in the prior year period.
• GAAP gross margin was 59.6%, down from 60.8% in the prior year period.
• Non-GAAP gross margin was 60.7%, down from 62.3% in the prior year period.
• GAAP operating margin was 13.5%, down from 14.7% in the prior year period.
• Non-GAAP operating margin was 21.8%, down from 23.6% in the prior year period.
• Cash flow from operations was $91 million, compared to $94 million in the prior year period.
• Free cash flow was $85 million, compared to $88 million in the prior year period.
• Adjusted free cash flow was $96 million, compared to $88 million in the prior year period.
• Total Annual Recurring Revenue (ARR) increased to $1.512 billion, a 1% increase as reported and 2% in constant currency.
• Public cloud ARR increased to $700 million, an 11% increase YoY as reported and in constant currency.
• For the nine months ended September 30, 2026, total revenue was $1,253 million, a 1% increase YoY as reported.
• For the nine months ended September 30, 2026, GAAP net income was $419 million, compared to $93 million in the prior year period.
• For the nine months ended September 30, 2026, Non-GAAP net income was $218 million, a 22% increase YoY.

Guidance and Future Outlook:

• Full-year 2026 GAAP diluted EPS outlook increased to a range of $4.63 to $4.67.
• Full-year 2026 Non-GAAP diluted EPS outlook increased to a range of $2.86 to $2.90.
• Full-year 2026 recurring revenue outlook narrowed to the high-end of the previous range: 1% to 2% YoY growth.
• Full-year 2026 total revenue outlook narrowed to the high-end of the previous range: -1% to flat YoY.
• Full-year 2026 Total ARR growth reaffirmed at 2% to 4% YoY.
• Full-year 2026 Cash flow from operations reaffirmed at $665 million to $685 million, including an after-tax net benefit of $315 million related to a settlement with SAP.
• Full-year 2026 Adjusted free cash flow reaffirmed at $330 million to $350 million.
• Fourth quarter 2026 recurring revenue outlook is -2% to -4% YoY.
• Fourth quarter 2026 total revenue outlook is -4% to -6% YoY.
• Fourth quarter 2026 GAAP diluted EPS expected to be $0.26 to $0.30.
• Fourth quarter 2026 Non-GAAP diluted EPS expected to be $0.58 to $0.62.

Business Segments and Product Lines:

• Product sales revenue was $362 million for the quarter, a 2% decrease YoY.
• Consulting services revenue was $37 million for the quarter, a 21% decrease YoY.
• Released Teradata Factory for general availability, an integrated GPU system combining analytics, AI, and governance.
• Evolved Tera into an agentic coworker for enterprise data work, enabling natural language analysis and workflow automation.
• Announced Tera Context Engine, a vendor-neutral layer connecting databases, data platforms, pipelines, catalogs, models, and AI agents.
• Launched Tera Harness, an execution layer designed to route work to the right skills, tools, data, and models.
• Made Teradata's Data Analyst Agent available in AWS Marketplace.
• Integrated Teradata Autonomous Knowledge Platform with Microsoft OneLake.
• Tera delivered 53% lower cost per reliably solved task than Snowflake Cortex Code based on internal testing using a public benchmark.

Market and Competitive Landscape:

• Management noted that the increased pace of new product innovation and AI service capabilities is driving positive customer interest.
• Teradata reported a 53% cost advantage over Snowflake Cortex Code on a specific data pipeline engineering benchmark.

Risks and Challenges:

• The press release notes risks related to the rapidly changing and intensely competitive nature of the IT and data analytics industries.
• Risks include execution risks for cloud, hybrid, on-premises, AI, and ML offerings, as well as operational disruptions and sales cycle delays.
• Potential impacts from global economic conditions, inflation, tariffs, and recessionary conditions are cited.
• Risks associated with data privacy, IP enforcement, cyberattacks, and maintaining secure products are noted.
• Risks include the potential for subscription cancellations or failures to renew.

Management Commentary and Tone:

• Steve McMillan, President and CEO, stated that the quarter marked progress against annual goals, driving total ARR growth, improving profitability, and delivering strong free cash flow.
• Management expressed confidence in the increased pace of innovation and AI capabilities driving customer interest.

Other Key Points:

• The full-year 2026 Cash flow from operations guidance includes an after-tax net benefit of $315 million related to a settlement with SAP.
• The nine-month 2026 GAAP net income included a $359 million non-cash benefit from the SAP settlement.
• The company reported $57 million in repurchases of common stock for the quarter and $131 million for the nine months.
• The company repaid $456 million of long-term borrowings during the nine months ended September 30, 2026.
• The company recorded $121 million in non-recurring legal and other expenses incurred in connection with the SAP litigation and resulting settlement for the nine months.
• Teradata's GAAP effective tax rate for the three months ended September 30, 2026, was 24.0%, while the Non-GAAP effective tax rate was 20.2%.