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TERADATA CORP /DE/ (TDC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 printed mixed: revenue $418M fell 10% YoY and came in slightly below S&P Global consensus, while non-GAAP EPS of $0.66 beat materially on lower spend and FX; GAAP EPS was $0.45 .
  • Public cloud ARR rose to $606M (+16% CC), but total ARR declined to $1.442B (-2% CC); cloud is now 42% of total ARR, underscoring hybrid traction amid macro volatility .
  • Guidance: FY25 GAAP EPS raised to $1.06–$1.16, total revenue range widened to -4% to -7% (from -4% to -6%), with non-GAAP EPS held at $2.15–$2.25; Q2 guides to non-GAAP EPS $0.37–$0.41 and revenue down 7–9% YoY (CC) .
  • Potential stock reaction catalysts: EPS beat despite revenue headwinds; reaffirmed return to total ARR growth in Q4; leadership hires (CFO, CPO) and new AI offerings (Enterprise Vector Store) reinforce execution and AI narrative .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP EPS $0.66 beat the top end of outlook, driven by lower spend and FX; operating margin expanded to 21.8% (+270 bps YoY) due to 2024 restructuring actions .
  • Public cloud ARR reached $606M (+16% CC), with cloud net expansion rate 115% and cloud now 42% of total ARR—management highlighted strong hybrid relevance amid macro uncertainty .
  • Strategic AI momentum: launched Enterprise Vector Store with planned NVIDIA NeMo integration, highlighted multiple customer AI use cases, and partnership visibility (AWS, Google, Azure, NVIDIA, ServiceNow) .

What Went Wrong

  • Revenue $418M declined 10% YoY and landed toward the low end of expectations, pressured by services; total ARR -2% CC with erosion seasonality in Q1 .
  • Gross margin down YoY (non-GAAP 60.3%, -190 bps) primarily due to services; recurring revenue -6% CC, with a ~2 ppt Q2 headwind anticipated from upfront revenue .
  • Q2 non-GAAP EPS guide ($0.37–$0.41) implies a sequential step-down from Q1 ($0.66) on lower volume, lower corporate spend, higher claims, and mix effects; FY25 total revenue range widened (discretionary services) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$440 $409 $418
Recurring Revenue ($USD Millions)$372 $351 $358
GAAP Gross Margin (%)60.5% 59.4% 59.3%
Non-GAAP Gross Margin (%)61.6% 60.9% 60.3%
GAAP Operating Margin (%)12.7% 9.5% 15.8%
Non-GAAP Operating Margin (%)22.5% 17.6% 21.8%
GAAP Diluted EPS ($)$0.33 $0.26 $0.45
Non-GAAP Diluted EPS ($)$0.69 $0.53 $0.66

Actuals vs S&P Global consensus:

MetricQ4 2024 ConsensusQ4 2024 ActualQ1 2025 ConsensusQ1 2025 Actual
Revenue ($USD Millions)$414.7*$409 $423.2*$418
Primary EPS ($)$0.434*$0.53 $0.562*$0.66
Values retrieved from S&P Global.*

Segment revenue:

SegmentQ3 2024 ($M)Q4 2024 ($M)Q1 2025 ($M)
Product Sales$379 $354 $368
Consulting Services$61 $55 $50
Total$440 $409 $418

KPIs:

KPIQ3 2024Q4 2024Q1 2025
Public Cloud ARR ($USD Millions)$570 $609 $606
Total ARR ($USD Millions)$1,482 $1,474 $1,442
Recurring Revenue as % of Total85% 86% 86%
Cloud Share of Total ARR (%)——42%

Key cross-references:

  • Free cash flow: $7M in Q1 (vs $21M LY) .
  • Cash from operations: $8M in Q1; FY25 outlook $270–$300M; FCF $250–$280M .
  • Share repurchases: ~$44M in Q1 (1.6M shares), target ≥50% of FCF returned .

Guidance Changes

MetricPeriodPrevious Guidance (as of Q4’24)Current Guidance (Q1’25)Change
Total Revenue YoY (CC)FY 2025-4% to -6% -4% to -7% Widened lower end (lowered)
GAAP Diluted EPSFY 2025$1.05–$1.15 $1.06–$1.16 Raised
Non-GAAP Diluted EPSFY 2025$2.15–$2.25 $2.15–$2.25 Maintained
Public Cloud ARR YoY (CC)FY 2025+14% to +18% +14% to +18% Maintained
Total ARR YoY (CC)FY 2025Flat to +2% Flat to +2% Maintained
Recurring Revenue YoY (CC)FY 2025-3% to -5% -3% to -5% Maintained
Cash from Operations ($M)FY 2025$270–$300 $270–$300 Maintained
Free Cash Flow ($M)FY 2025$250–$280 $250–$280 Maintained
Recurring Revenue YoY (CC)Q2 2025—-5% to -7% New Q2 detail
Total Revenue YoY (CC)Q2 2025—-7% to -9% New Q2 detail
GAAP Diluted EPSQ2 2025—$0.02–$0.06 New Q2 detail
Non-GAAP Diluted EPSQ2 2025—$0.37–$0.41 New Q2 detail
Non-GAAP Tax Rate / SharesQ2 2025—~23.1% tax; ~97M shares New Q2 detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
AI/Technology InitiativesGenAI features, hybrid AI narrative; restructuring to improve execution Enterprise Vector Store (planned NVIDIA NeMo); multiple AI use cases; agentic AI positioning Momentum building; clearer productization
Hybrid Cloud/ARRCloud ARR growth (Q3 $570M; Q4 $609M), total ARR down Cloud ARR $606M; cloud = 42% of total ARR; return to total ARR growth in Q4 reiterated Cloud mix rising; ARR inflect expected
Services/Macro/TariffsSegment realignment; cost actions Services softness impacting margins/revenue; tariffs direct impact immaterial; widened FY revenue range due to services discretion Macro cautious; services optimization
Partnerships/Ecosystem—Active with AWS/GCP/Azure/NVIDIA; featured at ServiceNow Knowledge, data network participation Expanding ecosystem relevance
Retention/Go-to-Market—Meaningful retention improvements; GTM pivot to AI/use cases; POCs converting to production Execution improving

Management Commentary

  • “We delivered public cloud ARR of $606 million… We are helping industry leaders around the world recognize value from trusted AI and our hybrid platform” — Steve McMillan, CEO .
  • “Operating margin was 21.8%, up 270 bps YoY… Non-GAAP EPS exceeded the top end of our outlook; the outperformance is primarily from lower spend and FX” — Charles Smotherman, Interim CFO .
  • “There is no trusted AI without trusted data… Enterprise Vector Store… purpose-built for agentic workloads and RAG-based implementations” — Sumeet Arora, CPO .
  • “Cloud is now 42% of our total ARR… hybrid capabilities are very relevant in times of macro volatility” — Steve McMillan, CEO .
  • “We remain committed to returning to total ARR growth in Q4, producing strong operating margin and free cash flow” — Charles Smotherman, Interim CFO .

Q&A Highlights

  • Profitability trajectory: Q2 non-GAAP EPS step-down vs Q1 due to lower volume, lower corporate spend, mix and “higher claims”; partially offset by lower headcount/corporate spend .
  • Services/margins: services weakness drove gross margin pressure; actions underway to return to positive services margin in H2 .
  • Retention: meaningful improvements YoY and sequentially; customer success driving better health metrics .
  • Government exposure: minimal U.S. federal spend; majority of government business is international/state/local .
  • Hybrid and AI monetization: POCs leveraging Teradata platform in production at higher speed and lower cost; AI revenue impact more 2026-weighted as capacity expands with use case adoption .

Estimates Context

  • Q1 2025: Revenue $418M vs S&P Global consensus $423.2M* (miss); non-GAAP EPS $0.66 vs $0.562* (beat). Management cited lower spend and FX for EPS outperformance and services drag on revenue/margins .
  • Q4 2024: Revenue $409M vs $414.7M* (miss); non-GAAP EPS $0.53 vs $0.434* (beat) .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • EPS resilience despite revenue pressure: cost actions and FX tailwinds supported margin/EPS; watch sustainability as Q2 guides to step-down .
  • ARR inflection narrative intact: management reiterates return to total ARR growth in Q4; monitor retention and net expansion rates (cloud NER 115%) .
  • Services are the swing factor: discretionary services softness widened FY revenue range; H2 margin recovery plan is a key execution milestone .
  • Hybrid + AI differentiation: Enterprise Vector Store and partner ecosystem (NVIDIA, ServiceNow) strengthen agentic AI positioning; potential incremental demand as use cases scale .
  • Capital returns continue: $44M buybacks in Q1; intention to return ≥50% of FCF underscores shareholder-friendly posture .
  • Leadership changes: new CFO (May 12) and new CPO add SaaS transition and AI product velocity experience—track impact on guide credibility and product cadence .
  • Near-term setup: Expect softer Q2 revenue/EPS; H2 targets—positive services margin and ARR growth—are catalysts for estimate revisions and narrative support .