Teradata Corporation (TDC) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended March 31, 2026. Teradata Corporation is a large accelerated filer providing data analytics and AI platforms. The company operates under two segments: Product Sales and Consulting Services. The quarter was significantly impacted by the resolution of long-standing litigation with SAP SE.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $444 million | $418 million |
| Recurring Revenue | $400 million | $358 million |
| Gross Profit | $276 million | $248 million |
| Gross Margin | 62.2% | 59.3% |
| Operating Income (Loss) | ($36) million | $66 million |
| Net Income | $335 million | $44 million |
| Diluted EPS | $3.47 | $0.45 |
| Operating Cash Flow | $401 million | $8 million |
| Free Cash Flow | $390 million | $7 million |
| Cash and Equivalents | $816 million | $369 million (end of period) |
| Total Debt (Long-term + Current) | $449 million | $456 million (approx.) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 6% year-over-year, driven by a 12% increase in recurring revenue. Public Cloud ARR grew 13% to $686 million, while perpetual license revenue declined 90%.
- Operating Loss: The company reported an operating loss of $36 million compared to $66 million in operating income in Q1 2025. This shift was primarily due to $121 million in legal fees associated with the SAP settlement recorded in SG&A expenses.
- Net Income Surge: Net income jumped to $335 million from $44 million. This was driven by a $480 million gross settlement payment from SAP, recorded as "Other income," which outweighed the operating loss and associated tax expenses.
- Cash Flow: Operating cash flow surged to $401 million, largely due to the receipt of the SAP settlement proceeds ($359 million net benefit).
Guidance, Outlook, and Risks
- Outlook: Management estimates the full-year 2026 effective tax rate to be approximately 25%. Currency translation is expected to have a neutral to slightly positive impact (0.0%-0.5%) on full-year revenue.
- Strategic Focus: Continued emphasis on Public Cloud migration and AI-driven use cases. Total ARR stands at $1.492 billion, up 3% year-over-year.
- Capital Allocation: The company repurchased approximately 1.2 million shares in Q1 2026. As of March 31, 2026, $470 million remains available under the active share repurchase program.
- Risks:
- Legal Resolution: The SAP litigation has been fully resolved with a mutual release of claims.
- Supply Chain: Reliance on a single primary manufacturer (Flex Ltd.) for hardware components creates concentration risk.
- Macroeconomics: Elevated interest rates and geopolitical uncertainty continue to elongate customer decision cycles.
Investor Verification Checklist
- SAP Settlement Sustainability: Verify that the $335 million net income is recognized as a one-time event and does not reflect core operational profitability.
- Recurring Revenue Quality: Confirm the 12% growth in recurring revenue is driven by organic Public Cloud expansion rather than one-time contract renewals.
- Debt Covenants: Review the leverage ratio covenants under the Credit Facility to ensure the company remains in compliance post-settlement.
- Restructuring Completion: Monitor the completion of the global restructuring announced in August 2024, with remaining actions expected in H1 2026.
- Share Repurchase Pace: Assess the remaining $470 million authorization against current cash burn and capital expenditure needs.