A month has gone by since the last earnings report for Teradata (TDC). Shares have lost about 28% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Teradata due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Teradata Corporation before we dive into how investors and analysts have reacted as of late.
Teradata Q4 Earnings Beat Estimates, Revenues Rise Y/Y
Teradata reported fourth-quarter 2025 non-GAAP earnings of 74 cents per share, which beat the Zacks Consensus Estimate by 35.04%. The bottom line increased 39.6% year over year.
Revenues of $421 million beat the Zacks Consensus Estimate by 6.52%. The figure appreciated 3% year over year on a reported basis and 1% on a constant-currency (cc) basis. Total annual recurring revenues (ARR) at the fourth-quarter end increased 3% year over year to $1.52 billion and 1% on a constant-currency (cc) basis.
TDC Q4 Top Line in Detail
Public cloud ARR increased 15% on a reported basis and 13% on a cc basis year over year to $701 million. The growth was driven by increasing demand for its cloud solutions. The cloud net expansion rate was 108% in the reported quarter.
Recurring revenues (87.2% of total revenues) increased 5% year over year on a reported basis and 3% on constant-currency (cc) to $367 million. Perpetual software license and hardware revenues (0.2% of total revenues) dropped 67% year over year (down 69% at constant currency) to $1 million.
Consulting services’ revenues (12.6% of revenues) fell 4% year over year (down 6% at constant currency) to $53 million. Product sales increased 4% year over year on a reported basis (up 2% at cc) to $368 million.
TDC Operating Details
Fourth-quarter gross margin on a non-GAAP basis was 62%, expanding 110 basis points (bps) year over year.
Selling, general & administrative (SG&A) expenses decreased 5.1% year over year to $129 million. Research & development (R&D) expenses were $73 million, up 7.4% year over year.
As a percentage of revenues, SG&A decreased 260 bps year over year to 30.6%, whereas R&D inched up 70 bps year over year to 17.3%.
The non-GAAP operating margin was 22.8%, up 520 bps year over year.
TDC’s Balance Sheet Remains Strong
As of Dec. 31, 2025, Teradata had cash and cash equivalents of $493 million compared with $406 million as of Sept. 30.
Long-term debt as of Dec. 31, 2025, was $431 million compared with $437 million as of Sept. 30.
In the fourth quarter, TDC generated $160 million in cash from operating activities compared with the previous quarter’s $94 million.
The company generated a free cash flow of $151 million in the reported quarter.
TDC Offers Q1 and 2026 Guidance
For first-quarter 2026, non-GAAP earnings are expected to be between 75 cents and 79 cents per share.
Teradata expects recurring revenues to increase between 6% and 8% year over year, at cc. The company expects total revenues to be up 1-3% year over year.
For 2026, TDC expects non-GAAP earnings between $2.55 and $2.65 per share.
Public cloud ARR growth is projected at a low double-digit percentage year over year. Total ARR growth is expected between 2% and 4% year over year, at cc.
Teradata expects recurring revenues to be in the range of flat to 2% up, year over year, at cc. The company expects total revenues to be in the range of -2% to flat year over year at cc from 2025.
Cash flow from operations is expected to be between $330 million and $350 million. Free cash flow is anticipated to be in the $310-$330 million range.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates revision.
The consensus estimate has shifted 15.91% due to these changes.
VGM Scores
At this time, Teradata has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of B on the value side, putting it in the top 40% for value investors.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Teradata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Teradata belongs to the Zacks Computer- Storage Devices industry. Another stock from the same industry, Sandisk Corporation (SNDK), has gained 9.4% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.
Sandisk Corporation reported revenues of $3.03 billion in the last reported quarter, representing a year-over-year change of 0%. EPS of $6.20 for the same period compares with $0.00 a year ago.
Sandisk Corporation is expected to post earnings of $9.43 per share for the current quarter, representing a year-over-year change of +3243.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +26.7%.
Sandisk Corporation has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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This article originally published on Zacks Investment Research (zacks.com).