Cloud analytics platform Teradata (NYSE:TDC) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 2.9% year on year to $421 million. On top of that, next quarter’s revenue guidance ($426.4 million at the midpoint) was surprisingly good and 3.8% above what analysts were expecting. Its non-GAAP profit of $0.74 per share was 33.1% above analysts’ consensus estimates.
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Teradata (TDC) Q4 CY2025 Highlights:
- Revenue: $421 million vs analyst estimates of $399.6 million (2.9% year-on-year growth, 5.4% beat)
- Adjusted EPS: $0.74 vs analyst estimates of $0.56 (33.1% beat)
- Adjusted Operating Income: $95.99 million vs analyst estimates of $82.54 million (22.8% margin, 16.3% beat)
- Revenue Guidance for Q1 CY2026 is $426.4 million at the midpoint, above analyst estimates of $410.7 million
- Adjusted EPS guidance for the upcoming financial year 2026 is $2.60 at the midpoint, beating analyst estimates by 2%
- Operating Margin: 12.8%, up from 9.5% in the same quarter last year
- Annual Recurring Revenue: $1.52 billion (3.3% year-on-year growth, beat)
- Market Capitalization: $2.72 billion
StockStory’s Take
Teradata’s Q4 results were met with a strong positive market reaction, reflecting better-than-expected execution across key areas. Management attributed the upside to a resurgence of customer interest in hybrid cloud and on-premise deployments, with demand spurred by new AI-focused products and services. CEO Steve McMillan highlighted, “We stabilized the business, meaningfully improved retention, and saw customers choosing to expand their use of Teradata with a mix of both traditional and new types of workloads.” Operational discipline and improved consulting services margins also contributed to the solid quarter.
Looking ahead, Teradata’s guidance is driven by expectations of continued growth in annual recurring revenue (ARR) and further adoption of its AI and knowledge platform. Management emphasized plans to increase investment in product development, particularly in AI services and agentic solutions, aiming to accelerate enterprise adoption of autonomous AI systems. CFO John Ederer noted that while new product launches will ramp up throughout the year, only limited incremental revenue is currently factored into guidance, stating, “We are starting to ramp that up this year and that will help offset some of the migration activity in 2026.”
Key Insights from Management’s Remarks
Management cited strong AI-driven demand, improved retention, and a shift toward hybrid deployments as key contributors to Q4 performance and the company’s raised outlook.
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AI product momentum: Teradata launched multiple AI-driven offerings, including its enterprise Vector Store and Agent Builder, targeting both cloud and on-premise environments. This positioned the company to capture new workloads as enterprises explore AI adoption.
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Hybrid deployment demand: Customers increasingly favored hybrid models to address regulatory and data sovereignty needs. McMillan noted that organizations are “wanting to leverage both on-prem and cloud deployment options,” which supports Teradata’s strategy of flexibility.
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Consulting services margin recovery: After early-year headwinds, the consulting segment rebounded with improved gross margins, driven by a pivot from migration-heavy engagements to AI-focused services. Management expects AI services to offset declining migration activity in 2026.
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Retention improvements: Enhanced customer retention was a key pillar, supported by the stickiness of new AI and analytics solutions. Management reported a material improvement in retention rates compared to the prior year, with expectations for continued progress.
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Ecosystem and partnerships: Strategic alliances, such as with unstructured.io and Google Cloud, expanded Teradata’s reach and enabled real-time analytics capabilities directly within customer environments. These initiatives are seen as foundational for broader AI ecosystem integration.
Drivers of Future Performance
For the coming year, Teradata’s outlook centers on accelerated AI adoption, product innovation, and a continued shift toward hybrid deployment models.
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AI and agentic solutions expansion: Management expects its new autonomous AI and agent stack offerings to drive incremental adoption across enterprise customers. Although early in market rollout, these products are seen as key levers for ARR growth over the next several quarters.
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Shift to hybrid and on-prem deployments: Heightened regulatory requirements and customer preferences for data control are sustaining demand for hybrid environments. This mix shift may introduce variability in reported recurring revenue, but management believes it enhances Teradata’s competitive positioning.
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Consulting transformation and margin focus: The transition from migration-related consulting to AI services is expected to stabilize the services business. Operating margin improvements are projected through disciplined cost management, even as the company invests more heavily in R&D and product engineering.
Catalysts in Upcoming Quarters
In the coming quarters, our team will be watching (1) the pace of adoption and monetization for Teradata’s new AI and agentic offerings, (2) sustained improvements in customer retention and consulting services mix, and (3) the impact of hybrid deployment trends on ARR and recurring revenue growth. Execution on major product launches and successful integration of new board members will also be important signposts.
Teradata currently trades at $33.85, up from $29.23 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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