Teradata Corporation

Teradata said Q2 non-GAAP results included total revenue of $410 million, flat year over year; recurring revenue of $363 million, up 3% year over year; consulting services revenue of $39 million, down 24%; total gross margin of 60.5%, up 220 basis points year over year; recurring revenue gross margin of 67.8%, up 30 basis points; operating margin of 21.5% versus 16.4% last year; non-GAAP EPS of $0.69; and adjusted free cash flow of $127 million. ARR grew 1% reported and 2% in constant currency, while cloud ARR grew 8% reported and 9% in constant currency. For Q3 2026, management expects recurring revenue to decline 4% to 2% year over year, total revenue to decline 6% to 4%, and non-GAAP EPS of $0.55 to $0.59. For FY 2026, Teradata reaffirmed total ARR, total revenue, and recurring revenue ranges, raised non-GAAP EPS to $2.65-$2.73, and increased adjusted free cash flow guidance to $330 million-$350 million.

Steve McMillan framed the quarter as evidence that Teradata's hybrid data foundation is resonating in the agentic AI era, especially for regulated and sovereign workloads. He highlighted the launch and rapid general availability of the Autonomous Knowledge Platform and AI Studio, plus Teradata Factory, as key steps in what he called Teradata 3.0. His tone was confident and strategic: the company is positioning itself as a platform for production AI that can run in cloud or on-prem environments with governance and context built in.

John Ederer emphasized improved recurring revenue, profitability, and cash generation. He cited recurring revenue growth of 3%, operating margin of 21.5%, adjusted free cash flow of $127 million, and net cash of $323 million at quarter-end, up $528 million year over year. He also noted the company repurchased about $40 million, or 1.3 million shares, in Q2, paid off the remaining $450 million term loan, and continues to target 50% of adjusted free cash flow for buybacks excluding the SAP settlement benefit. On the outlook, he pointed to stronger first-half revenue linearity from ASC 606 timing, but said that leaves less revenue to recognize in Q3 and Q4, explaining the lighter second-half pattern and the Q3 guide.

Analysts pressed on why the year is shaped as first-half strength and second-half declines despite new product momentum. Management said the main issue is revenue recognition timing, especially on-prem subscriptions under ASC 606, not a lack of demand; Steve also said Q4 remains the strongest selling quarter and that upside from the new launches was not heavily included in guidance. Questions also focused on Teradata Factory, hardware price pressures, and capital allocation; management said Factory is already seeing orders and interest, pricing has been adjusted to protect margins, and current capital priorities are organic R&D first, then buybacks, then M&A.