Teradata (NYSE:TDC) executives said the company closed fiscal 2025 with results that exceeded its expectations for revenue, recurring revenue, and free cash flow, citing improved operating discipline and higher customer engagement around AI and hybrid deployments. Management also issued 2026 guidance calling for continued growth in total annual recurring revenue (ARR), margin expansion, and higher free cash flow, while increasing investment in product development.
Management highlights AI, hybrid demand and product cadence
President and CEO Steve McMillan said 2025 marked a “year of revitalized execution,” with the company stabilizing the business, “meaningfully” improving retention, and seeing customers expand Teradata usage across both traditional and newer workloads. Looking ahead, McMillan positioned “agentic AI” as a major long-term driver, describing a “system of intelligence” that unifies data, analytics, governance, enterprise context, and AI agents.
McMillan outlined a series of product introductions during 2025, including the Enterprise Vector Store, enhancements to ModelOps, an MCP Server intended to connect AI systems with enterprise data and context, and the launch of Teradata Agent Builder with pre-built agents. He also highlighted Teradata AI Factory, which brings AI and machine learning capabilities to on-premises environments, and new AI services intended to help customers move pilots into production. To start 2026, Teradata introduced Enterprise AgentStack, described as a toolkit to help enterprises move from pilots to production-level autonomous agents with security, governance, and enterprise data integration.
Fourth-quarter results: revenue beat driven by recurring revenue
Chief Financial Officer John Ederer said Teradata finished 2025 “on a positive note,” returning total ARR to positive growth and improving quarterly consistency. For the year, total ARR grew 3% as reported (1% in constant currency), while cloud ARR grew 15% as reported (13% in constant currency) and reached 46% of total ARR. Teradata’s trailing 12-month cloud net expansion rate was 108% in the fourth quarter.
Fourth-quarter total revenue was $421 million, up 3% year over year as reported (1% in constant currency), which Ederer said was above the high end of the company’s outlook due to higher recurring revenue. Recurring revenue in the quarter was $367 million, up 5% as reported (3% in constant currency), also above the top end of guidance. Ederer attributed the outperformance primarily to higher upfront revenue from term license subscriptions.
Consulting services revenue in the quarter was $53 million, down 4% as reported (down 6% in constant currency). For the full year, recurring revenue was $1.445 billion, down 2% as reported (down 3% in constant currency), while total revenue was $1.663 billion, down 5% as reported (down 5% in constant currency).
Margins and cash flow: operating leverage and improved services profitability
On profitability, Ederer said fourth-quarter gross margin rose to 62% from 60.9% a year earlier, driven by improved consulting services margins. Recurring revenue gross margin was 68.4%, down from the prior year due to a higher mix of cloud revenue. Consulting services gross margin rose to 18.9%, up from 8.5% in the third quarter and 9.1% a year earlier, following cost actions taken in 2025.
Fourth-quarter operating margin improved to 22.8% from 17.6% a year ago. Non-GAAP diluted earnings per share were $0.74, exceeding the company’s outlook range by $0.17, driven by higher recurring revenue, lower expenses, and a lower effective tax rate. Ederer noted a one-time tax benefit in the fourth quarter that contributed about $0.05 to EPS.
Free cash flow was $151 million in the fourth quarter and $285 million for the year, above the high end of the company’s outlook. Cash and equivalents ended the year at $493 million, up from $420 million at the end of 2024.
Capital returns and board updates
Teradata repurchased approximately $38 million of stock, or about 1.5 million shares, in the fourth quarter. For the full year, repurchases totaled about $140 million, or 5.8 million shares. Ederer said the company reauthorized its buyback program for another $500 million starting in 2026 and again intends to use 50% of free cash flow for share repurchases.
On governance, the company announced that Melissa Fisher will join the board in the coming weeks. Management also said it is conducting a search process to add a second new independent director later in the year to complement upcoming director retirements.
2026 outlook: ARR growth and higher free cash flow, with seasonality expected
For fiscal 2026, Teradata guided to total ARR growth of 2% to 4% year over year (reported), recurring revenue growth of 0% to 2%, and total revenue ranging from down 2% to flat. Non-GAAP diluted EPS is expected to be $2.55 to $2.65, with approximately 100 basis points of operating margin expansion. Free cash flow is expected to be $310 million to $330 million, with management anticipating the first quarter to be slightly negative.
Ederer said the company expects typical ARR seasonality: the first quarter is generally the largest renewal period and “highest erosion quarter,” followed by stabilization and expansion through the year, with most expansion in the second half. He also reiterated that mix shifts between cloud and on-prem subscriptions can create variability, and that revenue recognition differs between cloud (ratable) and on-prem subscriptions (partly upfront). Teradata expects upfront revenue recognition to benefit first-quarter 2026 recurring revenue growth by more than two points, but be a roughly one-point headwind for full-year 2026 recurring revenue growth.
For the first quarter of 2026, the company guided to recurring revenue growth of 6% to 8%, total revenue growth of 1% to 3%, and non-GAAP EPS of $0.75 to $0.79. It expects a first-quarter non-GAAP tax rate of about 25% and weighted average shares outstanding of 96.1 million.
On cloud ARR, Teradata did not provide formal guidance due to potential mix variability, but said it is targeting low double-digit percentage growth.
About Teradata (NYSE:TDC)
Teradata Corporation is a global provider of enterprise analytics and data management solutions designed to help organizations unlock value from their data assets. The company offers both cloud-based and on-premises platforms that support data warehousing, big data analytics, and machine learning. Through its flagship analytics ecosystem, Teradata enables businesses to integrate, analyze, and manage large volumes of structured and unstructured data at scale.
Central to Teradata’s product suite is the Teradata Vantage analytics platform, which unifies diverse data types across multiple environments—including public and private clouds—into a single, coherent architecture.
