Teradata Corporation TDC reported second-quarter 2026 non-GAAP earnings of 69 cents per share, up 46.8% year over year. The figure surpassed the Zacks Consensus Estimate by 25.46%.
Revenues of $410 million increased 0.5% from the year-ago quarter and beat the consensus by 2.91%. Total annual recurring revenues (ARR) increased 1% as reported and 2% in constant currency to $1.509 billion.
TDC Builds Cloud & Subscription Momentum
Public cloud ARR advanced 8% year over year as reported and 9% in constant currency to $686 million. Cloud represented 45% of total ARR at quarter-end compared with 43% in the year-ago period.
Subscription ARR reached $750 million, down from $756 million a year earlier but above $729 million in the first quarter. Maintenance and software upgrade rights ARR declined to $73 million from $99 million.
TDC Q2 Top Line in Detail
Recurring revenues reached $363 million, up 3% as reported and 2% in constant currency and represented 89% of total revenues. Product sales rose 4% year over year and 3% in constant currency to $371 million.
Perpetual software license, hardware and other revenues, accounting for 2% of total revenues, surged 167% year over year and 313% in constant currency to $8 million.
Consulting services revenues, representing 9.5% of total revenues, fell 24% year over year and 23% in constant currency to $39 million.
TDC's Operating Details
Non-GAAP gross margin expanded 220 basis points year over year to 60.5%, helped by a higher recurring-revenue mix. Recurring revenue gross margin improved 30 basis points to 67.8%, partly reflecting continued progress in cloud gross margin.
Non-GAAP selling, general and administrative expenses declined 8.4% year over year to $98 million. Research and development expenses fell 3.1% to $62 million.
Non-GAAP operating margin improved to 21.5% from 16.4%, reflecting higher gross margin and a more optimized cost structure.
Teradata Pushes Deeper Into Agentic AI
The company launched the Teradata Autonomous Knowledge Platform during the quarter and brought major components, including AI Studio, to general availability early in the third quarter. The platform combines cloud, on-premise and hybrid deployment options with governed data, AI tools and agent capabilities.
Teradata also introduced Teradata Factory, a Dell-built on-premise system with integrated CPUs and GPUs for private AI workloads. Management highlighted early customer orders and interest, particularly among regulated organizations and customers with data sovereignty requirements. The partnership gives TDC access to Dell’s technology and go-to-market reach.
TDC’s Balance Sheet Remains Strong
As of June 30, 2026, Teradata had cash and cash equivalents of $414 million compared with $493 million as of Dec. 31, 2025. The company ended the quarter with net cash of $323 million after paying off the $450 million balance on its term loan.
Teradata generated $106 million in cash flow from operations during the quarter, up from $43 million in the year-ago period. Free cash flow increased to $105 million from $39 million, while adjusted free cash flow rose to $127 million from $39 million.
The company also repurchased approximately 1.3 million shares for $40 million during the quarter. Management continues to target the return of at least 50% of adjusted free cash flow through share repurchases.
TDC Provides Q3 & 2026 Outlook
For the third quarter of 2026, Teradata expects non-GAAP earnings of 55-59 cents per share. Total revenues are projected to decline 6% to 4% year over year, while recurring revenues are expected to decrease 4% to 2%. Management attributed the second-half revenue pattern to the timing of upfront revenue recognition from on-premises subscriptions during the first half.
For 2026, Teradata guided its non-GAAP earnings outlook to $2.65-$2.73 per share and adjusted free cash flow forecast to $330-$350 million. Cash flow from operations is expected to be between $665 million and $685 million, including an after-tax net benefit of $315 million from the SAP settlement.
The company reaffirmed its forecast for total ARR growth of 2-4% year over year, recurring revenue growth of flat to 2%, and total revenue performance ranging from a 2% decline to flat.
TDC's Zacks Rank & Stocks to Consider
Teradata currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector include Kimball Electronics KE, NVIDIA NVDA and Onto Innovation ONTO. Each stock currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Kimball Electronics have declined 2.5% in the year-to-date period. KE is set to report the fourth quarter of fiscal 2026 results on Aug. 12.
Shares of NVIDIA have gained 13.7% in the year-to-date period. NVDA is slated to report second-quarter 2026 results on Aug. 26.
Onto Innovation shares have jumped 82.2% in the year-to-date period. ONTO is set to report first-quarter fiscal 2027 results on Aug. 6, 2026.
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