No Raises for 5, 100 Workers as CEO Funds AI With Salary Budget His Own 2025 Pay Topped $16M
Teradata CEO Steve McMillan told the company’s 5,100 employees in January that 2026 annual salary increases would be scrapped and budgets reallocated to AI investment, according to an internal memo obtained by Business Insider. The memo said funds would support scaling AI and competing for AI talent. McMillan’s fiscal 2025 compensation was about £12.8m ($16.1m), per Teradata’s SEC proxy.
Cost structure and hiring/talent dynamics shift toward AI investment; near-term sentiment may hinge on execution and margin durability.
Teradata freezes 2026 salary raises for 5,100 workers and reallocates the budget to scale AI capabilities, directly impacting costs and talent strategy.
Likely modest volatility: investors may weigh AI growth narrative vs. employee morale/retention and cost pressure.
Background
Teradata’s CEO memo (Jan) reportedly redirects 2026 salary adjustment budgets to AI scaling and talent competition; the article also cites a broader survey showing many US firms cutting pay to fund AI.
Why it matters
For TDC, the key trade-off is whether AI investment accelerates revenue/ARR and offsets any retention/morale drag from base-pay freezes. The article also notes a Chief Data and AI Officer/Chief Information Officer appointment (Josh Fecteau) as operational follow-through.
Market relevance
The story is a company-specific labor-cost reallocation tied to AI strategy, with potential implications for margins, hiring, and sentiment toward enterprise AI execution.
Market effects
Reinforces a tech-wide pattern of funding AI via compensation cuts, which can pressure enterprise software/IT services hiring and wage expectations.
US labor-cost pressure narrative may influence expectations for other US-based cloud/software employers.
AI capex/talent competition theme is global, but the direct read-across is strongest within US-listed software/cloud peers.
Alternative perspectives
The raise freeze may be a one-time budget reallocation rather than a broader demand shock; performance bonuses/equity remain, potentially limiting retention damage.
Stock already surged after prior results; the market may be focused on execution of agentic AI at scale rather than compensation optics, muting the immediate impact.
Key entities
- personSteve McMillan
Teradata CEO who allegedly directed the salary adjustment reallocation to AI investment via an internal memo.
- personJosh Fecteau
Appointed to newly created dual Chief Data and AI Officer and Chief Information Officer role at Teradata.
- companyTeradata
San Diego-based cloud software company implementing a base-pay raise freeze to fund AI scaling.
