Third quarter 2026
Filed Nov 5, 2026Teradata reported third-quarter revenue declines and lower margins, while Total ARR and public cloud ARR increased and the company narrowed revenue outlook to the high end of its prior range.
Third-quarter Total ARR increased 1% as reported and public cloud ARR increased 11%, while total revenue declined 4%, recurring revenue declined 2%, and GAAP and non-GAAP operating margins declined. The company reiterated Total ARR and Adjusted Free Cash Flow outlook, narrowed revenue outlook to the high end of prior ranges, and increased its GAAP and non-GAAP diluted EPS outlook.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q3 2026 Total ARRother | $1.51B | – | 1% as reported and 2% in constant currency |
| Q3 2026 Public cloud ARRother | $700M | – | 11% as reported and 11% in constant currency |
| Q3 2026 Recurring revenueGAAP | $359M | – | (2)% |
| Q3 2026 Perpetual software licenses, hardware and other revenueGAAP | $3M | – | —% |
| Q3 2026 Consulting services revenueGAAP | $37M | – | (21)% |
| Q3 2026 Total revenueGAAP | $399M | – | (4)% |
| Q3 2026 Recurring revenue as a percentage of total revenueother | 90% | – | – |
| Q3 2026 GAAP gross profitGAAP | $238M | – | (6)% |
| Q3 2026 GAAP gross marginGAAP | 59.6% | – | – |
| Q3 2026 non-GAAP gross profitnon-GAAP | $242M | – | (7)% |
| Q3 2026 non-GAAP gross marginnon-GAAP | 60.7% | – | – |
| Q3 2026 Selling, general and administrative expensesGAAP | $109M | – | – |
| Q3 2026 Research and development expensesGAAP | $75M | – | – |
| Q3 2026 GAAP operating incomeGAAP | $54M | – | (11)% |
| Q3 2026 GAAP operating marginGAAP | 13.5% | – | – |
| Q3 2026 non-GAAP operating incomenon-GAAP | $87M | – | (11)% |
| Q3 2026 non-GAAP operating marginnon-GAAP | 21.8% | – | – |
| Q3 2026 GAAP net incomeGAAP | $38M | – | (5)% |
| Q3 2026 non-GAAP net incomenon-GAAP | $67M | – | (3)% |
| Q3 2026 GAAP diluted EPSGAAP | $0.40 | – | – |
| Q3 2026 non-GAAP diluted EPSnon-GAAP | $0.70 | – | – |
| Q3 2026 GAAP effective tax rateGAAP | 24.0% | – | – |
| Q3 2026 non-GAAP effective tax ratenon-GAAP | 20.2% | – | – |
| Q3 2026 Cash provided by operating activitiesGAAP | $91M | – | – |
| Q3 2026 Free Cash Flownon-GAAP | $85M | – | – |
| Q3 2026 Adjusted Free Cash Flownon-GAAP | $96M | – | – |
| Nine months ended September 30, 2026 Total revenueGAAP | $1.25B | – | 1% |
| Nine months ended September 30, 2026 Recurring revenueGAAP | $1.12B | – | 4% |
| Nine months ended September 30, 2026 GAAP gross profitGAAP | $757M | – | 4% |
| Nine months ended September 30, 2026 non-GAAP gross profitnon-GAAP | $773M | – | 3% |
| Nine months ended September 30, 2026 GAAP operating incomeGAAP | $66M | – | (56)% |
| Nine months ended September 30, 2026 non-GAAP operating incomenon-GAAP | $296M | – | 16% |
| Nine months ended September 30, 2026 GAAP net incomeGAAP | $419M | – | 351% |
| Nine months ended September 30, 2026 non-GAAP net incomenon-GAAP | $218M | – | 22% |
| Nine months ended September 30, 2026 GAAP diluted EPSGAAP | $4.36 | – | – |
| Nine months ended September 30, 2026 non-GAAP diluted EPSnon-GAAP | $2.27 | – | – |
| Nine months ended September 30, 2026 Cash provided by operating activitiesGAAP | $598M | – | – |
| Nine months ended September 30, 2026 Free Cash Flownon-GAAP | $580M | – | – |
| Nine months ended September 30, 2026 Adjusted Free Cash Flownon-GAAP | $254M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Product SalesNot specified in the release. | $362M | – | (2)% |
| Consulting ServicesNot specified in the release. | $37M | – | (21)% |
Full-year 2026 and fourth quarter 2026 outlook
- RevenueFull-year 2026 recurring revenue in the range of 1% to 2% year-over-year; full-year 2026 total revenue in the range of -1% to flat year-over-year; fourth-quarter 2026 recurring revenue in the range of -2% to -4% year-over-year; fourth-quarter 2026 total revenue in the range of -4% to -6% year-over-year
- NoteFull-year 2026 GAAP diluted EPS is now expected to be in the range of $4.63 to $4.67
- NoteFull-year 2026 non-GAAP diluted EPS is now expected to be in the range of $2.86 to $2.90 per share
- NoteFull-year 2026 Total ARR growth of 2% to 4% year-over-year
- NoteFull-year 2026 cash flow from operations of $665 million to $685 million, which includes an after-tax net benefit of $315 million related to a settlement with SAP
- NoteFull-year 2026 Adjusted Free Cash Flow of $330 million to $350 million
- NoteFourth-quarter 2026 GAAP diluted EPS is expected to be in the range of $0.26 to $0.30 per share
- NoteFourth-quarter 2026 non-GAAP diluted EPS is expected to be in the range of $0.58 to $0.62 per share
Capital returns
- Repurchases of common stock were $57 million for the three months ended September 30, 2026, compared to $30 million for the three months ended September 30, 2025.
- Repurchases of common stock were $131 million for the nine months ended September 30, 2026, compared to $102 million for the nine months ended September 30, 2025.
What drove it
- Total ARR increased to $1.512 billion from $1.490 billion, an increase of 1% as reported and 2% in constant currency.
- Public cloud ARR increased to $700 million from $633 million, an increase of 11% as reported and 11% in constant currency.
- Teradata released Teradata Factory for general availability and announced Tera Context Engine and Tera Harness.
- Teradata made its Data Analyst Agent available in AWS Marketplace and integrated Teradata Autonomous Knowledge Platform with Microsoft OneLake.
- The nine-month period included $480 million of SAP gross settlement proceeds, $121 million of legal and other expenses, and $33 million of taxes specific to the settlement in the free-cash-flow reconciliation.
Concerns
- Third-quarter total revenue was $399 million versus $416 million, a decrease of 4% as reported and 4% in constant currency.
- Third-quarter recurring revenue was $359 million versus $366 million, a decrease of 2% as reported and 2% in constant currency.
- Consulting services revenue was $37 million versus $47 million, a decrease of 21% as reported and 19% in constant currency.
- GAAP gross margin was 59.6% versus 60.8%, and non-GAAP gross margin was 60.7% versus 62.3%.
- GAAP operating margin was 13.5% versus 14.7%, and non-GAAP operating margin was 21.8% versus 23.6%.
- Fourth-quarter 2026 outlook calls for recurring revenue in the range of -2% to -4% year-over-year and total revenue in the range of -4% to -6% year-over-year.
What to watch
- Delivery against full-year 2026 Total ARR growth of 2% to 4% year-over-year.
- Fourth-quarter recurring revenue in the range of -2% to -4% year-over-year and total revenue in the range of -4% to -6% year-over-year.
- Full-year 2026 Adjusted Free Cash Flow of $330 million to $350 million.
- Progress in public cloud ARR, which was $700 million as of September 30, 2026.
- The impact of the SAP settlement on full-year cash flow from operations, which includes an after-tax net benefit of $315 million.
Balance sheet and cash flow
- Cash and cash equivalents were $432 million as of September 30, 2026, compared to $493 million as of December 31, 2025 and $406 million as of September 30, 2025.
- Long-term debt was $— as of September 30, 2026, compared to $431 million as of December 31, 2025 and $437 million as of September 30, 2025.
- Repayments of long-term borrowings were $456 million for the nine months ended September 30, 2026.
- Deferred revenue was $466 million as of September 30, 2026, compared to $533 million as of December 31, 2025 and $527 million as of September 30, 2025.
- Total capital expenditures were $(6) million for the three months ended September 30, 2026 and $(18) million for the nine months ended September 30, 2026.
- Cash, cash equivalents and restricted cash at end of period were $433 million as of September 30, 2026.
Analysis
Teradata's third quarter showed growth in contracted recurring measures alongside weaker reported revenue. Total ARR increased to $1.512 billion from $1.490 billion, and public cloud ARR increased to $700 million from $633 million. However, total revenue was $399 million versus $416 million, while recurring revenue was $359 million versus $366 million. Recurring revenue represented 90% of total revenue versus 88% in the prior-year quarter.
The revenue decline was concentrated in consulting services, which were $37 million versus $47 million. Product Sales were $362 million versus $369 million. Total revenue declined 4% as reported and 4% in constant currency, while consulting services declined 21% as reported and 19% in constant currency. The release highlights new AI and data-platform product capabilities, including Teradata Factory, Tera Context Engine, Tera Harness, AWS Marketplace availability for the Data Analyst Agent, and Microsoft OneLake integration.
Profitability declined on both a GAAP and non-GAAP basis in the quarter. GAAP gross margin was 59.6% versus 60.8%, and non-GAAP gross margin was 60.7% versus 62.3%. GAAP operating income was $54 million versus $61 million, while non-GAAP operating income was $87 million versus $98 million. GAAP diluted EPS was $0.40 versus $0.42, and non-GAAP diluted EPS was $0.70 versus $0.72. Cash provided by operating activities was $91 million compared to $94 million, while Adjusted Free Cash Flow was $96 million compared to $88 million.
Nine-month GAAP results include the SAP settlement, with GAAP net income of $419 million versus $93 million and cash provided by operating activities of $598 million versus $145 million. The free-cash-flow reconciliation includes $480 million of SAP gross settlement proceeds, $121 million of legal and other expenses, and $33 million of taxes specific to the settlement. Teradata repurchased $131 million of common stock during the nine months and repaid $456 million of long-term borrowings. Cash and cash equivalents were $432 million, and long-term debt was $—, as of September 30, 2026.
Management narrowed full-year recurring revenue guidance to 1% to 2% year-over-year and total revenue guidance to -1% to flat year-over-year, both described as the high end of previous ranges. It reaffirmed Total ARR growth of 2% to 4% year-over-year and Adjusted Free Cash Flow of $330 million to $350 million. The fourth-quarter outlook calls for further reported revenue contraction, with recurring revenue in the range of -2% to -4% year-over-year and total revenue in the range of -4% to -6% year-over-year. Full-year GAAP diluted EPS is now expected to be $4.63 to $4.67 and non-GAAP diluted EPS $2.86 to $2.90 per share.
Management, verbatim
In Q3, Teradata marked another quarter of progress against the goals we set at the start of the year, driving total ARR growth, improving profitability and delivering strong free cash flow,
Steve McMillan, president and CEO, Teradata
The increased pace of new product innovation and new AI service capabilities is driving positive interest from customers.”
Steve McMillan, president and CEO, Teradata
Not in the filing
stated, not guessed- Previous-release outlook was not provided; therefore, comparison of reported results with prior guidance is unavailable.
- No dividend declaration or dividend payment was reported.
- No full-year or fourth-quarter gross-margin guidance was reported.
- No full-year or fourth-quarter operating-expense guidance was reported.
- No full-year or fourth-quarter tax-rate guidance was reported.
- Prior-quarter comparisons were not reported for the key third-quarter operating metrics.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.