A maker of AI and data analytics software for large organizations, Teradata builds a platform that lets companies run analytics and agentic AI across hybrid, multi-cloud, and on-premises setups, with products like ClearScape Analytics and QueryGrid. Its customers are big data users in financial services, healthcare, and retail, working alongside cloud partners including AWS, Microsoft Azure, and Google Cloud. Recent additions include an Enterprise Vector Store, the Teradata AI Factory for on-premises AI, and Teradata AgentBuilder for deploying autonomous AI agents.
Operating income doubled to $48M as cost cuts offset flat revenue, while Public Cloud ARR growth slowed to 8%.
Public Cloud growth slowed to 8%, its lowest rate in the data shown, even as Total ARR inched up 1%. was flat at $410 million and rose 2.9 points to 59.3%, while doubled to $48 million as prior restructuring kept costs down. The cloud transition is still the story, but the engine that was supposed to pull the company forward is losing speed.
Key takeaways
doubled to $48 million from $24 million a year ago, as operating expenses fell 5% to $195 million — the result of lower employee compensation following restructuring actions taken in prior periods.
Total was flat at $410 million, as a 3% increase in was fully offset by a 24% decline in consulting services, continuing the pattern of shrinking services work.
expanded 2.9 points to 59.3% from 56.4% a year ago, which management attributed to a greater mix of higher-margin , reversing the acute cloud-mix compression seen in Q2 2025.
Section summaries
Management's Discussion and Analysis
Total ARR reached $1.509B (+1% YoY) with Public Cloud ARR up 8%, while operating income doubled to $48M on lower costs.
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Total was flat at $410M as a 3% increase in was offset by a 24% decline in consulting services.
expanded to 59.3% from 56.4%, driven by a greater mix of higher-margin .
Public Cloud grew 8% to $686 million, a further deceleration from 13% last quarter and 17% in the year-ago period, while Total ARR rose 1% to $1.509 billion as on-premises erosion continued.
for the first half reached $495 million, boosted by $337 million in net proceeds from the SAP legal settlement; the company used the cash to fully repay its term loan, bringing to zero.
was $46 million, up from $9 million a year ago, and rose to $0.48 from $0.09, reflecting the higher and the absence of the prior year's severance charges.
What changed
The Q1 FY2026 watch item asked whether Total growth would sustain above 3% in Q2; it did not — growth decelerated to 1%, with Public Cloud ARR growth slowing from 13% to 8%, suggesting the Q1 lift was not durable.
The Q1 FY2026 watch item asked whether would hold above 62%; it fell to 59.3%, though this was still a 2.9-point improvement over the prior-year quarter, indicating the Q1 margin spike was tied to one-time mix effects rather than a new baseline.
The Q1 FY2026 watch item asked how the $816 million cash balance would be deployed; the company fully repaid its term loan, eliminating , and ended the quarter with $414 million in cash.
The Q1 FY2026 watch item asked whether operating expenses would normalize below $200 million once SAP legal fees rolled off; they did, falling to $195 million from $312 million, restoring the operating profitability seen before the settlement quarter.
What to watch
Whether Public Cloud growth stabilizes near 8% or continues to decelerate, and whether the dollar increase in cloud ARR can keep Total ARR growing as on-premises erosion persists.
Whether can hold near 59% as Public Cloud becomes a larger share of the mix, or whether the improvement from 56.4% a year ago gives way to renewed compression.
How the company deploys its $414 million cash balance now that the term loan is fully repaid and stands at zero, and whether share repurchases resume.
Whether the 5% reduction in operating expenses is sustainable, or whether costs rise again as variable compensation normalizes, pressuring the $48 million level.
Operating expenses fell 5% to $195M, primarily due to lower employee compensation from prior-year restructuring actions.
Public Cloud grew 8% to $686M, fueled by customer demand and migrations, while legacy maintenance ARR continued to erode.
surged to $495M in the first half, largely from $337M in SAP settlement net proceeds, and the term loan was fully repaid.
Quantitative and Qualitative Disclosures About Market Risk
There have not been any material changes to the market risk factors previously disclosed in Part II, Item 7A of the 2025 Annual Report. 29 Table of Contents
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There have not been any material changes to the market risk factors previously disclosed in Part II, Item 7A of the 2025 Annual Report.
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Table of Contents
The information required to be set forth under this Part II, Item 1 is incorporated by reference to Note 8, Commitments and Contingencies—Legal Proceedings and Note 5, Supplemental Financial Information of the Notes to Condensed Consolidated Financial Statements (Unaudited) incl…
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The information required to be set forth under this Part II, Item 1 is incorporated by reference to Note 8, Commitments and Contingencies—Legal Proceedings and Note 5, Supplemental Financial Information of the Notes to Condensed Consolidated Financial Statements (Unaudited) included in this Quarterly Report on Form 10-Q.