2 days ago
Teradata's Q1 Earnings Call: Our Top 5 Analyst Questions
Teradata's first quarter results for 2025 were shaped by a combination of declining top-line sales and expanding profit margins. Management highlighted ongoing improvements in its advanced analytics and hybrid cloud offerings as key factors underpinning customer retention and growth in cloud annual recurring revenue. CEO Steve McMillan credited the company's focus on industry-specific use cases and its ability to meet customers' needs in both cloud and on-premises environments for sustaining engagement despite a challenging macroeconomic landscape. Management also noted the benefits of cost optimization efforts that helped support profitability, with McMillan stating, 'Our go to market team is executing well against the pipeline we carried into 2025.'
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Revenue: $418 million vs analyst estimates of $428.2 million (10.1% year-on-year decline, 2.4% miss)
Adjusted EPS: $0.66 vs analyst estimates of $0.56 (17% beat)
Adjusted Operating Income: $91 million vs analyst estimates of $82.32 million (21.8% margin, 10.6% beat)
Revenue Guidance for Q2 CY2025 is $401.1 million at the midpoint, below analyst estimates of $409 million
Management reiterated its full-year Adjusted EPS guidance of $2.20 at the midpoint
Operating Margin: 15.8%, up from 10.3% in the same quarter last year
Annual Recurring Revenue: $1.44 billion at quarter end, down 2.6% year on year
Billings: $457 million at quarter end, in line with the same quarter last year
Market Capitalization: $2.08 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Erik Woodring (Morgan Stanley) asked about additional cost-cutting opportunities and the balance between SG&A and R&D. CEO Steve McMillan emphasized the focus on profitable growth and continued optimization of investments, citing recent restructuring in the sales team to prioritize analytics and AI solutions.
Yitchuin Wong (Citi) inquired about lessons learned from recent executive transitions and the impact on future execution. McMillan described the evolution toward "Teradata 3.0," focused on business outcomes driven by advanced analytics and AI, and highlighted the company's retooled innovation strategy.
Howard Ma (Guggenheim) questioned parallels between current macro uncertainty and previous periods of cloud optimization. McMillan noted that Teradata's sticky customer base and critical workload management provide visibility, while services business headwinds are expected to ease later in the year.
Chirag Ved (Evercore ISI) sought clarification on the confidence behind maintaining ARR guidance amid cautious industry commentary. McMillan maintained that pragmatic guidance and improved retention rates support the company's outlook for returning to ARR growth in the second half of the year.
Jared Jungjohann (TD Cowen) asked for updates on the impact of AI-related products on near-term revenue. McMillan stated that while the current revenue impact is limited, strong customer interest and growing use cases are expected to drive platform utilization and future growth.
In upcoming quarters, the StockStory team will be watching (1) the pace of adoption for Teradata's new AI-enabled products, particularly the Enterprise Vector Store and on-premises AI capabilities, (2) sustained improvements in customer retention rates and the resulting impact on recurring revenue, and (3) evidence that the new executive leadership team can accelerate innovation and operational efficiency. Developments in hybrid cloud adoption and customer expansion within regulated industries will also be important markers.
Teradata currently trades at $21.99, in line with $21.95 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it's free).
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