Teradata Corporation Q2 FY2025 earnings call

• Introduced new executive leadership including Chief Product Officer, CFO, and Chief Administrative Officer. Realigned marketing function into GTM and product organizations for operational efficiency. - Highlighted AI-related innovations: Teradata AI factory for on-prem AI, Enterprise Vector Store now generally available, MCP server for agentic AI, LLMOPs for deploying language models. - Partner collaborations: Integration with ServiceNow, Salesforce, and Fivetran to enhance data integration and AI capabilities. - Customer examples: Work with a large bank on anti-money laundering analytics, a multinational bank in APJ using GenAI for customer experience, and a European logistics company on digital transformation.

Total ARR in Q2 was $1.49 billion, up 2% year-over-year. Cloud ARR was $634 million, with 15% constant currency growth. Total revenue was $408 million, down 6% year-over-year as reported and 7% in constant currency. Recurring revenue was $354 million, down 4% year-over-year as reported and in constant currency, making up 87% of total revenue. Services revenue was $51 million, down 19% year-over-year as reported and 20% in constant currency.

• Reiterated FY '25 outlook for total ARR, cloud ARR, and free cash flow. - Updated total revenue range to minus 5% to minus 7% year-over-year in constant currency due to lower services bookings. - Updated GAAP EPS outlook to $1.04 to $1.12 and non-GAAP EPS to $2.17 to $2.25. - Anticipated modest sequential decline in total ARR from Q2 to Q3, but on track for full year targets.

Q: Erik Woodring from Morgan Stanley asked about operating leverage and free cash flow optimization.

A: Steve McMillan and John Ederer discussed that optimizing the expense envelope provides opportunity for greater operating leverage and free cash flow growth.

Q: Tyler Radke from Citi asked about ARR outperformance and deals.

A: Stephen McMillan said deal execution was ahead of pace, driven by customer demand for Teradata's hybrid platform, with growth in both on-prem and cloud.

Q: Radi Sultan from UBS asked about catalysts for migrations to Vantage and GenAI use.

A: Stephen McMillan said AI-influence growth and hybrid capabilities are driving migrations, with customers valuing trusted data and flexibility.

Q: Chirag Ved from Evercore ISI asked about on-prem vs cloud deployments in AI.

A: Stephen McMillan said Teradata's hybrid platform allows data gravity preservation, with increased interest in on-prem for data sovereignty.

Q: Matthew Hedberg from RBC Capital Markets asked about monitoring agentic AI success.

A: Stephen McMillan said success is measured via partner use cases, customer proof of concepts, and opportunity pipeline influenced by AI workloads.

Q: Wamsi Mohan from Bank of America asked about Teradata AI factory revenue evolution.

A: Stephen McMillan said it's early days, but excited about partnership with NVIDIA and on-prem opportunities.

Q: Jared Jungjohann from TD Cowen asked about larger engagements.

A: Stephen McMillan said go-to-market team has multiple paths to outlook, with focus on recurring revenue growth.

Q: Nick from Citizens Bank asked about SLMs and enterprise workloads.

A: Stephen McMillan said Teradata's architecture is suited for small language models, with examples of customer success.

Q: Unidentified Analyst asked about CFO experience for John Ederer.

A: John Ederer said Q2 results were solid, but learning complexities of the business has been challenging.