Teradata Corp Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Erik Woodring - Morgan Stanley - Analyst : Great. Thanks so much for taking my question, guys. And John, welcome aboard, officially now. So, Steve, I wanted to circle back, with you. You made a comment right before you passed it to John that I thought was interesting, and you said we see an opportunity for greater operating leverage and free cash flow, looking forward as you optimize your OPEX envelope. Can you maybe just unpackage that comment a bit for us just to kind of help us understand what you mean either from a size, a texture, or even a timing perspective, and then I have a follow up, please. Thank you.

Question: Erik Woodring - Morgan Stanley - Analyst : Okay, thanks. And maybe I should have asked these questions in reverse order because, Steve, I wanted to get asked kind of what you alluded to, which is, from a kind of top line, and demand perspective and client engagement perspective, what's next, right? You highlight solid execution in the first half of the year. Obviously a couple moving pieces between 2Q and 3Q. But solid execution is what you need to do today. But what's next? How are you playing, kind of offense from here? Help us understand, help us kind of dream the dream, so to speak, of where is this model and this story can go as you think about the changes you've made over the last 12 months and the dividends that they could pay out over the next 12 months, so to speak. Thank you.

Question: Erik Woodring - Morgan Stanley - Analyst : Thanks so much, Steve. Good Luck.

Question: Tyler Radke - Citi - Analyst : Yeah, thank you for taking the question. Steve, maybe first one for you that, encouraging to hear some, outperformance on ARR in the quarter. Sounds like a lot of it was timing related, pulling in some deals from Q3, but I was just curious, was there, was this sort of driven by the customer? Was this more just better execution in terms of, managing the sales pipeline? And did you see these deals like come in stronger than you expected as well just in terms of the expansion potential? I assume there was these were cloud deals because the cloud sequential growth was pretty strong, but just anything you could, expand upon in terms of the deals that came in. And then, if you're expecting now like any type of headwind in terms of sequential growth into Q3, thank you.

Question: Tyler Radke - Citi - Analyst : Okay, great. And then on the margin side, I mean it sounds like there were some, optimizations in the quarter. I know you talked about kind of the move away from lower margin services revenues and then some consolidation within the go to market function, but it didn't look like you really raised. Profitability guidance too much. So just curious, is there kind of more conservatism in that? Are you sort of redeploying, some of those REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2025 / 8:30PM, TDC.N - Q2 2025 Teradata Corp Earnings Call savings in the, R&D and just kind of help us understand, you assess the cost base here, like what the timing for kind of additional, steps and unlocks could be. Thank you.

Question: Radi Sultan - UBS Securities LLC - Analyst : Awesome, thank you. Maybe first for Steve, as you think about the second half of the year, just curious, what do you, what do you see as the biggest catalyst behind migrations to vantage, and then is there any way to think about what portion of those migrations are related to a Gen AI use case?

Question: Radi Sultan - UBS Securities LLC - Analyst : Awesome, super clear. And then follow up for John, given this is your first quarter as a CFO, just curious, like what did you see in your first few months in Teradata that gave you confidence in underwriting the current guidance framework, especially those linearity comments around Q3 and Q4.

Question: Radi Sultan - UBS Securities LLC - Analyst : Awesome, super clear. Thank you, guys.

Question: Chirag Ved - Evercore ISI - Analyst : Hi, thanks for taking the question. Steve, what are you noticing about how companies are thinking about on-prem versus cloud deployments in this AI world, especially when it comes to modernizing their data estates and how this might be similar or different from what you might have seen or heard over the past year Thanks.

Question: Chirag Ved - Evercore ISI - Analyst : Thanks Steve. And maybe one quick one for John. It looks like cloud net retention rates dropped sequentially. Do you see cloud growth in fiscal year '25 being more driven by new cloud customers and that new migration or by stabilization and or expansion in the metric. Thanks so much.

Question: Chirag Ved - Evercore ISI - Analyst : All right, thank you so much.

Question: Matt Hedberg - RBC Capital Market - Analyst : Great, thanks for taking my questions. Steve, you started the marks, talking about agentic AI and you know how you're thinking a lot about it from a Teradata perspective. I'm curious, how would you expect to monitor usage or success from a customer base there because it seems it's a topical conversation among customers and how would you, define success there?

Question: Matt Hedberg - RBC Capital Market - Analyst : Great, thanks for that. And then, John, for you, curious if you, what sort of the thought process on the recent R&D tax changes, do you think that might have an impact to you guys next year? Any way to kind of think about the potential benefit of that?

Question: Matt Hedberg - RBC Capital Market - Analyst : Great, thanks guys.

Question: Wamsi Mohan - Bank of America - Analyst : Yes, thank you so much. Still on the Teradata AI factory, how do you see the revenue there evolving and how much revenue uplift could you see from this over time? Curious if you could share maybe any color on the pipeline, the type of customers, because investors have generally been waiting for some traction in enterprise AI adoption. So given your comments about that, putting in on-prem, how do you think that it was, and I have a follow up.

Question: Wamsi Mohan - Bank of America - Analyst : Okay, thanks Steve. And maybe one for John, sorry if I missed this, but can you talk about the magnitude of what you think were deals that got pulled forward from from Q3 to Q2, clearly, obviously you highlighted some, in on the public cloud side, but in overall terms, how would you quantify that magnitude and, would, should we expect to see some of that behavior persist, give them some of the more broader macro uncertainty around tariffs and other things like that. Thank you.

Question: Wamsi Mohan - Bank of America - Analyst : Okay, thank you so much.

Question: Sheldon McMeans - Barclays - Analyst : Hi, this is Sheldon McMean on for Ramo. Thanks for taking our question. First for Steve, can you help further contextualize the improvements and retention rates you discussed, in your prepared remarks and maybe how should we think about the drivers of that between better sales execution, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2025 / 8:30PM, TDC.N - Q2 2025 Teradata Corp Earnings Call maybe some of the AI related solutions that you've come out with that shows, your futureproof roadmap and then just general improvement in the macro environment because it does seem like we're past the peak uncertainty on the tariff front.

Question: Sheldon McMeans - Barclays - Analyst : Understood, thanks for that. And I believe in the prepared remarks included commentary about a quarter over quarter decline in air are expected in Q3. Would love to hear, what are some of the driving factors of that, as I would think that the pull forward from Q3 to Q2 would be relatively neutral, as that would still be in the Q3 balance there.

Question: Sheldon McMeans - Barclays - Analyst : Got it. Thanks.