Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 4, 2026 · Beat 7 of last 7 quarters
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Teradata's Q2 results reinforce the trend of AI workloads moving closer to data, with hybrid and on-prem deployments gaining traction for regulated and sovereign AI use cases. The launch of Teradata Factory with Dell and the Autonomous Knowledge Platform positions Teradata to capture agentic AI infrastructure demand, though monetization may lag as customers utilize existing capacity. The company's focus on total ARR and margin expansion suggests a disciplined approach to the AI infrastructure buildout.
Teradata delivered solid Q2 results with recurring revenue of $363M (up 3% YoY), total revenue of $410M (flat YoY, 2 points above outlook), and non-GAAP EPS of $0.69 (beating by $0.12). Operating margin expanded to 21.5% from 16.4% a year ago, and adjusted free cash flow was $127M. The company launched the Teradata Autonomous Knowledge Platform, including AI Studio, which reached GA in early Q3, and announced Teradata Factory with Dell for on-prem AI. Early AI wins included a South Asian telecom, a major Japanese bank, and a North American financial institution. The company also paid off its remaining term loan and repurchased $40M in shares.
Management reaffirmed full-year guidance for total ARR, total revenue, and recurring revenue, while raising non-GAAP EPS to $2.65-$2.73 and adjusted free cash flow to $330M-$350M. They expect modest sequential total ARR growth in Q3 with the majority of growth in Q4, and recurring revenue to decline slightly on a quarterly basis in H2 due to ASC 606 revenue recognition timing. The company is focused on driving total ARR growth through hybrid deployments, with Teradata Factory (on-prem AI platform) and the Autonomous Knowledge Platform expected to be key growth drivers. Management emphasized continued margin expansion through operating leverage and disciplined cost management, and signaled potential for strategic M&A given a strengthened balance sheet.
“We've set a clear vision for this agentic AI era. We call it Teradata 3.0, and we have retooled our business for this clear opportunity of autonomous intelligence.”
on Strategic vision
“Our hybrid capabilities and our on-prem strength in particular continue to resonate with customers running the most demanding and regulated workloads where a solid data foundation is not discretionary.”
on Hybrid differentiation
“As we have said previously, our focus remains on driving total ARR growth, and we may see variability from quarter to quarter in the mix between cloud and on-premise growth.”
on Cloud ARR variability
Why is the shape of the year first-half growth versus second-half declines given strong product launches?
Management explained that the second-half decline is due to ASC 606 revenue recognition timing, with more upfront revenue recognized in H1 from on-prem subscriptions. They reaffirmed full-year guidance and noted Q4 is the strongest selling quarter, with new product upside not yet factored into guidance.
How is Teradata Factory impacting customer conversations and competitive dynamics, especially against cloud-native competitors?
Steve highlighted Teradata Factory's on-prem GPU capabilities as a key differentiator, enabling AI workloads to run next to data with sovereignty. The Dell partnership provides access to advanced tech and go-to-market, and early orders have been received. This supports total ARR growth by capturing both cloud and on-prem choices.
Are early AI wins generating incremental spending, expanding existing commitments, or reallocating heritage spend?
Steve noted all three: new logo wins, workload expansions, and on-prem/cloud expansions. He emphasized that AI workloads utilize existing platform capacity, which may lag ARR growth but provides cost advantages for customers.