Teradata Corp. Bottom Line Advances In Q4

Teradata reported Q4 GAAP net income of $37 million ($0.38/share) versus $25 million ($0.26) a year earlier, with revenue up 2.9% to $421 million from $409 million. Management provided next-quarter EPS guidance of $0.75–$0.79 and full-year 2026 non-GAAP diluted EPS guidance of $2.55–$2.65, indicating improving profitability and modest top-line growth that should be positive for the equity absent other headwinds.

Analysis

Market structure: Teradata (TDC) benefits directly from the reported beat and constructive FY26 non‑GAAP EPS guide ($2.55–$2.65), implying regained pricing/margin leverage even as revenue grew only +2.9% YoY. Winners include legacy data‑warehouse vendors and systems integrators that monetize migrations and managed services; losers are high‑multiple pure‑cloud analytics names if investors rotate to cheaper, cash‑flow positive software. Cross‑asset: expect muted equity‑credit spread tightening for software credits, modest compression in TDC implied option vols near term, and negligible FX/commodity impact.

Risk assessment: key tail risks are one‑off large deal timing (±$10–30M revenue swing), accelerated customer cloud migrations (Snowflake/Databricks), and macro capex cuts lowering license and services spend. Time horizons: immediate (days) — earnings re‑rate and vol compression; short (3–6 months) — execution vs guide; long (12–36 months) — secular cloud share outcomes. Hidden dependencies: revenue mix (subscription vs services), deferred revenue conversion and customer concentration; catalysts include Q1 guide execution, major customer renewals, and potential M&A interest.

Trade implications: actionable short‑term thesis is a modest long in TDC (2–3% portfolio) to capture re‑rating on margin guide with a 3–6 month horizon, hedged by a small short in SNOW (1–1.5%) to protect versus secular cloud re‑rating. Use defined‑risk options: buy 3–6 month TDC call spreads (delta ~0.40 long / 0.15 short) sizing 0.5–1% portfolio to cap premium. Rotate 3–5% from expensive cloud growth names into data‑infra/value software.

Contrarian angles: consensus may underweight margin improvement and recurring revenue conversion implied by the guide — if subscription mix expands by +5–10ppt, upside is underpriced. Conversely, markets may be slow to punish TDC if cloud wins large enterprise renewals; historical parallels (Oracle’s cloud re‑rating) show either mid‑cycle M&A or rapid share loss. Watch for ARR trends: >5% QoQ ARR decline should trigger exit; >5ppt subscription mix improvement should prompt position add.

Key Decisions for Investors

• Establish a 2–3% long position in Teradata (TDC) within 48 trading hours to capture re‑rating on FY26 guidance; set a primary profit target of +20–30% over 3–6 months and a stop‑loss at -8% from entry or if next quarter EPS guide falls below $0.70.
• Implement a relative value hedge: short Snowflake (SNOW) equal to ~50–75% of the dollar exposure of the TDC long (i.e., long 2% TDC, short 1–1.5% SNOW) for a 3–6 month horizon to protect against broad cloud multiple expansion.
• Buy a defined‑risk TDC call spread (3–6 month expiry): buy near‑the‑money call (~delta 0.35–0.45) and sell an out‑of‑the‑money call (~delta 0.15–0.25) sizing at 0.5–1% of portfolio to leverage upside while capping premium; close on 30% realized premium gain or 60 days if unchanged.
• Reallocate 3–5% of exposure from high‑multiple pure‑cloud analytics names (e.g., reduce SNOW/PLTR overweight) into value/data‑infra (TDC, ORCL, IBM) over the next 2 weeks; reassess after the next two earnings cycles.
• Trigger‑based rules: increase TDC position by +50% if subscription/recurring revenue share improves >5 percentage points QoQ or if ARR growth turns positive; reduce/exit if QoQ ARR declines >5% or next‑quarter EPS guide < $0.70.