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Why Teradata (TDC)’s Focus on Total ARR, Not Cloud Labels, May Unlock Its Next Growth Leg!

Teradata reported its Fourth Quarter and Full Year 2025 financial results, highlighting a strong performance across several key metrics. The company exceeded expectations for total revenue, recurring revenue, and free cash flow, marking a year of stabilized business and revitalized execution. Its total Annual Recurring Revenue (ARR) saw a 3% growth year-over-year, with cloud ARR playing a significant role by growing 15% as reported. The cloud now represents 46% of Teradata’s total ARR, demonstrating its importance in the company’s strategy. From a sectoral perspective, Teradata saw strong customer engagement across various industries, including telecommunications, airlines, and financial services, with notable interest in AI and elastic compute services. Positives from the report include the company’s ability to improve its operating model, resulting in a non-GAAP operating margin of 21% for the year. Additionally, free cash flow increased to $285 million, exceeding the high end of their outlook.