Teradata: Sell as On-Premise EDW Attrition Outweighs Working-Capital Cash Spikes
VantageCloud migrations fail to halt multi-year revenue contraction (-3.49% TTM to $1.69B) and -0.25x R&D payback, exposing the gap between 7.5% GAAP EBIT and transient 43.5% FCF.
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Quantitative screens routinely flag Teradata (`TDC`) as a deep-value free-cash-flow compounder, pointing to $761.00M in trailing twelve-month GAAP operating cash flow, $736.00M
terminal perpetuity growth model, the resulting DCF prints
$87.10
per share, implying
185.6%
upside from
$30.50
.
Our primary-filing audit rejects that extrapolation and anchors our Sell rating on two structural realities hidden beneath the trailing cash spike. First, trailing operating cash flow ($761.00M) diverged wildly from trailing GAAP operating income ($127.00M, a 7.51% margin) and from Teradata's own full-year FY2024 and FY2025 GAAP free cash flow of $279.00M (15.94% margin) and $286.00M (17.20% margin), which translated into just 9.14% and 10.46% SBC-burdened Owner FCF margins.
[1] Upfront multi-year contract collections and receivable timing temporarily inflated trailing cash conversion by nearly 3x relative to underlying GAAP operating profit, a gap that mechanically mean-reverts in subsequent quarters. [1]
Second, Teradata's core enterprise data warehouse (EDW) franchise is in multi-year secular contraction. Annual GAAP revenue declined in four of the past five periods, falling 13.2% cumulatively from $1.92B in FY2021 to $1.66B in FY2025 ($1.69B TTM, -3.49% YoY), while gross profit eroded from $1.19B to $1.03B (60.79% gross margin).
[1] Despite spending $290.00M annually on R&D (16.84% of revenue) to promote VantageCloud Lake on AWS, Azure, and Google Cloud, Teradata's 1-year R&D gross-profit payback sits at -0.25x: every dollar of public-cloud ARR converted from legacy appliances carries lower gross margin (due to third-party hyperscaler infrastructure pass-throughs) and suffers partial workload defection to cloud-native lakehouses during migration. [1][2]
Exhibit 1Financial Schedule
Teradata top-line contraction from $1.83B to $1.69B contrasts with working-capital TTM cash surge
Filed annual and trailing twelve-month GAAP operating performance and SBC-burdened Owner FCF.
Line
FY2023
FY2024
FY2025
TTM (Q2 2026)
Contracting Revenue & Gross Profit Base
RevenueFiled GAAP recurring software/cloud, perpetual, and consulting revenue
$1.83B
$1.75B
$1.66B
$1.69B
Gross profit
$1.12B
$1.06B
$987.00M
$1.03B
Gross marginCapped near 60% by hyperscaler cloud hosting and migration consulting mix
60.8%
60.5%
59.4%
60.8%
GAAP EBIT vs. Cash Flow & Buybacks
Operating income (EBIT)TTM GAAP operating margin compressed to 7.51%
$186.00M
$209.00M
$205.00M
$127.00M
Free cash flowTTM OCF ($761M) boosted by working-capital and upfront billing timing vs. FY24-25
Source: Teradata Corporation SEC Form 10-K and Form 10-Q filings.
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