TERADATA CORP /DE/

Previous wording

As more fully discussed in later sections of this MD&A, the following were what we view as the more significant financial items for the second quarter of 2025:

Current wording

As more fully discussed in later sections of this MD&A, the following were what we view as the more significant financial items for the third quarter of 2025:

Previous wording

•At the end of the second quarter of 2025, Total ARR was$1.489 billion compared to $1.465 billion at the end of the second quarter of 2024, increasing 2% as compared to the second quarter of 2024, including a 2% positive impact from foreign currency fluctuations.

Current wording

•At the end of the third quarter of 2025, Total ARR was $1.490 billion compared to $1.482 billion at the end of the third quarter of 2024, increasing 1% as compared to the third quarter of 2024, including a 1% positive impact from foreign currency fluctuations.

Previous wording

•At the end of the second quarter of 2025, Public Cloud ARR was$634 million compared to $542 million at the end of the second quarter of 2024, increasing 17% as compared to the second quarter of 2024, including a 2% positive impact from foreign currency fluctuations.

Current wording

•At the end of the third quarter of 2025, Public Cloud ARR was $633 million compared to $570 million at the end of the third quarter of 2024, increasing 11% as compared to the third quarter of 2024, with no impact from foreign currency fluctuations.

Previous wording

•Total revenue was$408 million for the second quarter of 2025, decreasing by $28 million compared to the second quarter of 2024, with recurring revenue down 4%. Perpetual software licenses, hardware and other revenue reduced by 40%, and consulting services revenue decreased 19%. Foreign currency fluctuations had a 1% positive impact on total revenue for the quarter compared to the prior year.

Current wording

•Total revenue was $416 million for the third quarter of 2025, decreasing by $24 million compared to the third quarter of 2024, with recurring revenue down 2%. Perpetual software licenses, hardware and other revenue reduced by 57%, and consulting services revenue decreased 23%. Foreign currency fluctuations had a 1% positive impact on total revenue for the quarter compared to the prior year.

Previous wording

•Operating expenses for the second quarter of 2025 increased 4% compared to the second quarter of 2024, largely due to the impact of severance charges in the second quarter of 2025 partially offset by lower employee compensation expenses due to the impact of restructuring actions taken in the prior year.

Current wording

•Operating expenses for the third quarter of 2025 decreased 9% compared to the third quarter of 2024, largely from lower employee compensation expense in the third quarter of 2025, due to the impact of restructuring actions taken in the prior year.

Previous wording

•Operating income was$24 million in the second quarter of 2025, compared to $66 million in the second quarter of 2024.

Current wording

•Operating income was $61 million in the third quarter of 2025, compared to $56 million in the third quarter of 2024.

Previous wording

•Net income in the second quarter of 2025 was$9 million, compared to $37 million in the second quarter of 2024.

Current wording

•Net income in the third quarter of 2025 was $40 million, compared to $32 million in the third quarter of 2024.

Previous wording

•Cloud Net Expansion Rate for the second quarter of 2025 was 112%, compared to 123% for the second quarter of 2024.

Current wording

•Cloud Net Expansion Rate for the third quarter of 2025 was 109%, compared to 120% for the third quarter of 2024.

Previous wording

Total revenue decreased $28 million, or 6%, in the second quarter of 2025, including a 1% positive impact from foreign currency fluctuations. Recurring revenue decreased 4%as compared to the second quarter of 2024 with no material impact from foreign currency fluctuations. Recurring revenue for the second quarter of 2025 included growth from Public Cloud revenue, which was more than offset by a decrease in revenue from our on-premises business. Revenue from perpetual software licenses, hardware and other decreased $2 million year over year. Consulting services revenue decreased 19% in the second quarter of 2025, includinga 1% positive impact from foreign currency fluctuations. The consulting services revenuedec rease is an expected result of the lower order booking activity in the second half of 2024 and into 2025.

Current wording

Total revenue decreased $24 million, or 5%, in the third quarter of 2025, including a 1% positive impact from foreign currency fluctuations. Recurring revenue decreased 2% as compared to the third quarter of 2024 including a 1% positive impact from foreign currency fluctuations. Recurring revenue for the third quarter of 2025 included growth from Public Cloud revenue, which was more than offset by a decrease in revenue from our on-premises business. Revenue from perpetual software licenses, hardware and other decreased $4 million year over year. Consulting services revenue decreased 23% in the third quarter of 2025, including a 1% negative impact from foreign currency fluctuations. The consulting services revenue decrease is an expected result of the lower order booking activity in the second half of 2024 and into 2025.

Previous wording

At the end of the second quarter of 2025, Total ARRincreased 2% as compared to the second quarter of 2024. At the end of the second quarter of 2025, Public Cloud ARR increased 17% as compared to the second quarter of 2024, including a 2% positive impact from foreign currency fluctuations. Public Cloud ARR growth in the second quarter of 2025 was primarily driven by customer demand of Teradata VantageCloud, our Public Cloud offering. The decreases in subscription ARR and maintenance and software upgrade rights ARR were primarily driven by customer migrations to Public Cloud ARR, on-premises erosions, and some elongated deal closing cycles.

Current wording

At the end of the third quarter of 2025, Total ARR increased 1% as compared to the third quarter of 2024, including a 1% positive impact from foreign currency fluctuations. At the end of the third quarter of 2025, Public Cloud ARR increased 11% as compared to the third quarter of 2024, with no significant impact from foreign currency fluctuations. Public Cloud ARR growth in the third quarter of 2025 was primarily driven by customer demand of Teradata VantageCloud, our Public Cloud offering. The decreases in subscription ARR and maintenance and software upgrade rights ARR were primarily driven by customer migrations to Public Cloud ARR and on-premises erosions.

Previous wording

In the second quarter of 2025, we experienced the following trends:

Current wording

In the third quarter of 2025, we experienced the following trends:

Previous wording

•Elongated deal closing cycles and some customers implementing cloud migration projects on a staged basis over time.

Current wording

•Some customers implementing cloud migration projects on a staged basis over time.

Previous wording

As a portion of the Company’s operations and revenue occur outside the United States, and in currencies other than the United States ("U.S.") dollar, the Company is exposed to fluctuations in foreign currency exchange rates. Based on currency rates as of July 31, 2025, Teradata is now estimating a (0.25)-to-0.25% impact from currency translation on our 2025 full-year total reported revenues.

Current wording

As a portion of the Company’s operations and revenue occur outside the United States, and in currencies other than the United States ("U.S.") dollar, the Company is exposed to fluctuations in foreign currency exchange rates. Based on currency rates as of September 30, 2025, Teradata is now estimating an immaterial impact from currency translation on our 2025 full-year total reported revenues.

Previous wording

We expect to see continued elongated deal closing cycles and that cloud migration activity with some customer accounts will continue to be implemented on a staged basis over time. We expect expansion and migration activity as the primary contributors for Public Cloud ARR growth in 2025.

Current wording

We expect to see continued cloud migration activity with some customer accounts that will continue to be implemented on a staged basis over time. We expect expansion and migration activity as the primary contributors for Public Cloud ARR growth in 2025.

Previous wording

Thedecreasein recurring revenue gross profit as a percentage of revenue was primarily due to a higher mix of Public Cloud revenues versus on-premises revenue as compared to the prior-year period, offset in part by continued improvement in our Public Cloud margin rate.

Current wording

The decrease in recurring revenue gross profit as a percentage of revenue was primarily due to a higher mix of Public Cloud revenues versus on-premises revenue as compared to the prior-year period, offset in part by continued improvement in our Public Cloud margin rate.

Previous wording

Perpetual software licenses, hardware and other gross profit as a percentage of revenue was flat year over year.

Current wording

Perpetual software licenses, hardware and other gross profit as a percentage of revenue increased as compared to the prior-year period primarily due to deal mix.

Previous wording

Consulting services gross profit as a percentage of revenue decreased as compared to the prior year primarily due to thedecreasein revenue as compared to the prior-year period.

Current wording

Consulting services gross profit as a percentage of revenue decreased as compared to the prior year primarily due to the decrease in revenue as compared to the prior-year period.

Previous wording

Selling, general and administrative ("SG&A") expense increased year over year due to the impact of severance charges in the current year andhigher stock-based compensation expense partially offset by continued cost discipline focused on cost reductions across the Company. Research and development ("R&D") expense increased year over year due to additional investments in Public Cloud and AI-related technology opportunities.

Current wording

Selling, general and administrative ("SG&A") expense decreased year over year due to the impact of continued cost discipline focused on cost reductions across the Company. Research and development ("R&D") expense decreased year over year due to cost reduction initiatives, offset in part by investments in Public Cloud and AI-related technology opportunities.

Previous wording

Other expense, net in the second quarter of 2025 and 2024 is comprised primarily of interest expense on long-term debt and finance leases, losses resulting from foreign currency transactions, as well as benefit costs on our pension and postemployment plans, partially offsetby interest income earned on our cash and cash equivalents. Other expense isflat year over year as decreased inte rest expense and other items were offset by foreign currency losses of $2 million as compared to the prior period.

Current wording

Other expense, net in the third quarter of 2025 and 2024 is comprised primarily of interest expense on long-term debt and finance leases, losses resulting from foreign currency transactions, as well as benefit costs on our pension and postemployment plans, partially offsetby interest income earned on our cash and cash equivalents. Other expense is down $2 million year-over-year primarily due to lower losses in foreign currency exchange rate fluctuations as compared to the prior period.

Previous wording

We estimate that the full-year effective tax rate for 2025 will be approximately 27.5%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction, the estimated impact to GILTI tax (including the requirement to capitalize R&D for tax purposes), and the estimated discrete items to be recognized in 2025. The forecasted tax rate is based on the foreign profits being taxed at an overall effective tax rate of approximately 20%, as compared to the U.S. federal statutory tax rateof 21%.

Current wording

We estimate that the full-year effective tax rate for 2025 will be approximately 27%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction, the estimated impact to GILTI tax, and the estimated discrete items to be recognized in 2025. We are currently forecasting approximately$2 million of tax expense related to GILTI in our marginal effective tax rate for 2025.

Previous wording

Results of Operations for the Six Months Ended June 30, 2025

Current wording

Results of Operations for the Nine Months Ended September 30, 2025

Previous wording

Total revenue decreased $75 million, or 8%, in the first six months of 2025, with no material impact from foreign currency fluctuations. Recurring revenue decreased 6%, including 1% of negative impact from foreign currency fluctuations. Within recurring revenue, Public Cloud revenue increased primarily due to expansions and migrations.

Current wording

Total revenue decreased $99 million, or 7%, in the first nine months of 2025, with no material impact from foreign currency fluctuations. Recurring revenue decreased 4%. Within recurring revenue, Public Cloud revenue increased primarily due to expansions and migrations.

Previous wording

Revenues from perpetual software licenses, hardware and other were flat year over year in the first six months of 2025.

Current wording

Revenues from perpetual software licenses, hardware and other decreased 20% year over year in the first nine months of 2025.

Previous wording

Consulting services revenue decreased 23%in the first six months of 2025, with no material impact from foreign currency fluctuations. The consulting services revenue decrease is an expected result of the lower order booking activity in the second half of 2024 and into 2025.

Current wording

Consulting services revenue decreased 23% in the first nine months of 2025, with no material impact from foreign currency fluctuations. The consulting services revenue decrease is an expected result of the lower order booking activity in the second half of 2024 and into 2025.

Previous wording

SG&A expenses decreased 14% for the first six months of 2025 as compared to the prior year, primarily due to continued cost discipline focused on cost reductions across the Company and lowers tock-based compensation expense.

Current wording

SG&A expenses decreased 13% for the first nine months of 2025 as compared to the prior year, primarily due to continued cost discipline focused on cost reductions across the Company and lower stock-based compensation expense.

Previous wording

R&D expenses decreased for the firstsix months of 2025 as compared to prior year, primarily due to continued cost discipline and lowers tock-based compensation expense.

Current wording

R&D expe nses decreased for the first nine months of 2025 as compared to prior year, primarily due to continued cost discipline and lower stock-based compensation expense.

Previous wording

Other expense, net for the six months of 2025 and 2024 is comprised primarily of interest expense on long-term debt and finance leases, losses resulting from foreign currency transactions, and benefit costs associated with our pension and postemployment plans, partially offset by interest income earned on our cash and cash equivalents. Other expense islowerin the first six months of 2025 as compared to the first six months of 2024 primarily due to$7 million lower costs resulting from foreign currency transactions compared to the prior period. Interest income islower primarily due to lower average interest rates during the current year as compared to the prior period.

Current wording

Other expense, net for the nine months of 2025 and 2024 is comprised primarily of interest expense on long-term debt and finance leases, losses resulting from foreign currency transactions, and benefit costs associated with our pension and postemployment plans, partially offset by interest income earned on our cash and cash equivalents. Other expense islowerin the first nine months of 2025 as compared to the first nine months of 2024 primarily due to$7 million lower costs resulting from foreign currency transactions compared to the prior period. Interest income islower primarily due to lower average interest rates during the current year as compared to the prior period.

Previous wording

As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the six months ended June 30, 2024, we entered into Blue Chip Swap transactions in order to remit cash from our Argentine operations that resulted in a pre-tax loss on investment of $3 million that is reported in "Other" expense. During the six months ended June 30, 2025 the Company incurred an immaterial pre-tax loss on investment from one Blue Chip Swap transaction.

Current wording

As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the nine months ended September 30, 2024, we entered into Blue Chip Swap transactions in order to remit cash from our Argentine operations that resulted in a pre-tax loss on investment of$3 million that is reported in "Other" expense. During the nine months ended September 30, 2025 the Company incurred a pre-tax loss on investment of $1 million from Blue Chip Swap transactions.

Previous wording

The effective tax rates for the six months ended June 30, 2025 and 2024 were as follows:

Current wording

The effective tax rates for the nine months ended September 30, 2025 and 2024 were as follows:

Previous wording

For the six months ended June 30, 2025, the Company had no material net discrete tax adjustment as the discrete tax benefit recognized in the first quarter of 2025 related to the reversal of uncertain tax positions due to the Company's completion of the IRS audit of its 2020 tax return, which was offset by incremental tax expense from stock-based compensation vesting.

Current wording

For the nine months ended September 30, 2025, the Company recorded $1 million of net discrete tax benefit, as the discrete tax benefit recognized in the first quarter of 2025 related to the reversal of uncertain tax positions due to the Company's completion of the IRS audit of its 2020 tax return, was mostly offset by incremental tax expense from stock-based compensation vesting.

Previous wording

For the six months ended June 30, 2024, the Company recorded $2 millionof net discrete tax benefits, a majority of which related to tax expense from stock-based compensation vesting.

Current wording

For the nine months ended September 30, 2024, the Company recorded $3 million of net discrete tax benefits, a majority of which related to tax expense from stock-based compensation vesting.

Previous wording

Cash provided by operating activities was$51 million, which decreased by $19 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Thedecreasein cash provided by operating activities was primarily dueto working capital dynamics and the volume and timing of billings. Teradata used approximately $11 million of cash in the first six months of 2025 for severance payments, as compared to $18 million in the first six months of 2024. Teradata expects that approximately $30 to $35 million in cash will be used during 2025 in connection with the implementation of the Restructuring discussed in Note 13 of Notes to Condensed Consolidated Financial Statements (Unaudited).

Current wording

Cash provided by operating activities was $145 million, which decreased by $2 million in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Teradata used approximately $20 million of cash in the first nine months of 2025 for severance payments, as compared to $24 million in the first nine months of 2024. Teradata expects that approximately $25 to $30 million in cash will be used during 2025 in connection with the implementation of the Restructuring discussed in Note 13 of Notes to Condensed Consolidated Financial Statements (Unaudited).

Previous wording

Financing activities and certain other investing activities, are not included in our calculation of free cash flow. As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the six months ended June 30, 2024, we entered into Blue Chip Swap transactions in order to remit cash from our Argentine operations that resulted in a pre-tax loss on investment of $3 million that was reported as an investing activity for cash flow purposes. There were no other material other investing activities for the six months ended June 30, 2025.

Current wording

Financing activities and certain other investing activities, are not included in our calculation of free cash flow. As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the nine months ended September 30, 2024, we entered into Blue Chip Swap transactions in order to remit cash from our Argentine operations that resulted in a pre-tax loss on investment of $3 million and a pre-tax loss of $1 million for the nine months ended September 30, 2025, that was reported as an investing activity for cash flow purposes. There wereno other material other investing activities for the nine months ended September 30, 2025.

Previous wording

Teradata’s financing activities for the six months ended June 30, 2025 and 2024 primarily consisted of cash outflows for share repurchases and payments on our finance leases. At June 30, 2025, we had no outstanding borrowings on our $400 million Revolving Facility (as defined below).

Current wording

Teradata’s financing activities for the nine months ended September 30, 2025 and 2024 primarily consisted of cash outflows for share repurchases and payments on our finance leases. At September 30, 2025, we had no outstanding borrowings on our $400 million Revolving Facility (as defined below).

Previous wording

•Our open market share repurchase program provides for the repurchase of Teradata stock periodically on an ongoing basis in open market transactions, through 10b5-1 programs, through accelerated share repurchase programs, in privately negotiated transactions, or through the use of derivative instruments, in accordance with applicable securities rules regarding issuer repurchases. The open market share repurchase program will expire on December 31, 2025. On November 1, 2021, our Board of Directors authorized an additional $1 billion for share repurchases under the open market share repurchase program. There is a total authority of $285 million remaining under the open market share repurchase program as of June 30, 2025.

Current wording

•Our open market share repurchase program provides for the repurchase of Teradata stock periodically on an ongoing basis in open market transactions, through 10b5-1 programs, through accelerated share repurchase programs, in privately negotiated transactions, or through the use of derivative instruments, in accordance with applicable securities rules regarding issuer repurchases. The open market share repurchase program will expire on December 31, 2025. On November 1, 2021, our Board of Directors authorized an additional $1 billion for share repurchases under the open market share repurchase program. There is a total authority of$259 million remaining under the open market share repurchase program as of September 30, 2025.

Previous wording

In the aggregate under the dilution offset share repurchase program and the open market share repurchase program, we repurchased approximately 2.9 million shares of common stock at an average price per share of$25.12 in the six months ended June 30, 2025.

Current wording

In the aggregate under the dilution offset share repurchase program and the open market share repurchase program, we repurchased approximately 4.3 million shares of common stock at an average price per share of$23.94 in the nine months ended September 30, 2025.

Previous wording

Other financing activities, including net share settlement for the payroll tax liability of section 16 officers (as discussed in Item 2. Unregistered Sales of Equity Securities and Use of Proceeds), offset by proceeds from the ESPP and the exercise of stock options, net of tax was a net outflow of $2 million for the six months ended June 30, 2025 and a net outflow of$6 million for the six months ended June 30, 2024. The ESPP proceeds are included in other financing activities, net in the Condensed Consolidated Statements of Cash Flows (Unaudited).

Current wording

Other financing activities, including net share settlement for the payroll tax liability of section 16 officers (as discussed in Item 2. Unregistered Sales of Equity Securities and Use of Proceeds), offset by proceeds from the ESPP and the exercise of stock options, net of tax was a netinflow of$3 million for the nine months ended September 30, 2025 and a net outflow of$1 million for the nine months ended September 30, 2024. The ESPP proceeds are included in other financing activities, net in the Condensed Consolidated Statements of Cash Flows (Unaudited).

Previous wording

Our total cash and cash equivalents held outside the United States in various foreign subsidiaries was$326 million as of June 30, 2025 and$350 million as of December 31, 2024. The remaining balance held in the U.S. was $43 million as of June 30, 2025 and$70 million as of December 31, 2024. The Company expects that a majority of its foreign earnings will be repatriated to the U.S. Effective January 1, 2018, the U.S. moved to a territorial system of international taxation, and as such will generally not subject future foreign earnings to U.S. taxation upon repatriation in future years.

Current wording

Our total cash and cash equivalents held outside the United States in various foreign subsidiaries was$386 million as of September 30, 2025 and$350 million as of December 31, 2024. The remaining balance held in the U.S. was $20 million as of September 30, 2025 and$70 million as of December 31, 2024. The Company expects that a majority of its foreign earnings will be repatriated to the U.S. Effective January 1, 2018, the U.S. moved to a territorial system of international taxation, and as such will generally not subject future foreign earnings to U.S. taxation upon repatriation in future years.

Previous wording

Management believes current cash, cash generated from operations and the$400 million available under the Credit Facility will be sufficient to satisfy future working capital, research and development activities, capital expenditures, pension contributions, and other financing requirements for at least the next twelve months. The Company principally holds its cash and cash equivalents in bank deposits and highly-rated money market funds.

Current wording

Management believes current cash, cash generated from operations and the $400 million available under the Credit Facility will be sufficient to satisfy future working capital, research and development activities, capital expenditures, pension contributions, and other financing requirements for at least the next twelve months. The Company principally holds its cash and cash equivalents in bank deposits and highly-rated money market funds.

Previous wording

Long-term Debt. On June 28, 2022, we entered into a Credit Agreement that provides for (i) a five-year unsecured term loan in an aggregate principal amount of $500 million (the "Term Loan"), and (ii) a five-year unsecured revolving credit facility in an aggregate principal amount of up to $400 million, including a $50 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swingline loans (the "Revolving Facility" and, collectively with the Term Loan, the "Credit Facility"). Our long-term debt is discussed in Note 10 of Notes to Condensed Consolidated Financial Statements (Unaudited). In addition, as disclosed in Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited), Teradata entered into an interest rate swap to hedge approximately 90% (or$428 million as of June 30, 2025) of the floating interest rate of the outstanding principal of the $500 million Term Loan and a cross currency swap to hedge a portion of Euro currency exposure of its net investment in certain foreign subsidiaries. As of June 30, 2025, the Company hadno borrowings outstanding under the Revolving Facility, leaving$400 million in borrowing capacity available under the Revolving Facility and the Term Loan principal outstanding was$469 million.

Current wording

Long-term Debt. On June 28, 2022, we entered into a Credit Agreement that provides for (i) a five-year unsecured term loan in an aggregate principal amount of $500 million (the "Term Loan"), and (ii) a five-year unsecured revolving credit facility in an aggregate principal amount of up to $400 million, including a $50 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swingline loans (the "Revolving Facility" and, collectively with the Term Loan, the "Credit Facility"). Our long-term debt is discussed in Note 10 of Notes to Condensed Consolidated Financial Statements (Unaudited). In addition, as disclosed in Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited), Teradata entered into an interest rate swap to hedge approximately 90% (or$422 million as of September 30, 2025) of the floating interest rate of the outstanding principal of the $500 million Term Loan and a cross currency swap to hedge a portion of Euro currency exposure of its net investment in certain foreign subsidiaries. As of September 30, 2025, the Company hadno borrowings outstanding under the Revolving Facility, leaving$400 million in borrowing capacity available under the Revolving Facility and the Term Loan principal outstanding was$463 million.