TERADATA CORP /DE/

Previous wording

•Revenue of $1,750 million decreased by 5% in 2024 as compared to 2023, with a 1% decrease in recurring revenue. Foreign currency fluctuations had a 2% adverse impact on total revenue and a 2% adverse impact on recurring revenue compared to the prior year. In addition to adverse foreign currency impact, the recurring revenue decline was primarily driven by a decrease in revenue from on-premises solutions, which was offset in part by an increase in Public Cloud revenue. Perpetual software licenses, hardware and other revenue decreased by 49% and consulting services revenue decreased by 16%. Revenues from perpetual software licenses, hardware and other decreased primarily due to our strategic shift towards recurring revenue. Thedecline in consulting service revenue was additionally due to our focus on higher-margin engagements and purposeful decrease in consulting services given the development of our strategic partner ecosystem.

Current wording

•Revenue of$1,663 million decreased by 5% in 2025 as compared to 2024, with a 2% decrease in recurring revenue. Foreign currency fluctuations had no impact on total revenue and a 1% positive impact on recurring revenue compared to the prior year. The recurring revenue decline was primarily driven by a decrease in revenue from on-premises solutions, which was offset in part by an increase in Public Cloud revenue. Perpetual software licenses, hardware and other revenue decreased by 26% and Consulting Services revenue decreased by 19%. Revenues from perpetual software licenses, hardware and other decreased primarily due to our strategic shift towards recurring revenue. Thedeclinein consulting service revenue was additionally due to our focus on higher-margin engagements and purposeful decreasein Consulting Services given the development of our strategic partner ecosystem.

Previous wording

•Gross profit as a percent of revenue was 60.5% in 2024, a slight decrease from 60.8% in 2023, primarily due to a higher mix of Public Cloud revenue, partially offset by an improvement in Public Cloud margins year-over-year.

Current wording

•Gross profit as a percent of revenue was 59.4% in 2025, adecrease from 60.5% in 2024, primarily due to a higher mix of Public Cloud revenue, and declines in Consulting Services revenue outpacing associated cost reductions. These factors were partially offset by an improvement in Public Cloud margins year-over-year.

Previous wording

•Operating expenses in 2024 decreased by 9% as compared to 2023, primarily drivenbyour cost discipline initiatives and afavorable impact from foreign currency fluctuations.

Current wording

•Operating expenses in 2025 decreased by 8% as compared to 2024, primarily drivenbyour cost discipline initiatives, primarily within selling, general and administrative ("SG&A") expenses.

Previous wording

•Net income was $114 million in 2024 versus net income of $62 million in 2023, primarily due to lower operating expenses and lower income tax expense. Diluted net earnings per share was $1.16 in 2024 compared to diluted earnings per share of $0.61 in 2023.

Current wording

•Net income was$130 million in 2025 versus net income of$114 million in 2024, primarily due to lower expenses from foreign currency exchange rate fluctuations, and interest expense. Diluted net earnings per share was$1.35 in 2025 compared to diluted earnings per share of$1.16 in 2024.

Previous wording

2024 compared to 2023 - Total revenue decreased 5% in 2024, which included a 2% negative impact from foreign currency exchange rate fluctuations. Recurring revenue declined 1% in 2024, which included a 2% negative impact from foreign currency exchange rate fluctuations. Within recurring revenue, a decline in revenue from on-premises solutions was partially offset by growth in Public Cloud revenue as we continued to migrate customers to the cloud.

Current wording

2025 compared to 2024 - Total revenue decreased 5% in 2025, which included no impact from foreign currency exchange rate fluctuations. Recurring revenue declined 2% in 2025, which included a 1% positive impact from foreign currency exchange rate fluctuations. Within recurring revenue, a decline in revenue from on-premises solutions was partially offset by growth in Public Cloud revenue, consistent with prior-year trends.

Previous wording

Revenues from perpetual software licenses, hardware, and other were down 49% in 2024, including 2% of adverse impact from foreign currency exchange rate fluctuations, as customers continue to transition to our subscription-based offerings, consistent with our overall strategy towards recurring revenue.

Current wording

Revenues from perpetual software licenses, hardware, and other were down 26% in 2025, including 1% of adverse impact from foreign currency exchange rate fluctuations, as customers continue to transition to our subscription-based offerings, consistent with our overall strategy towards recurring revenue.

Previous wording

As a portion of our operations and revenue occur outside the United States, and in currencies other than the U.S. dollar, we are exposed to fluctuations in foreign currency exchange rates. Based on currency rates as of December 31, 2024, Teradata is estimating a 1.5%-to-2.0% negative impact from currency translation on our 2025 full-year total revenues.

Current wording

As a portion of our operations and revenue occur outside the United States, and in currencies other than the U.S. dollar, we are exposed to fluctuations in foreign currency exchange rates. Based on currency rates as of December 31, 2025, Teradata is estimating a 0.25%-to-0.75% positive impact from currency translation on our 2026 full-year total revenues.

Previous wording

Total ARR decreased 6% versus the prior year, with declines in Subscription, and Maintenance and Software upgrade rights ARR off-set in part by growth in Public Cloud ARR. Foreign currency fluctuations had a negative 2% impact on total ARR. Our overall ARR decline was primarily driven by on-premises erosions, elongated deal closing cycles and lower on-premises expansion activity, and was partially offset by growth in Public Cloud ARR.

Current wording

Total ARRincreased 3%versus the prior year, with declines in Subscription, and Maintenance and Software upgrade rights ARR off-set in part by growth in Public Cloud ARR. Foreign currency exchange rate fluctuations had a positive 2% impact on total ARR. Our overall Total ARR increase reflects meaningful improvement in customer retention as compared to the prior year.

Previous wording

Public Cloud ARR increased 15% versus the prior year primarily due to on-premises customers migrating to Teradata VantageCloud along with a net expansion rate of 117%. Foreign currency fluctuations had a negative 3% impact on Public Cloud ARR. Public Cloud ARR growth and the Cloud Net Expansion rate were driven by customer demand for our differentiated offerings, resulting in new workloads for both migrations and expansions. Subscription ARR decreased 12% in 2024 from the prior year primarily due to migrations from on-premises to Public Cloud, and included a 2%adverse impact from foreign currency fluctuations.

Current wording

Public Cloud ARRincreased 15% versus the prior year primarily due to a net expansion rate of 108%, as well as on-premises customers migrating to Teradata's cloud platform. Foreign currency exchange rate fluctuations had a positive 2% impact on Public Cloud ARR. Public Cloud ARR growth and the Cloud Net Expansion rate were primarily driven by customer demand for our differentiated offerings, resulting in new workloads for both migrations and expansions. Subscription ARR decreased 4% in 2025 from the prior year primarily due to migrations from on-premises to Public Cloud, and included a 3% positive impact from foreign currency exchange rate fluctuations.

Previous wording

Our Maintenance and Software upgrade rights ARR declined 43% compared to 2023. This was expected as we continue to transition to a subscription model and customers increasingly purchased Teradata on a subscription and/or public cloud basis.

Current wording

Our Maintenance and Software Upgrade Rights ARRdeclined 13% compared to 2024. This was expected as we continue to transition to a subscription model and customers increasingly purchased Teradata on a subscription and/or public cloud basis.

Previous wording

2024 compared to 2023 - The slight decrease in gross profit as a percentage of revenue was primarily driven by a higher mix of Public Cloud revenue, offset in part by improving Public Cloud gross profit rates year-over-year.

Current wording

2025 compared to 2024 - The decrease in gross profit as a percentage of revenue was primarily driven by a higher mix of Public Cloud revenue, offset in part by improving Public Cloud gross profit rates year-over-year.

Previous wording

Recurring gross profit as a percentage of revenue was down from the prior year, primarily because the negative gross profit rate impact on increased Public Cloud revenue, partially offset by improved Public Cloud gross profit rates year-over-year.

Current wording

Recurring gross profit as a percentage of revenue was down from the prior year, primarily because of the negative gross profit rate impact from increased Public Cloud revenue, partially offset by improved Public Cloud gross profit rates year-over-year.

Previous wording

The decrease in perpetual software licenses, hardware and other gross profit as a percentage of revenue was primarily driven by deal mix and a higher ratio of perpetual hardware to software revenue as compared to prior year as the vast majority of all customers have transitioned to our subscription-based offerings, consistent with our overall strategy.

Current wording

The increasein perpetual software licenses, hardware and other gross profit as a percentage of revenue was primarily driven by deal mix as compared to prior year as the vast majority of all customers have transitioned to our subscription-based offerings, consistent with our overall strategy.

Previous wording

Consulting services gross profit as a percentage of revenue decreased as compared to the prior year primarily due to lower consulting services revenue. We continue to refocus our consulting organization on Teradata Vantage-oriented offerings and reduce our footprint in non-core consulting engagements, accompanied by our strategic development of a partner ecosystem.

Current wording

Consulting Services gross profit as a percentage of revenue decreased as compared to the prior year primarily due tolower Consulting Services revenue. We continue to refocus our consulting organization on Teradata Vantage-oriented offerings and reduce our footprint in non-core consulting engagements, accompanied by our strategic development of a partner ecosystem.

Previous wording

R&D expenses decreased in 2024 as compared to the prior year. R&D expenses were impacted by continued cost discipline initiatives as compared to the prior year.

Current wording

R&D expenses decreased in 2025 as compared to the prior year. R&D expenses were impacted by continued cost discipline initiatives as compared to the prior year, offset in part by targeted investments around new market opportunities.

Previous wording

We intend to continue investing in R&D areas that we anticipate will generate growth, such as technologies that support AI/ML and OTF, including for on-premises environments.

Current wording

We intend to continue investing in R&D areas that we anticipate will generate growth, such as technologies that support AI/ML, including for on-premises environments.

Previous wording

Other expense, net in 2024 and 2023, is comprised primarily of interest expense on long-term debt and finance leases, foreign currency transactions, as well as benefit costs for our pension and postemployment plans, partially offset by interest income earned on our cash and cash equivalents. Other expense is lower in 2024, primarily due to $30 million less in losses resulting from foreign currency transactions compared to the prior year, and $9 million less in losses with respect to Argentina Blue Chip Swaps (a foreign exchange mechanism which effectively results in a parallel U.S. dollar exchange rate) in order to remit cash from our Argentine operations.

Current wording

Other expense, net in 2025 and 2024, is comprised primarily of interest expense on long-term debt and finance leases, foreign currency transactions, as well as benefit costs for our pension and postemployment plans, partially offset by interest income earned on our cash and cash equivalents. Other expense is lower in 2025, primarily due to $10 million less in losses resulting from foreign currency transactions compared to the prior year, and $3 million less in losses with respect to Argentina Blue Chip Swaps (a foreign exchange mechanism which effectively results in a parallel U.S. dollar exchange rate) in order to remit cash from our Argentine operations.

Previous wording

Effective on January 1, 2022, the U.S. tax law changed to require that R&D expenses be capitalized and amortized for tax purposes under Internal Revenue Code Section 174; as a result of this law change, we recognized approximately $2 million of tax expense related to global intangible low-taxed income ("GILTI") in our marginal effective tax rate for 2024 and approximately $2 million for 2023. We expect that a majority of our foreign earnings will be repatriated to the U.S.

Current wording

We recognized approximately $2 million of tax expense related to global intangible low-taxed income ("GILTI") in our marginal effective tax rate for 2025 and approximately $2 million for 2024. We expect that a majority of our foreign earnings will be repatriated to the U.S.

Previous wording

On August 5, 2024, Teradata announced that it realigned its sales function and initiated global restructuring to optimize operations. Due to these organizational changes, Teradata now manages its business under two segments, which are also the Company’s new operating segments: (1) Product Sales and (2) Consulting Services. Teradata’s Product Sales segment represents the results for the Recurring Revenue and Perpetual Software Licenses, Hardware and Other line items and the Consulting Services segment represents the Consulting Services line item, each as disclosed in the Company’s financial statements and in the tables in this Form 10-K. As the revenue and gross margin trends for these business categories are already discussed in the sections above, there is no separate segment discussion presented here. Our segment information is presented in Note 14 of Notes to Condensed Consolidated Financial Statements.

Current wording

On August 5, 2024, Teradata announced that it realigned its sales function and initiated global restructuring to optimize operations. Due to these organizational changes, Teradata now manages its business under two segments, which are also the Company’s operating segments: (1) Product Sales and (2) Consulting Services. Teradata’s Product Sales segment represents the results for the Recurring Revenue and Perpetual Software Licenses, Hardware and Other line items and the Consulting Services segment represents the Consulting Services line item, each as disclosed in the Company’s financial statements and in the tables in this Form 10-K. As the revenue and gross margin trends for these business categories are already discussed in the sections above, there is no separate segment discussion presented here. Our segment information is presented in "Note 14-Segment, Other Supplemental Information and Concentrations" of Notes to Consolidated Financial Statements in this Annual Report.

Previous wording

Teradata ended 2024 with $420 million in cash and cash equivalents, a $66 million decrease from December 31, 2023, after using approximately $215 million for repurchases of Company common stock during the year. Cash provided by operating activities decreased by $72 million to $303 million in 2024 compared to 2023. The decrease in cash provided by operating activities was primarily due to lower billings year over year driving a decrease in deferred revenue and a lower receivables balance in 2024 as compared to the prior year. This was offset in part by higher net income, adjusted for non-cash items, in 2024 as compared to 2023. Teradata used approximately $37 million of cash in 2024 for reorganization activities, including the re-alignment of our go-to-market function and other activities to optimize our workforce, as compared to $43 million used in 2023 for similar purposes.

Current wording

Teradata ended 2025 with$493 million in cash and cash equivalents, a$73 million increase from December 31, 2024, after using approximately$140 million for repurchases of Company common stock during the year. Cash provided by operating activities increased by$2 million to$305 million in 2025 compared to 2024. Cash provided by operating activities benefited from higher net income, adjusted for non-cash items, in 2025 as compared to 2024, as well as improved growth in deferred revenue balances, partially offsetby higher receivables and lower payables balances in 2025 as compared to the prior year. Teradata used approximately $35 million of cash in 2025 for reorganization activities, and other activities to optimize our workforce, as compared to $37 million used in 2024 for similar purposes.

Previous wording

Financing activities and certain other investing activities are not included in our calculation of free cash flow. In 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 $4 million, compared to $13 million of such pre-tax losses in 2023, the net purchases of which are reported in other investing activities in the Consolidated Statement of Cash Flows. In 2023, other investing activities also included our strategic acquisition of Stemma Technologies. The acquisition of Stemma Technologies was not financially material. There were no other material other investing activities in 2024 and 2023.

Current wording

Financing activities and certain other investing activities are not included in our calculation of free cash flow. In 2025, 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 $1 million, compared to $4 million of such pre-tax losses in 2024, the net purchases of which are reported in other investing activities in the Consolidated Statement of Cash Flows. There were no other material other investing activities in 2025 and 2024.

Previous wording

We have two share repurchase programs that were authorized by our Board of Directors:

Current wording

We have two share repurchase programs that have been authorized by our Board of Directors:

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 $352 million remaining under the open market share repurchase program as of December 31, 2024.

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. On November 1, 2021, our Board of Directors authorized an additional $1 billion for share repurchases under the open market share repurchase program. There was a total authority of $222 million remaining under the open market share repurchase program as of December 31, 2025. On November 17, 2025, the Board approved the Repurchase Program authorizing the Company to repurchase up to $500 million of its common stock. The Repurchase Program became effective on January 1, 2026, does not have an expiration date, and will continue until otherwise modified, suspended, or terminated. The purchases under the Repurchase Program may be made from time to time in the open market, in privately negotiated transactions, or by other means, including through Rule 10b5-1 trading plans, in accordance with applicable securities law and other regulatory requirements. The Repurchase Program does not obligate the Company to repurchase any shares under the authorization and the timing and amount of any repurchases will depend on a variety of factors, including the price of the Company’s common stock, general business and market conditions, and other investment considerations.

Previous wording

In the aggregate under the dilution offset share repurchase program and the open market share repurchase program, we repurchased approximately 5.8 million shares of our common stock at an average price per share of $36.99 in 2024 and approximately 7.0 million shares of our common stock at an average price per share of $43.79 in 2023.

Current wording

In the aggregate under the dilution offset share repurchase program and the open market share repurchase program, we repurchased approximately 5.8 million shares of our common stock at an average price per share of$24.34 in 2025 and approximately 5.8 million shares of our common stock at an average price per share of $36.99 in 2024.

Previous wording

Other financing activities, including net share settlement for the payroll tax liability of section 16 officers (as discussed in Item 5 of this Annual Report on Form 10-K), offset by proceeds from the ESPP and the exercise of stock options, net of tax, was a net outflow of $1 million for 2024 and a net inflow of $7 million for 2023.

Current wording

Other financing activities, including net share settlement for the payroll tax liability of section 16 officers (as discussed in Item 5 of this Annual Report on Form 10-K), offset by proceeds from the ESPP and the exercise of stock options, net of tax, was a net inflow of $1 million for 2025 and a net outflow of $1 million for 2024.

Previous wording

Our total cash and cash equivalents held outside the United States in various foreign subsidiaries was$350 million as of December 31, 2024 and $428 million as of December 31, 2023. The remaining balance held in the United States ("U.S.")was $70 million as of December 31, 2024 and $58 million as of December 31, 2023. 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

States ("U.S.")was $32 million as of December 31, 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 12 of Notes to Consolidated Financial Statements. In addition, as disclosed in Note 9 of Notes to Consolidated Financial Statements, Teradata entered into an interest rate swap to hedge approximately 90% of the floating interest rate of the total $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.

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 12-Debt" of Notes to Consolidated Financial Statements in this Annual Report. In addition, as disclosed in "Note 9-Derivative Instruments and Hedging Activities" of Notes to Consolidated Financial Statements in this Annual Report, Teradata entered into an interest rate swap to hedge approximately 90% of the floating interest rate of the total $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.

Previous wording

Leases. In the normal course of business, we enter into operating and finance leases that impact, or could impact, our liquidity. Leases and minimum lease obligations as of December 31, 2024 are described in detail in Note 13 of Notes to Consolidated Financial Statements.

Current wording

Leases. In the normal course of business, we enter into operating and finance leases that impact, or could impact, our liquidity. Leases and minimum lease obligations as of December 31, 2025 are described in detail in "Note 13-Leases" of Notes to Consolidated Financial Statements in this Annual Report.

Previous wording

Transition tax is the remaining current payable balance recorded on our balance sheet as of December 31, 2024, of the one-time tax on accumulated foreign earnings resulting from the 2017 Tax Act. The payments associated with this deemed repatriation are being paid over seven years ending in 2025. Purchase obligations are committed purchase orders and other contractual commitments for goods and services and include non-cancelable contractual payments for fixed or minimum amounts to be purchased in relation to service agreements with various vendors for ongoing telecommunications, information technology, hosting and other services.

Current wording

Purchase obligations are committed purchase orders and other contractual commitments for goods and services and include non-cancelable contractual payments for fixed or minimum amounts to be purchased in relation to service agreements with various vendors for ongoing telecommunications, information technology, hosting and other services.

Previous wording

Additionally, we had $44 million of unrecognized tax benefits recorded on our balance sheet as of December 31, 2024, of which $21 million is recorded in non-current liabilities and $23 million is reflected as an offset to deferred tax assets related to certain tax attribute carryforwards. These items are not included in the table of obligations shown above. The settlement period for the non-current income tax liabilities cannot be reasonably estimated as the timing and the amount of the payments, if any, will depend on possible future tax examinations with the various tax authorities.

Current wording

Additionally, we had $38 million of unrecognized tax benefits recorded on our balance sheet as of December 31, 2025, of which $13 million isrecorded in non-current liabilitiesand $25 million isreflected as an offset to deferred tax assets related to certain tax attribute carryforwards. These items are not included in the table of obligations shown above. The settlement period for the non-current income tax liabilities cannot be reasonably estimated as the timing and the amount of the payments, if any, will depend on possible future tax examinations with the various tax authorities.

Previous wording

We also have postemployment and international pension obligations that may affect future cash flow. These items are not included in the table of obligations shown above. We are also potentially subject to concentration of supplier risk. Our hardware components are assembled primarily by Flex Ltd. ("Flex"). Flex procures a wide variety of components used in the manufacturing process on our behalf. Although many of these components are available from multiple sources, we utilize preferred supplier relationships to better ensure more consistent quality, cost, and delivery. Typically, these preferred suppliers maintain alternative processes and/or facilities to ensure continuity of supply. Given our strategy to outsource manufacturing activities to Flex and to source certain components from single suppliers, a disruption in production at Flex or at a supplier could impact the timing of customer shipments and/or Teradata’s operating results. In addition, a significant change in the forecasts to any of these preferred suppliers could result in purchase obligations or components that may be in excess of demand. Postemployment and pension obligations are described in detail in "Note 8—Employee Benefit Plans" in the Notes to Consolidated Financial Statements.

Current wording

We also have postemployment and international pension obligations that may affect future cash flow. These items are not included in the table of obligations shown above. We are also potentially subject to concentration of supplier risk. Our hardware components are assembled primarily by Flex Ltd. ("Flex"). Flex procures a wide variety of components used in the manufacturing process on our behalf. Although many of these components are available from multiple sources, we utilize preferred supplier relationships to better ensure more consistent quality, cost, and delivery. Typically, these preferred suppliers maintain alternative processes and/or facilities to ensure continuity of supply. Given our strategy to outsource manufacturing activities to Flex and to source certain components from single suppliers, a disruption in production at Flex or at a supplier could impact the timing of customer shipments and/or Teradata’s operating results. In addition, a significant change in the forecasts to any of these preferred suppliers could result in purchase obligations or components that may be in excess of demand. Postemployment and pension obligations are described in detail in "Note 8—Employee Benefit Plans" in the Notes to Consolidated Financial Statements in this Annual Report.

Previous wording

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require significant management judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. The significant accounting policies and estimates that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are discussed in the paragraphs below. Teradata’s senior management has reviewed these critical accounting policies and related disclosures with the Audit Committee of Teradata’s Board of Directors. For additional information regarding our accounting policies and other disclosures required by GAAP, see "Note 1—Description of Business, Basis of Presentation and Significant Accounting Policies" in the Notes to Consolidated Financial Statements.

Current wording

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require significant management judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. The significant accounting policies and estimates that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are discussed in the paragraphs below. Teradata’s senior management has reviewed these critical accounting policies and related disclosures with the Audit Committee of Teradata’s Board of Directors. For additional information regarding our accounting policies and other disclosures required by GAAP, see "Note 1—Description of Business, Basis of Presentation and Significant Accounting Policies" in the Notes to Consolidated Financial Statements in this Annual Report.

Previous wording

We review the standalone selling price on a periodic basis and update it, when appropriate, to ensure that the practices employed reflect our recent pricing experience. We maintain internal controls over the establishment and updates of these estimates, which includes review and approval by management. For the year ended December 31, 2024 there was no material impact to revenue resulting from changes in the standalone selling price, nor do we expect a material impact from such changes in the near term. Refer to Notes 1 and 3 in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for discussion of our revenue recognition policies.

Current wording

We review the standalone selling price on a periodic basis and update it, when appropriate, to ensure that the practices employed reflect our recent pricing experience. We maintain internal controls over the establishment and updates of these estimates, which includes review and approval by management. For the year ended December 31, 2025 there was no material impact to revenue resulting from changes in the standalone selling price, nor do we expect a material impact from such changes in the near term. Refer to "Note 1-Description of Business, Basis of Presentation and Significant Accounting Policies" and "Note 3-Revenue from Contract with Customers" in the Notes to Consolidated Financial Statements included in this Annual Report for discussion of our revenue recognition policies.

Previous wording

Effective January 1, 2018, the United States moved to a territorial system of international taxation, and as such will generally not subject future foreign earnings to United States taxation upon repatriation in future years. The Company considers a majority of its foreign earnings not indefinitely reinvested outside of the United States. However, these distributions may be subject to non-U.S. withholding taxes if profits are distributed from certain jurisdictions; accordingly, the Company has recorded $2 million of deferred foreign tax expense with respect to certain earnings that are not considered permanently reinvested. Deferred taxes have not been provided on earnings considered indefinitely reinvested.

Current wording

Effective January 1, 2018, the United States moved to a territorial system of international taxation, and as such will generally not subject future foreign earnings to United States taxation upon repatriation in future years. The Company considers a majority of its foreign earnings not indefinitely reinvested outside of the United States. However, these distributions may be subject to non-U.S. withholding taxes if profits are distributed from certain jurisdictions; accordingly, the Company has recorded $4 million of deferred foreign tax expense with respect to certain earnings that are not considered permanently reinvested. Deferred taxes have not been provided on earnings considered indefinitely reinvested.

Previous wording

We account for uncertainty in income taxes by prescribing thresholds and attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. We record any interest and/or penalties related to uncertain tax positions in the income tax expense line on our Consolidated Statements of Income. As of December 31, 2024, the Company has a total of $44 million of unrecognized tax benefits, of which $21 million is included in the other liabilities section of the Company’s consolidated balance sheet as a non-current liability and $23 million of uncertain tax positions relates to certain tax attributes generated by the Company which are netted against the underlying deferred tax assets recorded on the balance sheet.

Current wording

We account for uncertainty in income taxes by prescribing thresholds and attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. We record any interest and/or penalties related to uncertain tax positions in the income tax expense line on our Consolidated Statements of Income. As of December 31, 2025, the Company has a total of $38 million of unrecognized tax benefits, of which$13 million is included in the other liabilities section of the Company’s consolidated balance sheet as a non-current liability and $25 million of uncertain tax positions relates to certain tax attributes generated by the Company which are netted against the underlying deferred tax assets recorded on the balance sheet.

Previous wording

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. We have recorded $101 million in 2024 and $90 million in 2023 for valuation allowances, $65 million of which offset our California R&D tax credit carryfoward, and $19 million of which relates to our US Foreign Tax Credit Carryforward, as the Company expects to continue to generate excess California R&D & Foreign tax credits into the foreseeable future. The remaining $17 million relates to certain of our operating entities with cumulative 3-year net operating losses whereby the future realization of their net deferred tax assets may not be realized.

Current wording

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. We have recorded $110 millionin 2025 and $101 million in 2024 for valuation allowances,$69 million of which offset our California R&D tax credit carryfoward, and $24 million of which relates to our US Foreign Tax Credit Carryforward, as the Company expects to continue to generate excess California R&D & Foreign tax credits into the foreseeable future. The remaining $17 million relates to certain of our operating entities with cumulative 3-year net operating losses whereby the future realization of their net deferred tax assets may not be realized.

Previous wording

We issue service-based and performance-based restricted share units. We measure compensation cost for service-based restricted share unit awards at fair value and recognize compensation expense over the service period. Our performance-based restricted share units vest only if specific performance conditions are satisfied. The number of shares that will be earned pursuant to our performance-based restricted share unit awards will vary based on actual performance. No shares will vest if the threshold objectives are not met. In the event the objectives are exceeded, additional shares will vest up to a maximum payout. The cost of our performance-based restricted share awards is expensed over the performance period based upon management’s estimate and analysis of the probability of meeting the performance criteria. Because the actual number of shares to be awarded is not known until the end of the performance period, the actual compensation expense related to our performance-based restricted share unit awards could differ from our current expectations. We account for forfeitures for both service-based and performance-based restricted share units as they occur instead of estimating forfeitures at the time of grant and revising those estimates in subsequent periods if actual forfeitures differ from our estimates.

Current wording

We issue service-based and performance-based restricted share units. We measure compensation cost for service-based restricted share unit awards at fair value and recognize compensation expense over the service period. Our performance-based restricted share units vest only if specific performance conditions are satisfied. The number of shares that will be earned pursuant to our performance-based restricted share unit awards will vary based on actual performance. No shares will vest if certain objectives are not met. In the event the objectives are exceeded, additional shares will vest up to a maximum payout. The cost of our performance-based restricted share awards is expensed over the performance period based upon management’s estimate and analysis of the probability of meeting the performance criteria. Because the actual number of shares to be awarded is not known until the end of the performance period, the actual compensation expense related to our performance-based restricted share unit awards could differ from our current expectations. We account for forfeitures for both service-based and performance-based restricted share units as they occur instead of estimating forfeitures at the time of grant and revising those estimates in subsequent periods if actual forfeitures differ from our estimates.

Previous wording

The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. For 2024, the Company performed a quantitative impairment test. In this test, the Company compared the fair value of each reporting unit to its carrying value. The Company typically determines the fair value of its reporting units using a weighting of fair values derived from the income and market approaches. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable companies with similar operating and investment characteristics as the reporting unit. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company records an impairment loss equal to the difference. In the fourth quarter of 2024, the Company performed its annual impairment test of goodwill and determined that no impairment to the carrying value of goodwill was necessary.

Current wording

The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. For 2024, the Company performed a quantitative impairment test. In this test, the Company compared the fair value of each reporting unit to its carrying value. The Company typically determines the fair value of its reporting units using a weighting of fair values derived from the income and market approaches. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable companies with similar operating and investment characteristics as the reporting unit. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company records an impairment loss equal to the difference. In the fourth quarter of 2025, the Company performed its annual impairment test of goodwill and determined thatno impairment to the carrying value of goodwill was necessary.

Previous wording

We measure pension and postemployment benefit costs and credits using actuarial valuations. Actuarial assumptions attempt to anticipate future events and are used in calculating the expense and liability relating to these plans. These factors include assumptions we make about interest rates, expected investment return on plan assets, total and involuntary turnover rates, and rates of future compensation increases. In addition, our actuarial consultants also use subjective factors such as withdrawal rates and mortality rates to develop our valuations. We review and update these assumptions on an annual basis at the beginning of each fiscal year. We are required to consider current market conditions, including changes in interest rates, in making these assumptions. The actuarial assumptions that we use may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. These differences may result in a significant impact to the measurement of our pension and postemployment benefit obligations and to the amount of pension and postemployment benefits expense we have recorded or may record. For example, as of December 31, 2024, a one-half percent increase/decrease in the discount rate would change the projected benefit obligation of our pension plans by approximately $6 million, and a one-half percent increase/decrease in our involuntary turnover assumption would change our postemployment benefit obligation by approximately $5 million.

Current wording

We measure pension and postemployment benefit costs and credits using actuarial valuations. Actuarial assumptions attempt to anticipate future events and are used in calculating the expense and liability relating to these plans. These factors include assumptions we make about interest rates, expected investment return on plan assets, total and involuntary turnover rates, and rates of future compensation increases. In addition, our actuarial consultants also use subjective factors such as withdrawal rates and mortality rates to develop our valuations. We review and update these assumptions on an annual basis at the beginning of each fiscal year. We are required to consider current market conditions, including changes in interest rates, in making these assumptions. The actuarial assumptions that we use may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. These differences may result in a significant impact to the measurement of our pension and postemployment benefit obligations and to the amount of pension and postemployment benefits expense we have recorded or may record. For example, as of December 31, 2025, a one-half percent increase/decrease in the discount rate would change the projected benefit obligation of our pension plans by approximately $6 million, and a one-half percent increase/decrease in our involuntary turnover assumption would change our postemployment benefit obligation by approximately $4 million.