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 first quarter of 2026:

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 second quarter of 2026:

Previous wording

•At the end of the first quarter of 2026, Total ARR was$1.492 billion compared to $1.442 billion at the end of the first quarter of 2025, increasing 3%as compared to the first quarter of 2025, including a 1% positive impact from foreign currency fluctuations.

Current wording

•At the end of the second quarter of 2026, Total ARR was$1.509 billion compared to $1.489 billion at the end of the second quarter of 2025, increasing 1%as compared to the second quarter of 2025, including a 1% negative impact from foreign currency fluctuations.

Previous wording

•At the end of the first quarter of 2026, Public Cloud ARR was$686 million compared to $606 million at the end of the first quarter of 2025, increasing 13% as compared to the first quarter of 2025, with a 1% positive impact from foreign currency fluctuations.

Current wording

•At the end of the second quarter of 2026, Public Cloud ARR was$686 million compared to $634 million at the end of the second quarter of 2025, increasing 8% as compared to the second quarter of 2025, with a 1%negative impact from foreign currency fluctuations.

Previous wording

•Total revenue was $444 million for the first quarter of 2026, increasing by $26 million compared to the first quarter of 2025, with recurring revenue up 12%. Perpetual software licenses, hardware and other revenue reduced by 90%, and consulting services revenue decreased 14%. Foreign currency fluctuations had a 2% positive impact on total revenue for the quarter compared to the prior year.

Current wording

•Total revenue was$410 million for the second quarter of 2026, increasing by $2 million compared to the second quarter of 2025, with recurring revenue up 3%. Perpetual software licenses, hardware and other revenue increased by 167% ($5 million), and consulting services revenue decreased 24%. Foreign currency fluctuations did not have a material impact on total revenue for the quarter compared to the prior year.

Previous wording

•Gross margin increased to 62.2% in the first quarter of 2026 from 59.3% in the first quarter of 2025, primarily due to a greater mix of recurring revenue in the period.

Current wording

•Gross margin increasedto 59.3% in the second quarter of 2026 from 56.4% in the second quarter of 2025, primarily due to a greater mix of recurring revenue in the period.

Previous wording

•Operating expenses for the first quarter of 2026 increased 71% compared to the first quarter of 2025, largely from legal fees related to the SAP Settlement Agreement, partially off-set by lower employee compensation expense in the first quarter of 2026, due to the impact of restructuring actions taken in the prior year.

Current wording

•Operating expenses for the second quarter of 2026 decreased 5% compared to the second quarter of 2025, largely from lower employee compensation expense in the second quarter of 2026, due to the impact of restructuring actions taken in the prior year.

Previous wording

•The Company saw an operating loss of $36 million in the first quarter of 2026, compared to operating income of $66 million in the first quarter of 2025.

Current wording

•The Company saw an operating income of$48 million in the second quarter of 2026, compared to operating income of $24 million in the second quarter of 2025.

Previous wording

Total revenue increased$26 million, or 6%, in the first quarter of 2026, including a 2% positive impact from foreign currency fluctuations. Recurring revenue increased 12% as compared to the first quarter of 2025 including a 3% positive impact from foreign currency fluctuations. Recurring revenue for the first quarter of 2026 included growth from higher annual upfront software subscription revenue associated with on-premises subscription software and public cloud revenue growth, which contrib utedto the year-over-year growth rate as we experienced continued interest in our hybrid platform. Revenue from perpetual software licenses, hardware and other decreased$9 million year over year. Consulting services revenue decreased 14% or $7 million in the first quarter of 2026, with a 1% positive impact from foreign currency exchange rate fluctuations. The consulting services revenue decrease is primarily the result of lower order performance from the second half of 2025.

Current wording

Total revenue increased $2 million, or 0%, in the second quarter of 2026, with no material impact from foreign currency fluctuations. Recurring revenue increased 3% as compared to the second quarter of 2025 including a 1% positive impact from foreign currency fluctuations. Recurring revenue for the second quarter of 2026 included growth from Public Cloud revenue, offset in part by lower annual upfront software subscription revenue. Revenue from perpetual software licenses, hardware and other increased $5 million year over year, primarily driven by perpetual hardware. Consulting services revenue decreased 24% or $12 million in the second quarter of 2026, with a 1% negative impact from foreign currency exchange rate fluctuations. The consulting services revenue decrease is primarily the result of lower order performance from the second half of 2025 and first quarter of 2026.

Previous wording

At the end of the first quarter of 2026, Total ARRincreased 3% as compared to the first quarter of 2025, including a 1% positive impact from foreign currency fluctuations. At the end of the first quarter of 2026, Public Cloud ARRincreased 13% as compared to the first quarter of 2025, with a 1% positive impact from foreign currency fluctuations. Public Cloud ARR growth in the first quarter of 2026 was primarily driven by customer demand of our Public Cloud offering and customer migrations. The decreases insubscription ARR and maintenance and software upgrade rights ARR were primarily driven by customer migrations to Public Cloud ARR and on-premises erosions.

Current wording

At the end of the second quarter of 2026, Total ARRincreased 1% as compared to the second quarter of 2025, including a 1%negative impact from foreign currency fluctuations. At the end of the second quarter of 2026, Public Cloud ARR increased 8% as compared to the second quarter of 2025, with a 1% negative impact from foreign currency fluctuations. Public Cloud ARR growth in the second quarter of 2026 was primarily driven by customer demand of our Public Cloud offering and customer migrations. The decreases in maintenance and software upgrade rights ARR were primarily driven by customer migrations to Public Cloud ARR and on-premises erosions.

Previous wording

In the first quarter of 2026, we experienced the following trends:

Current wording

In the second quarter of 2026, we experienced the following trends:

Previous wording

•Customer interest in AI-driven use cases continues to grow across various industries.

Current wording

•Customer interest in AI-driven use cases continues to grow across various industries, including initial transactions incorporating our AI capabilities.

Previous wording

The decrease in recurring revenue gross profit as a percentage of revenue was primarily due to unfavorable on-premises deal mix, and 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 increase in recurring revenue gross profit as a percentage of revenue was primarily due to continued improvement in our Public Cloud margin rate, offset in part by a higher mix of Public Cloud revenues versus on-premises 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 the $121 million of expenses incurred in connection with the SAP litigation and related settlement and an increase stock compensation expense partially offset by continued budget discipline focused on cost reductions across the Company. Research and development ("R&D") expense increased year over year due to investments in Public Cloud and AI-related technology opportunities offset in part by continued cost reduction initiatives.

Current wording

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

Previous wording

We estimate that the full-year effective tax rate for 2026 will be approximately 25%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction, the estimated impact to NCTI tax, and the estimated discrete items to be recognized in 2026. We are currently forecasting approximately$0.2 million of taxexpense related to NCTI in our marginal effective tax rate for 2026. In addition, the Company has recorded $16 million of NCTI tax expense as a discrete item in the first quarter of 2026 related to the impact from the SAP Settlement Agreement.

Current wording

We estimate that the full-year effective tax rate for 2026 will be approximately 23%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction, the estimated impact to NCTI tax, and the estimated discrete items to be recognized in 2026.

Previous wording

The forecasted tax rate is based on the foreign profits being taxed at an overall effective tax rate of approximately 17%, as compared to the U.S. federal statutory tax rate of 21%.

Current wording

The forecasted tax rate is based on the foreign profits being taxed at an overall effective tax rate of approximately 16%, as compared to the U.S. federal statutory tax rate of 21%.

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 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-Q. 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 12, Segment and Other Supplemental Information, of the Notes to Condensed Consolidated Financial Statements (Unaudited).

Current wording

Teradata 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-Q. 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 12, Segment and Other Supplemental Information, of the Notes to Condensed Consolidated Financial Statements (Unaudited).

Previous wording

Other income (expense), net in the first quarter of 2026 and 2025 is comprised primarily of, legal expenses, 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, generally partially offsetby interest income earned on our cash and cash equivalents and other income. Other income (expense) has improved by $481 million year-over-year primarily due to the receipt of the SAP Settlement Amount as disclosed in more detail in Item 1. Financial Statements to this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 (the "Form 10-Q") (see Note 5. Supplemental Financial Information and Note 8, Commitments and Contingencies).

Current wording

Other income (expense), net for the six months of 2026 and 2025 is comprised primarily of the SAP Settlement Amount proceeds, interest income earned on our cash and cash equivalents, and gains from foreign currency transactions, offset in part by interest expense on long-term debt (which was recently paid off) and finance leases, as well as benefit costs associated with our pension and postemployment plans. Interest income is higher primarily due to higher average cash balances during the current year as compared to the prior period. Other income (expense) has improved by $491 million year-over-year primarily due to the receipt of the SAP Settlement Amount as disclosed in more detail in Item 1. Financial Statements to this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 (the "Form 10-Q") (see Note 5. Supplemental Financial Information).

Previous wording

For the three months ended March 31, 2026, the Company recorded $79 million of discrete tax expense related to the tax expense impact from the receipt of the SAP Settlement Net Proceeds.

Current wording

For the six months ended June 30, 2026, the Company recorded $67 million of net discrete tax expense, a majority of which related to the tax expense impact from the receipt of the SAP Settlement Net Proceeds.

Previous wording

For the three months ended March 31, 2025, the Company recorded $1 million of net discrete tax benefit, a majority of which related to tax benefits from uncertain tax position reversals due to the Company's completion of its IRS audit related to its 2020 federal tax return, which was largely offset by incremental tax expense from stock-based compensation vesting. The Company received a final no change audit ruling from the Congressional Joint Committee on Tax in early February of 2025.

Current wording

For the six months ended June 30, 2025, the Company had no material net discrete tax adjustment. 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 offset by incremental tax expense from stock-based compensation vesting in the second quarter of 2025.

Previous wording

Cash provided by operating activities was$401 million, which increased by$393 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. $359 million of the increase was due to the SAP Settlement Net Proceeds received as a result of the SAP Settlement Agreement as discussed in Note 5, Supplemental Financial Information, and Note 8, Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements (Unaudited) of this Form 10-Q. Teradata used approximately $11 millionof cash in the first three months of 2026 for severance payments, as compared to $5 million in the first three months of 2025.

Current wording

Cash provided by operating activities was$507 million, which increased by$456 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. $337 million of the increase was due to the SAP Settlement Net Proceeds received as a result of the SAP Settlement Agreement as discussed in Note 5, Supplemental Financial Information, of the Notes to Condensed Consolidated Financial Statements (Unaudited) of this Form 10-Q. Teradata used approximately $21 million of cash in the first six months of 2026 for severance payments, as compared to $11 million in the first six months of 2025.

Previous wording

As disclosed in Note 5, Supplemental Financial Information, of the Notes to Condensed Consolidated Financial Statements (Unaudited), during the three months ended March 31, 2026, we received $480 million cash from the SAP Settlement Agreement and paid $121 million in related expenses, that was reported as an operating activity for cash flow purposes.

Current wording

As disclosed in Note 5, Supplemental Financial Information, of the Notes to Condensed Consolidated Financial Statements (Unaudited), during the six months ended June 30, 2026, we received $480 million cash from the SAP Settlement Agreement and paid $121 million in related expenses. Additionally, $22 million in cash taxes related to the SAP Settlement Net Proceeds were paid during the first half of 2026, that was reported as an operating activity for cash flow purposes.

Previous wording

Financing activities and certain other investing activities, are not included in our calculation of free cash flow. There wereno material other investing activities for the three months ended March 31, 2026.

Current wording

Financing activities and certain other investing activities, are not included in our calculation of free cash flow. There wereno material other investing activities for the six months ended June 30, 2026.

Previous wording

Teradata’s financing activities for the three months ended March 31, 2026 and 2025 primarily consisted of cash outflows for share repurchases and payments on our finance leases. At March 31, 2026, we had no outstanding borrowings on our $400 million Revolving Facility (as defined below).

Current wording

Teradata’s financing activities for the six months ended June 30, 2026 and 2025 primarily consisted of cash outflows for term loan debt repayments, share repurchases and payments on our finance leases. Financing cash outflows were higher in 2026 primarily due to the repayment of the remaining $450 million principal balance of the Company's term loan debt, compared to regularly scheduled principal payments on the term loan debt during 2025. At June 30, 2026, we had no outstanding borrowings on our $400 million Revolving Credit Facility (as defined below).

Previous wording

•On November 17, 2025, the Board approved a share repurchase program (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. There is a total authority of $470 million remaining under the Repurchase Program as of March 31, 2026.

Current wording

•On November 17, 2025, the Board approved a share repurchase program (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. There is a total authority of $430 million remaining under the Repurchase Program as of June 30, 2026.

Previous wording

In the aggregate under the dilution offset share repurchase program and the Repurchase Program, we repurchased approximately 1.2 million shares of common stock at an average price per share of$29.03 in the three months ended March 31, 2026.

Current wording

In the aggregate under the dilution offset share repurchase program and the Repurchase Program, we repurchased approximately 2.5 million shares of common stock at an average price per share of$29.76 in the six months ended June 30, 2026.

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$5 million for the three months ended March 31, 2026 and a net outflow of$2 million for the three months ended March 31, 2025. 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 net outflow of$7 million for the six months ended June 30, 2026 and a net outflow of$2 million for the six months ended June 30, 2025. 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$450 million as of March 31, 2026 and$462 million as of December 31, 2025. The remaining balance held in the U.S. was $366 million as of March 31, 2026 and$32 million as of December 31, 2025. 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$359 million as of June 30, 2026 and$462 million as of December 31, 2025. The remaining balance held in the U.S. was $55 million as of June 30, 2026 and$32 million as of December 31, 2025. 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 Revolving 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

The Company’s ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other business and risk factors described in the 2025 Annual Report and elsewhere in this Quarterly Report on Form 10-Q. If the Company is unable to generate sufficient cash flows from operations, or otherwise comply with the terms of the Credit Facility or its term loan agreement, the Company may be required to seek additional financing alternatives.

Current wording

The Company’s ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other business and risk factors described in the 2025 Annual Report and elsewhere in this Quarterly Report on Form 10-Q. If the Company is unable to generate sufficient cash flows from operations, or otherwise comply with the terms of the Revolving Credit Facility, the Company may be required to seek additional financing alternatives.

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, Debt, of the Notes to Condensed Consolidated Financial Statements (Unaudited). In addition, as disclosed in Note 7 Derivative Instruments and Hedging Activities, of the Notes to Condensed Consolidated Financial Statements (Unaudited), Teradata entered into an interest rate swap to hedge approximately 90% (or$411 million as of March 31, 2026) 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 March 31, 2026, 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$450 million.

Current wording

Long-term Debt. On June 24, 2026, the Company entered into a Credit Agreement with Bank of America, N.A., as Administrative Agent and the lenders party thereto (the "Credit Agreement"). The Credit Agreement provides for afive-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 Credit Facility"). The Revolving Credit Facility replaces our prior credit agreement which was entered into in 2022 (the "Prior Agreement"). In connection with the execution of the Revolving Credit Facility, the $450 million term loan outstanding under the Prior Agreement was repaid in full. Our long-term debt is discussed in Note 10, Debt, of the Notes to Condensed Consolidated Financial Statements (Unaudited). In addition, as disclosed in Note 7 Derivative Instruments and Hedging Activities, of the Notes to Condensed Consolidated Financial Statements (Unaudited), Teradata entered into a cross currency swap to hedge a portion of Euro currency exposure of its net investment in certain foreign subsidiaries. As of June 30, 2026, the Company hadno borrowings outstanding under the Revolving Credit Facility, leaving$400 million in borrowing capacity available under the Revolving Credit Facility.

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 2025 Annual Report. Teradata’s senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the three months ended March 31, 2026.

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 2025 Annual Report. Teradata’s senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the six months ended June 30, 2026.