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 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 third quarter of 2026:

Previous 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.

Current wording

•At the end of the third quarter of 2026, Total ARR was$1.512 billion compared to $1.490 billion at the end of the third quarter of 2025, increasing 1%as compared to the third quarter of 2025, including a 1% negative impact from foreign currency fluctuations.

Previous 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.

Current wording

•At the end of the third quarter of 2026, Public Cloud ARR was$700 million compared to $633 million at the end of the third quarter of 2025, increasing 11% as compared to the third quarter of 2025, with an immaterial negative impact from foreign currency fluctuations.

Previous 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.

Current wording

•Total revenue was$399 million for the third quarter of 2026, decreasing by $17 million compared to the third quarter of 2025, with recurring revenue down 2%. Perpetual software licenses, hardware and other revenuewas flat year over year, and consulting services revenue decreased 21%. Foreign currency fluctuations didnot have a material impact on total revenue for the quarter compared to the prior year.

Previous 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.

Current wording

•Operating expenses for the third quarter of 2026 decreased 4% compared to the third quarter of 2025, largely from lower salary and wage expense in the third quarter of 2026, due to the impact of restructuring actions taken in the prior year, as well as incremental provisions for uncollectable accounts in the prior year that didn't recur in the current period.

Previous 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.

Current wording

•The Company saw an operating income of$54 million in the third quarter of 2026, compared to operating income of $61 million in the third quarter of 2025.

Previous wording

•Net income in the second quarter of 2026 was$46 million, compared to $9 million in the second quarter of 2025.

Current wording

•Net income in the third quarter of 2026 was$38 million, compared to $40 million in the third quarter of 2025.

Previous 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.

Current wording

Total revenue decreased $17 million, or 4%, in the third quarter of 2026, withno material impact from foreign currency fluctuations. Recurring revenue decreased 2% as compared to the third quarter of 2025, withno material impact from foreign currency fluctuations. The decrease in recurring revenue for the third quarter of 2026 was impacted by lower annual upfront software subscription revenue, offset in part by growth from Public Cloud revenue. Revenue from perpetual software licenses, hardwareand other was flat year over year, primarily consisting of perpetual hardware. Consulting services revenue decreased 21% or $10 million in the third quarter of 2026, with a 2% 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 half of 2026.

Previous 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.

Current wording

At the end of the third quarter of 2026, Total ARRincreased 1% as compared to the third quarter of 2025, including a 1% negative impact from foreign currency fluctuations. At the end of the third quarter of 2026, Public Cloud ARR increased 11% as compared to the third quarter of 2025, with an immaterial impact from foreign currency fluctuations. Public Cloud ARR growth in the third quarter of 2026 was primarily driven by customer demand of our Public Cloud offering and customer migrations. The decreasesin Subscriptions 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 2026, we experienced the following trends:

Current wording

In the third quarter of 2026, we expe rienced the following trends:

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 June 30, 2026, Teradata is now estimating 0.0%-0.5% positive impact from currency translation on our 2026 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, 2026, Teradata is now estimating an approximately 0.5% positive impact from currency translation on our 2026 full-year total reported revenues.

Previous 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.

Current wording

The decrease in recurring revenue gross profit as a percentage of revenue was impacted by a higher mix of Public Cloud revenues versus on-premises revenue as compared to the prior-year period, the impact of upfront subscription software revenue recognized earlier in the year, as well as the timing of certain infrastructure charges recognized in the 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 increased as compared to the prior-year period primarily due to deal mix.

Current wording

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

Previous wording

Consulting services gross profit as a percentage of revenue increased as compared to the prior year primarily due to cost reduction efforts taken over the past year.

Current wording

Consulting services gross profit as a percentage of revenue was flat as compared to the prior year as cost reduction efforts were taken reflective of the revenue decline over the past year.

Previous 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.

Current wording

Selling, general and administrative ("SG&A") expense decreased year over year due to lower employee salary and wage 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, as well as incremental provisions for uncollectable accounts in the prior year that didn't recur in the current period. 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

Other expense, net in the second quarter of 2026 and 2025 is comprised primarily of interest expense on the recently paid-off long-term debt and finance leases, as well as benefit costs on our pension and postemployment plans, largely offsetby interest income earned on our cash and cash equivalents and gains from foreign currency transactions.

Current wording

Other expense, net in the third quarter of 2026 and 2025 is comprised primarily of interest expense on finance leases, as well as benefit costs on our pension and postemployment plans, offset in part by interest income earned on our cash and cash equivalents, and gains/losses from foreign currency transactions.

Previous wording

During the three months ended June 30, 2026, the Company recorded a gain of approximately $3 million related to the fair value of the Company's interest rate swap upon its termination, see Note 7, Derivative Instruments and Hedging Activities, for further details. As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the three months ended June 30, 2025, we entered into Blue Chip Swap transactions in order to remit cash from our Argentine operations that resulted in an immaterial pre-tax loss on investment that is reported in "Other" expense. During the three months ended June 30, 2026 the Company incurred a pre-tax loss on investment of $1 million from Blue Chip Swap transactions.

Current wording

As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the three months ended September 30, 2026 and 2025, the Company incurred immaterial pre-tax investment losses related to Blue Chip Swap transactions.

Previous 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%.

Current wording

The forecasted tax rate is based on the foreign profits being taxed at an overall effective tax rate of approximately 20%, ascompared to the U.S. federal statutory tax rate of 21%.

Previous wording

Results of Operations for the Six Months Ended June 30, 2026

Current wording

Results of Operations for the Nine Months Ended September 30, 2026

Previous wording

Total revenue increased $28 million, or 3%, in the first six months of 2026, with a 1% positive impact from foreign currency fluctuations. Recurring revenue increased 7%, with a 2% positive impact from foreign currency fluctuations, and benefit from higher annual upfront software revenue associated with on-premises subscription software as compared to the prior-year period. Within recurring revenue, Public Cloud revenue increased primarily due to expansions and migrations.

Current wording

Total revenue increased $11 million, or 1%, in the first nine months of 2026, with a 1% positive impact from foreign currency fluctuations. Recurring revenue increased 4%, with a 1% positive impact from foreign currency fluctuations, and benefit from higher Public Cloud revenue, which increased primarily due to expansions and migrations.

Previous wording

Revenues from perpetual software licenses, hardware and other decreased $4 million, or 31% year over year in the first six months of 2026.

Current wording

Revenues from perpetual software licenses, hardware and other decreased$4 million, or 25% year over year in the first nine months of 2026.

Previous wording

Consulting services revenue decreased 19% in the first six months of 2026, with no material impact from foreign currency fluctuations. The consulting services revenue decrease is primarily the result of lower order performance from the second half of 2025.

Current wording

Consulting services revenue decreased 20% in the first nine months of 2026, with a 1% negative impact from foreign currency fluctuations. The consulting services revenue decrease is primarily the result of lower order performance from the second half of 2025 and the first half of 2026.

Previous wording

Recurring revenue gross profit as a percentage of revenue was relatively unchanged, with continued improvement in our Public Cloud margin rate largely offset by the impact of a higher mix of Public Cloud revenues versus on-premises revenue as compared to the prior-year period.

Current wording

Recurring revenue gross profit as a percentage of revenue was down slightly, with the impact of a higher mix of Public Cloud revenues versus on-premises revenue largely offset by continued improvement in our Public Cloud margin rate as compared to the prior-year period.

Previous 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.

Current wording

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

Previous wording

Consulting services gross profit as a percentage of revenue increased as compared to the prior year primarily due to cost reduction efforts taken over the past year.

Current wording

Consulting services gross profit as a percentage of revenue improved somewhat as compared to the prior year primarily due to cost reduction efforts taken over the past year.

Previous wording

SG&A expenses increased 43% for the first six months of 2026 as compared to the prior year, primarily due to the impact of the $121 million of expenses incurred in connection with the SAP litigation and related settlement and an increase in stock-based compensation expense partially offset by continued budget discipline focused on cost reductions across the Company, including the impact of restructuring actions taken in the prior year.

Current wording

SG&A expenses increased 26% for the first nine months of 2026 as compared to the prior year, primarily due to the impact of the $121 million of expenses incurred in connection with the SAP litigation and related settlement and an increase in stock-based compensation expense partially offset by continued budget discipline focused on cost reductions across the Company, including the impact of restructuring actions taken in the prior year.

Previous wording

R&D expe nses increased for the first six months of 2026 as compared to prior year, due to investments in Public Cloud and AI-related technology opportunities offset in part by continued cost reduction initiatives.

Current wording

R&D expe nses increased for the first nine months of 2026 as compared to prior year, due to investments in Public Cloud and AI-related technology opportunities offset in part by continued cost reduction initiatives.

Previous 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).

Current wording

Other income (expense), net for the nine months of 2026 and 2025 is comprised primarily of the SAP Legal 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 paid off in June 2026) 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 $494 million year-over-year primarily due to the receipt of the SAP Legal Settlement Amount as disclosed in more detail in Item 1. Financial Statements to this Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 (the "Form 10-Q") (see Note 5. Supplemental Financial Information).

Previous wording

During the second quarter of 2026, the Company recorded a gain of approximately $3 million related to the fair value of the Company's interest rate swap upon its termination, see Note 7, Derivative Instruments and Hedging Activities, for further details. As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the six months ended June 30, 2025, we entered into Blue Chip Swap transactions in order to remit cash from our Argentine operations that resulted in an immaterial pre-tax loss on investment that is reported in "Other" expense. During the six months ended June 30, 2026 the Company incurred a pre-tax loss on investment of $1 million from Blue Chip Swap transactions.

Current wording

During the second quarter of 2026, the Company recorded a gain of approximately$3 million related to the fair value of the Company's interest rate swap upon its termination, see Note 7, Derivative Instruments and Hedging Activities, for further details. As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the nine months ended September 30, 2026 and 2025, the Company incurred$1 million of pre-tax investment losses related to Blue Chip Swap transactions.

Previous wording

The effective tax rates for the six months ended June 30, 2026 and 2025 were as follows:

Current wording

The effective tax rates for the nine months ended September 30, 2026 and 2025 were as follows:

Previous 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.

Current wording

For the nine months ended September 30, 2026, the Company recorded $66 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 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.

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

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.

Current wording

Cash provided by operating activities was $598 million, which increased by$453 million in the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. $326 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 $29 million of cash in the first nine months of 2026 for severance payments, as compared to $20 million in the first nine months of 2025.

Previous 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.

Current wording

As disclosed in Note 5, Supplemental Financial Information, of the Notes to Condensed Consolidated Financial Statements (Unaudited), during the nine months ended September 30, 2026, we received$480 million cash from the SAP Settlement Agreement and paid $121 millionin related expenses. Additionally, approximately $33 millionin cash taxes related to the SAP Settlement Net Proceeds were paid during the nine months ended September 30, 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 six months ended June 30, 2026.

Current wording

Financing activities and certain other investing activities, are not included in our calculation of free cash flow. There were no material other investing activities for the nine months ended September 30, 2026.

Previous 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).

Current wording

Teradata’s financing activities for the nine months ended September 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 September 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 $430 million remaining under the Repurchase Program as of June 30, 2026.

Current wording

•On November 17, 2025, the Board approved a share repurchase program (the "Repurchase Program") authorizing the Company to repurchase upto $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 $377 million remaining under the Repurchase Program as of September 30, 2026.

Previous 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.

Current wording

In the aggregate under the dilution offset share repurchase program and the Repurchase Program, we repurchased approximately 4.5 million shares of common stock at an average price per share of$29.55 in the nine months ended September 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$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).

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 netoutflow of $3 million for the nine months ended September 30, 2026 and a netinflow of $3 million for the nine months ended September 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$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.

Current wording

Our total cash and cash equivalents held outside the United States in various foreign subsidiaries was$413 million as of September 30, 2026 and$462 million as of December 31, 2025. The remaining balance held in the U.S. was $19 million as of September 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.