TERADATA CORP /DE/

1. Basis of Presentation

These statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the results of operations, financial position and cash flows of Teradata Corporation ("Teradata" or the "Company") for the interim periods presented herein. The year-end 2025 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates.

These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Teradata’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Annual Report"). The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

2. New Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). The new guidance requires disaggregated information about certain income statement expense line items on an annual and interim basis. This guidance will be effective for annual periods beginning the year ended December 31, 2027 and for interim periods thereafter. The new standard permits early adoption and can be applied prospectively or retrospectively. We are evaluating the effect that this guidance will have on our Consolidated Financial Statements.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (ASU 2025-06). The new guidance eliminates the requirement to classify software development costs by project stage, instead, entities now capitalize internal-use software costs when management has both authorized and committed funding for the project and it is probable the software will be completed and used as intended. This guidance will be effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. Early adoption is permitted and the standard may be applied prospectively, retrospectively, or using a modified approach. We are evaluating the effect that this guidance will have on our Consolidated Financial Statements.

3. Revenue from Contracts with Customers

Disaggregation of Revenue from Contracts with Customers

The following table presents a disaggregation of revenue:

Rental revenue, which is included in recurring revenue in the above table, was as follows:

*Rental revenue includes hardware maintenance.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets, and customer advances and deposits (deferred revenue or contract liabilities) on the condensed consolidated balance sheet. Accounts receivable include amounts due from customers that are unconditional. Contract assets relate to the Company’s rights to consideration for goods delivered or services completed and recognized as revenue but billing and the right to receive payment is conditional upon the completion of other performance obligations. Contract assets are included in other current assets on the balance sheet and are transferred to accounts receivable when the rights become unconditional. Deferred revenue consists of advance payments and billings in excess of revenue recognized. Deferred revenue is classified as either current or noncurrent based on the timing of when the Company expects to recognize revenue. These assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period.

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:

Revenue recognized during the nine months ended September 30, 2026 from amounts included in deferred revenue at the beginning of the period was$373 million.

Transaction Price Allocated to Unsatisfied Obligations

The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at September 30, 2026:

The amounts above represent the price of firm orders for which work has not been performed or goods have not been delivered and exclude unexercised contract options outside the stated contractual term that do not represent material rights to the customer. Although the Company believes that the contract value in the above table is firm, approximately $1,068 million of the amount is under contracts that are subject to customer-only general cancellation for convenience terms that the Company is contractually obligated to perform unless the customer notifies us of cancellation. The Company expects to recognize revenue of approximately $492 million in the next year from contracts that are non-cancelable. The Company believes the inclusion of this information is important to understanding the obligations that the Company is contractually required to perform and provides useful information regarding remaining obligations related to these executed contracts.

4. Contract Costs

The Company capitalizes sales commissions and other contract costs that are incremental direct costs of obtaining customer contracts if the expected amortization period of the asset is greater than one year. These costs are recorded in capitalized contract costs, net on the Company’s balance sheet. The capitalized amounts are calculated based on the annual recurring revenue and contract value for individual multi-term contracts. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as selling, general and administrative expenses on a straight-line basis over the expected period of benefit, which is typically around four years. These costs are periodically reviewed for impairment. The following table identifies the activity relating to capitalized contract costs:

5. Supplemental Financial Information

SAP Legal Settlement

Teradata had been involved in several litigation proceedings (collectively, the "SAP Litigation") against SAP SE, SAP America, Inc., and SAP Labs, LLC (collectively, "SAP" and with "Teradata" the "Parties"). On February 19, 2026, Teradata entered into a Settlement Agreement (the "SAP Settlement Agreement") with SAP, pursuant to which the Parties agreed, among other things, to (i) resolve all past and pending litigation between the Parties, including the SAP Litigation and (ii) mutual releases of all claims and liabilities asserted or that could have been asserted in the SAP Litigation. During the three months ended March 31, 2026, as a result of the SAP Settlement Agreement, Teradata received a gross payment of $480 million (the "SAP Legal Settlement Amount"). Additionally, the Company recorded $121 million in selling, general and administrative expenses for the associated fees and expenses for the SAP Settlement Agreement, including a customary contingent fee arrangement and other outstanding legal fees incurred in connection with the SAP Litigation (the "SAP Legal Settlement Fees"). The net cash benefit of the SAP Settlement Amount after the SAP Legal Settlement Fees was approximately$359 million before taxes (the "SAP Settlement Net Proceeds").

Other: Interest Rate Swap Termination

During the three months ended June 30, 2026, the Company recorded a gain of approximately$3 million related to the derivative's fair value upon termination of the Company's interest rate swap, see Note 7, Derivative Instruments and Hedging Activities, for further details.

Other: Argentina Blue Chip Swap Transactions

The Central Bank of Argentina continues to impose foreign exchange controls that restrict access to U.S. dollars and the remittance of funds outside Argentina. These controls have led to the development of alternative foreign exchange mechanisms, including Blue Chip Swaps, through which market-based exchange rates for U.S. dollars are established that differ from official exchange rates. During the three months ended September 30, 2026 and 2025, the Company incurred immaterial pre-tax investment losses related to Blue Chip Swap transactions. 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.

6. Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. The Company expects that a majority of its foreign earnings will be repatriated back to the U.S. As a result, the effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business.

The effective tax rate is as follows:

For the three months ended September 30, 2026, the Company hadno material discrete tax adjustments.

For the three months ended September 30, 2025, the Company hadno material discrete tax adjustments.

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 resulting from the $359 million of SAP Settlement Net Proceeds recognized in the first quarter of 2026.

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 its IRS audit of its 2020 tax return, was offset by incremental tax expense from stock-based compensation vesting.

Effective January 1, 2024, many jurisdictions wherethe Company conducts business, including several European Union members and G20 countries, have enacted a 15% global minimum tax on the income generated in each of the jurisdictions in whichthe Company operates, referred to as "Pillar Two" of the Global Anti-Base Erosion rules framework that was undertaken by the Organization for Economic Co-operation and Development ("OECD"). The Company continues to monitor developments and evaluate the impacts of the Pillar Two rules, however, as of the date of this Report on Form 10-Q, the Company does not expect the Pillar Two rules to have a material impact to its annual effective tax rate.

The Company estimates its annual effective tax rate for 2026 to be approxi mately 23%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction and the impact of discrete tax items to be recognized in 2026. Under U.S. tax law, U.S. shareholders are subject to a tax on the net controlled foreign corporations tested income ("NCTI"), (formerly global intangible low-taxed income ("GILTI") tax) earned by certain foreign subsidiaries. The Company has elected to provide for the tax expense related to NCTI in the year in which the tax is incurred, if any. For the nine months ended September 30, 2026, the Company has recorded $5 million of NCTI net tax expense as a discrete item related to the impacts from the SAP Settlement Agreement.

7. Derivative Instruments and Hedging Activities

As a portion of Teradata’s operations is conducted outside the U.S. and in currencies other than the U.S. dollar, the Company uses foreign exchange forward contracts designated as fair value hedges to mitigate the impact of currency fluctuations on foreign currency denominated assets and liabilities. These contracts generally mature in three months or less; Teradata holds both long and short positions such that net exposure is less than total contract notional amount.

Gains and losses from foreign exchange forward contracts are fully recognized each period and reported along with the offsetting gain or loss of the related hedged item, either in cost of revenues, operating expenses or in other income (expense), depending on the nature of the related hedged item.

On June 17, 2026, the Company restructured its net investment hedge by terminating its existing cross-currency swap and simultaneously entering intotwo replacement cross-currency swaps (designated as net investment hedges of the Company's euro-denominated net investment in certain foreign subsidiaries) of approximately€71 million /$75 million, each. One swap matures on June 29, 2029 and the second swap matures on June 30, 2031. The restructuring extended the hedge horizon without changing the Company's risk management objective. In connection with the restructuring, the Company made a cash payment of approximately$1 million to reduce the embedded market value of the original swap. The remaining fair value was incorporated into the pricing of the replacement swaps and is being recognized consistent with the accounting for net investment hedges.

As of September 30, 2026, the Company maintained thesetwo cross-currency swaps with an aggregate notional amount of€143 million and$150 million from the counterparty. The Company receives monthly interest payments from the counterparty based on a fixed interest rate until maturity of the agreements. Under the agreements, the Company will deliver Euro notional amounts and receive U.S. dollar notional amounts at maturity and receives fixed-rate interest payments from the counterparties over the remaining terms of the swaps.

The Company performed an effectiveness assessment upon designation of the replacement swaps and concluded they were highly effective. Effectiveness is evaluated quarterly. Changes in fair value are recorded in Accumulated other comprehensive loss and periodic settlements are recorded in inte rest income. The Company will systematically amortize the initial excluded component, which was immaterial at inception, to interest income overthe term of the hedging relationships.

On June 24, 2026, the Company repaid the outstanding balance of its term loan and terminated the related five-year Secured Overnight Financing Rate ("SOFR") based interest rate swap (initial notional amount of$450 million, stepping down per the term loan amortization schedule). As a result of the debt extinguishment, the forecasted interest payments previously designated as the hedged transactions were no longer probable of occurring and the Company discontinued hedge accounting. Amounts previously deferred in Accumulated Other Comprehensive Loss associated with the interest rate swap were reclassified into earnings. The Company received approximately$4 million upon termination of the interest rate swap, including less than$1 million related to accrued interest settlements and approximately$3 million related to the derivative's fair value.

The following table identifies the contract notional amount of the Company’s derivative financial instruments:

All derivatives are recorded at fair value in the condensed consolidated balance sheets. Notional amounts do not represent amounts exchanged and are not a measure of the instruments. See Note 9, Fair Value Measurements.

The Company does not hold or issue derivatives for trading or speculative purposes. Counterparty credit risk is managed by transacting exclusively with highly rated financial institutions.

8. Commitments and Contingencies

Legal Proceedings. In the ordinary course of business, the Company is subject to proceedings, lawsuits, governmental investigations, claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance, intellectual property, tax matters and other regulatory compliance and general matters, including for Foreign Corrupt Practices Act and shareholder matters. It is not a party to any litigation, nor is it aware of any pending or threatened litigation against it that the Company believes would materially affect its business, operating results, financial condition or cash flows.

Other Contingencies. Additionally, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third party asserts patent or other infringement on the part of the customer for its use of the Company’s offerings. The Company has indemnification obligations under its charter and bylaws to its officers and directors, and has entered into indemnification agreements with its officers and directors and with the officers and directors of its subsidiaries. From time to time, the Company also enters into agreements in connection with its acquisition and divestiture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is typically not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement. As such, the Company has generally not recorded a liability in connection with these indemnification arrangements. Historically, payments made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

Concentrations of Risk. The Company is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments, and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Teradata’s business often involves large transactions with customers, and if one or more of those customers were to default in its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses were adequate at September 30, 2026 and December 31, 2025.

The Company is also potentially subject to concentrations 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 behalf of the Company. Although many of these components are available from multiple sources, Teradata utilizes preferred supplier relationships to provide more consistent and optimal quality, cost and delivery. Typically, these preferred suppliers maintain alternative processes and/or facilities to ensure continuity of supply. Given the Company's strategy to outsource its 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, industry-wide capacity allocations and production prioritization by component manufacturers, including manufacturers of NAND Flash Memory ("NAND") and Dynamic Random Access Memory ("DRAM") technologies, driven in part by increasing demand for artificial intelligence infrastructure, may constrain the availability of critical components, increase costs, extend lead times and adversely affect the Company's ability to manufacture and deliver products to customers in a timely manner. In addition, a significant change in the forecasts to any of these preferred suppliers could result in purchase obligations for components that may be in excess of demand.

9. Fair Value Measurements

The Company measures fair value using a three-tier hierarchy: Level 1 (quoted prices in active markets for identical assets/liabilities), Level 2 (significant other observable inputs), and Level 3 (unobservable inputs). Assets and liabilities are classified based on the lowest level of input significant to the measurement. The Company's recurring fair value measurements include money market funds (Level 1, included in cash and cash equivalents) and derivative instruments (Level 2).

The Company uses foreign exchange forward contracts and cross-currency swaps to manage foreign currency exposure. During the three months ended June 30, 2026, the Company restructured its net investment hedge cross- currency swaps (aggregate notional valueof €143 million/$150 million)and terminated its interest rate swap in connection with the repayment of its term loan. See Note 7, Derivative Instruments and Hedging Activities, for further detail.

Derivative fair values are measured using market spot and forward exchange rates (Level 2). Unrealized gains are recorded in other assets and unrealized losses in other liabilities, classified between current and long-term by remaining duration. Fair values of foreign exchange forward contracts and realized hedge gains/losses (net of underlying exposure offsets) were not material for the three and nine months ended September 30, 2026 and 2025.

The Company’s other assets and other liabilities measured at fair value on a recurring basis and subject to fair value disclosure requirements at September 30, 2026 and December 31, 2025 were as follows:

10. 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 Credit Agreement replaces the Company's prior credit agreement entered into on June 28, 2022, which provided for a revolving credit facility in the maximum principal amount of$400 million and a term loan ("Prior Term Loan") commitment in the principal amount of$500 million (the "Prior Credit Agreement"). In connection with the execution of the Credit Agreement, and using proceeds from the SAP Legal Settlement Amount (see Note 5, Supplemental Financial Information), the Company repaid in full the outstanding$450 million Prior Term Loan under the Prior Credit Agreement. In connection with the repayment of the Prior Term Loan, the Company recognized animmaterial loss on extinguishment of debt related primarily to the write-off of unamortized debt issuance costs associated with the Prior Credit Agreement. The Company incurred and capitalized approximately$1 million of debt issuance costs in connection with entering into the Credit Agreement, which are being amortized over the term of the Revolving Credit Facility.

All outstanding borrowings pursuant to the Revolving Credit Facility are due and payable on June 24, 2031, withtwo optionalone-year extensions available by agreement of the parties. Under the terms of the Credit Agreement, Teradata may request an increase in the Revolving Credit Facility in an aggregate principal amount of up to an additional$200 million, with the commitment amount to be increased solely to the extent that existing and/or new lenders agree to provide such additional commitments. At its option, the Company may designate up to$100 million of loans under the Revolving Credit Facility to be denominated in British Pounds Sterling, Euros and Japanese Yen. The outstanding principal amount of the Revolving Credit Facility bears interest at a floating rate based upon, at the Company's option, a negotiated base rate or a rate generally based on SOFR, plus in each case, an applicable margin based on the Company's leverage ratio. The applicable margin ranges from 0.00% to 0.50% for base rate borrowings and from 1.00% to 1.50% for SOFR-based and foreign currency borrowings.

The Credit Agreement is unsecured but is guaranteed by certain material domestic subsidiaries, and contains customary representations, default provisions, and covenants, including maintenance of a leverage ratio. The Credit Agreement does not include the sustainability-linked provisions contained in the Prior Credit Agreement.

As of September 30, 2026, the Company hadno borrowings outstanding under the Revolving Credit Facility, leaving$400 million in borrowing capacity available under the Revolving Credit Facility. The Companywas in compliance with all covenants under the Credit Agreement as of September 30, 2026.

For the three months ended September 30, 2025, the blended all-in interest rate associated with the Prior Term Loan was 4.14%.

In connection with the Prior Term Loan repayment, the Company terminated its related interest rate swap and received cash proceeds (excluding accrued interest) of $3 million. See Note 7, Derivative Instruments and Hedging Activities, for additional information.

11. Earnings per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during the reported period. The calculation of diluted earnings per share is similar to basic earnings per share, except that the weighted average number of shares outstanding includes the dilution from potential shares resulting from stock options, restricted stock awards and other stock awards. The components of basic and diluted earnings per share are as follows:

Options to purchase 0.1 million shares in the three and nine months ended September 30, 2025, were not included in the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the common shares for the period, and therefore would have been anti-dilutive. There wereno anti‑dilutive share options for the three and nine months ended September 30, 2026.

12. Segment and Other Supplemental Information

Teradata manages its business undertwo segments, which are also the Company’s operating segments: (1) Product Sales and (2) Consulting Services. The Company’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. For purposes of discussing results by segment, management excludes the impact of certain items, consistent with the manner by which management evaluates the performance of each segment. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by Teradata management to make decisions regarding the segments and to assess financial performance. The chief operating decision maker, who is the Company's President and Chief Executive Officer, evaluates the performance of the segments based on revenue and multiple profit measures, including segment gross profit. For management reporting purposes, assets are not allocated to the segments.

The following table presents segment revenue and segment gross profit for the Company:

(1) Cost of Product Sales, for the three months ended September 30, included product costs of $60 million in 2026 and $60 million in 2025 for Public Cloud fees and direct product and third-party software costs associated with the Company's perpetual product sales. Depreciation expense for the three months ended September 30, included in Cost of Product Sales, was $19 million in 2026, and $18 million in 2025. The remaining cost of Product Sales included payroll and benefits costs, and corporate allocations including back-office information technology, real estate, and other support services.

Cost of Product Sales, for the nine months ended September 30, included product costs of $180 million in 2026 and $183 million in 2025 for Public Cloud fees and direct product and third-party software costs associated with the Company's perpetual product sales. Depreciation expense for the nine months ended September 30, included in Cost of Product Sales, was $57 million in 2026, and $53 million in 2025. The remaining cost of Product Sales included payroll and benefits costs, and corporate allocations including back-office information technology, real estate, and other support services.

(2)Cost of Consulting Services, for the three months ended September 30, included payroll and benefit costs of $25 million in 2026 and $29 million in 2025. The remaining cost of Consulting Services included corporate allocations, including back-office information technology, real estate, and other support services.

Cost of Consulting Services, for the nine months ended September 30, included payroll and benefit costs of $79 million in 2026 and $94 million in 2025. The remaining cost of Consulting Services included corporate allocations, including back-office information technology, real estate, and other support services.

Certain items, including stock-based compensation and reorganization-related costs, were excluded from segment gross profit to conform to the way the Company manages and reviews the results by segment.

13. Reorganization and Business Transformation

On August 5, 2024, the Company announced that it realigned its sales function and initiated global restructuring and cost actions to optimize operations, reduce non-revenue generating expenses, and drive efficiencies for long-term growth and profitability (the "Restructuring"). The actions related to the Restructuring were completed as of June 30, 2026.

The majority of the costs related to the Restructuring include one-time employee separation benefits, transition support, and other employee-related costs. The Company recognized costs of $20 million related to the Restructuring in 2025 and 2024. Cash expenditures related to these actions were $45 million. The Company recorded $41 million of cash payments from these actions in 2025 and 2024, and $4 million of cash payments in the nine months ended September 30, 2026.

Not included in the table below are approximately $2 million in 2026 of cash payments for international employees which did not have a material impact on the Condensed Consolidated Statements of Income as the Company accounts for its International postemployment benefits under Accounting Standards Codification 712, Compensation - Nonretirement Postemployment Benefits ("ASC 712"), which uses actuarial estimates to accrue for severance benefits over the course of employees' service period.

The Company may enter into additional restructuring programs and incur future additional restructuring expenses associated with these plans or new plans. At this time, we are unable to estimate the range of costs associated with any such future phases of any of our restructuring programs or the total costs we may incur in connection with such future programs.

The 2026 activity and the reserves related to the Restructuring are as follows: