Teradata aims for $1 billion cloud ARR by 2025 amid challenges By Investing.com

Teradata Corporation (NYSE: NYSE:) reported its financial results for the first quarter of 2024, revealing a mixed performance with a slight decrease in total annual recurring revenue (ARR) but a notable increase in cloud ARR. The company announced that it remains committed to achieving a significant milestone of $1 billion in cloud ARR by 2025, despite facing some headwinds in its on-premises business. The appointment of Rich Petley as Chief Revenue Officer and strategic initiatives such as the AI Unlimited engine highlight Teradata’s focus on driving sales growth and innovation.

Key Takeaways

• Total ARR decreased by 1% in constant currency to $1.48 billion.
• Cloud ARR increased by 36% year-over-year in constant currency to $525 million.
• Teradata expects cloud ARR and total ARR growth to reaccelerate throughout 2024.
• The company repurchased $124 million of stock and aims to return at least 75% of free cash flow to shareholders.
• Teradata continues to be recognized for its ethical practices and partnerships, including being named the World’s Most Ethical Company for the 15th year by Ethisphere.

Company Outlook

• Teradata maintains its growth outlook for 2024, expecting acceleration in cloud and total ARR dollar growth.
• Q4 is projected to be the strongest quarter for the company.
• Teradata aims to achieve $1 billion in cloud ARR by 2025, with an operating margin in the low 20% range and at least $450 million in free cash flow.

Bearish Highlights

• Total ARR decreased by $76 million in constant currency, within the range provided in February.
• Free cash flow was $21 million, lower year-over-year due to decreased net income and working capital dynamics.

Bullish Highlights

• Teradata grew its cloud ARR faster than the broader market in 2023 and expects to continue this trend in 2024.
• The company has added over 100 net new logos to its pipeline and is experiencing traction in international business through partners.
• Strategic collaboration with AWS is expected to contribute to the expansion of Teradata’s cloud margins.

Misses

• Cloud ARR growth in Q1 was 36% year-over-year but slightly below expectations due to on-premises erosion.
• Total revenue was down 2% year-over-year at $465 million.

Q&A Highlights

• Teradata expects to achieve its 2025 total ARR and revenue targets in the latter half of the year, with a possible delay.
• The company’s net expansion rate assumption from 2024 to 2025 is…