Last Update 19 Feb 26

Fair value Increased 23%

TDC: Cash Returns And 2026 Earnings Outlook Will Shape Fairly Balanced Case

Analysts have raised their Teradata fair value estimate from $29.00 to about $35.73, citing updated assumptions for revenue growth, profit margins, discount rate, and future P/E that are reflected in a series of higher price targets across major research firms.

Analyst Commentary

Recent research updates cluster around higher price targets for Teradata, with several firms lifting their views by single to low double digit dollar amounts. These moves feed directly into the higher fair value estimate, but the tone across the Street is not one sided.

Bullish Takeaways

Bullish analysts are pointing to a set of updated assumptions on revenue growth, margins, and discount rate that support higher valuation inputs, which is reflected in multiple price target increases of between $2 and $13.
The series of upward revisions, including moves of $13, $12 and $7, suggest growing confidence that Teradata can execute against its current plans well enough to justify a higher P/E than previously used in models.
Some research points to a favorable setup for software generally into 2026, with comments around stable macro conditions and IT spending, which supports using stronger sector multiples in Teradata valuation work.
Even where ratings remain cautious, the step up in price targets, such as the move to $27 from $24, indicates that downside targets are being reset higher as analysts revisit their longer term forecasts.

Bearish Takeaways

Despite the higher targets, at least one firm keeps an Underweight rating, signaling that some bearish analysts still see better risk reward elsewhere, even as they acknowledge the need to lift their numbers.
The reliance on a broadly favorable software backdrop for 2026, including stable macro and IT budgets, introduces sensitivity to any change in those conditions that could pressure the multiples used in Teradata models.
Higher targets built on revised assumptions for growth and margins leave less room for execution missteps, meaning any shortfall against those updated assumptions could create valuation pressure.
With multiple price target increases occurring over a short window, there is a risk that expectations for operational delivery and P/E outcomes move ahead of what Teradata can practically achieve on its current trajectory.

What’s in the News

Teradata issued earnings guidance for the first quarter of 2026, targeting total revenue growth in the range of 1% to 3% year over year and GAAP diluted EPS of US$0.36 to US$0.40 per share (corporate guidance).
For full year 2026, the company guided to a total revenue range from a 2% decline to flat year over year and GAAP diluted EPS of US$1.26 to US$1.36 (corporate guidance).
From October 1, 2025 to December 31, 2025, Teradata repurchased 5,342,137 shares, or 5.7% of its shares, for US$140 million, bringing total repurchases under its February 9, 2012 buyback to 107,579,431 shares, or 87.94%, for US$3,995.79 million (buyback tranche update).
Between November 17, 2025 and December 31, 2025, the company reported no share repurchases under the buyback program announced on November 18, 2025 (buyback tranche update).
On February 10, 2026, Teradata announced a cooperation agreement with Lynrock Lake LP that includes adding Melissa Fisher to the Board as a Class I director by March 1, 2026 and working with Lynrock Lake on an additional independent director candidate for after the 2026 annual meeting, in exchange for support of the company’s full director slate and certain standstill and related provisions (investor activism agreement).

Valuation Changes

Fair Value: Raised from $29.00 to about $35.73, a move of roughly 23% that reflects the latest modeling updates.
Discount Rate: Trimmed slightly from 9.10% to about 8.89%, signaling a modest adjustment to the required return used in the analysis.
Revenue Growth: Assumption lifted from about 7.16% to a very large figure of roughly 86.58%, indicating a much more optimistic top line outlook in the new model.
Net Profit Margin: Increased from roughly 9.47% to about 10.14%, pointing to a slightly stronger earnings profile on each dollar of revenue.
Future P/E: Raised from about 21.40x to roughly 22.67x, implying a modestly higher valuation multiple applied to expected earnings.

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Key Takeaways

Cloud-neutral platform, ongoing product innovation, and strategic partnerships position Teradata to capture demand from AI-driven workloads and expand its addressable market.
Organizational streamlining and increased recurring revenue are expected to improve margins, operating leverage, and long-term earnings growth.
Persistent top-line pressures, competitive threats, and slow cloud migration threaten Teradata's revenue stability, margin expansion, and long-term relevance amid evolving industry trends.

Catalysts

About Teradata

Provides a connected hybrid cloud analytics and data platform in the United States and internationally.What are the underlying business or industry changes driving this perspective?

The accelerating adoption of AI and GenAI initiatives among large enterprises is driving a surge in demand for robust data management and analytics infrastructure, positioning Teradata's hybrid platform to capture new, high-value workloads-supporting sustained recurring revenue growth and platform usage.
The enterprise migration toward multi-cloud and hybrid cloud architectures continues to expand, and Teradata's cloud-neutral, open ecosystem (along with strong on-prem capabilities) is enabling the company to serve complex, regulated industries and data sovereignty needs, broadening its addressable market and supporting both cloud ARR growth and customer retention.
Ongoing product innovation (AI Factory, Enterprise Vector Store, LLMOps, and open source MCP server) is increasing platform differentiation by integrating AI/ML capabilities and supporting industry-specific use cases, which is expected to drive higher average contract values and improve net retention rates over time.
Recent organizational streamlining, leadership changes, and integration of go-to-market/product/marketing functions are expected to create meaningful operating leverage, reduce SG&A and service-related costs, and ultimately expand net margins and free cash flow as recurring revenue becomes a larger portion of the business.
Strategic partnerships (e.g., with NVIDIA, ServiceNow, Salesforce, Fivetran) are providing access to new AI-driven workloads and enabling seamless data integration across enterprise environments, further driving ARR expansion and increasing Teradata's relevance in the converging analytics, data warehousing, and AI landscape, which should positively impact revenue and long-term earnings.

Teradata Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Teradata's revenue will decrease by 0.9% annually over the next 3 years.
Analysts assume that profit margins will shrink from 6.6% today to 6.2% in 3 years time.
Analysts expect earnings to reach $101.6 million (and earnings per share of $0.98) by about September 2028, down from $110.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $125 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.3x on those 2028 earnings, up from 18.1x today. This future PE is lower than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to decline by 1.25% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.27%, as per the Simply Wall St company report.

Teradata Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing revenue headwinds, with total revenue declining 6–7% year-over-year and recurring revenue declining 4% year-over-year, highlight persistent top-line pressure that, if not reversed, could dampen long-term earnings growth and reduce the company's ability to expand margins.
Difficulty in accelerating cloud migrations and recurring revenue growth-cloud ARR growth, though positive at 15–17%, remains partly driven by migration/expansion within the existing base rather than robust net-new customer wins; reliance on internal deal pull-forwards in Q2 also suggests inconsistent underlying momentum, posing risks to sustainable revenue expansion and net margin improvement.
Heightened competition from cloud-native hyperscalers (AWS, Azure, Google) and the rise of open-source/lakehouse analytics solutions risks eroding Teradata's addressable market and pressuring pricing, which could negatively impact long-term revenue resilience and force higher R&D expense to maintain competitiveness, thereby suppressing net margins.
Industry shifts toward serverless, cloud-native, and AI-integrated platforms may undermine the relevance of Teradata's hybrid and on-prem offerings over time, potentially increasing customer churn and volatility in earnings if migration to Teradata's newer platforms lags or fails to attract incremental workloads at scale.
Ongoing declines and uncertainties in service revenues (down 19–20% year-over-year) and the need for recurring restructuring/cost optimization indicate structural challenges; continued contraction could limit operational flexibility and curtail free cash flow generation despite efforts to optimize the expense base.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $24.444 for Teradata based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $28.0, and the most bearish reporting a price target of just $22.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $101.6 million, and it would be trading on a PE ratio of 28.3x, assuming you use a discount rate of 9.3%.
Given the current share price of $21.06, the analyst price target of $24.44 is 13.8% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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