Teradata (TDC): Valuation Check After Q3 Earnings Reveal Revenue Pressure, Profit Growth, and AI Strategy Pivot

Teradata (NYSE:TDC) just released its third quarter earnings, showing a drop in revenue but an increase in profitability. The company also updated its guidance and pointed to ongoing challenges in sales, while expecting steadier earnings ahead.

See our latest analysis for Teradata.

Teradata’s share price has struggled lately, sliding 4% in the past day and down over 32% year-to-date, as investors digest mixed signals such as a contracting top line, improved profitability, and new leadership focused on AI transformation. The company’s 1-year total shareholder return stands at -27%, reflecting a broader decline even as it launches new AI Services and prioritizes cloud growth, which may suggest that confidence could recover only if revenue momentum returns.

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With shares now trading at a double-digit discount to analyst targets and profitability on the rise, should investors view Teradata as undervalued? Or is the market already factoring in its future AI-powered growth prospects?

Most Popular Narrative: 15.3% Undervalued

Teradata’s most widely followed valuation narrative places its fair value at $24.44, notably higher than the last close price of $20.71. This perspective suggests the gap may reflect shifting industry expectations and continued market doubt amidst Teradata’s transformation. Here is the catalyst behind this valuation:

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.

Read the complete narrative.

Want to know why analysts think the future looks brighter than the stock price suggests? This narrative is betting on a powerful mix of recurring revenue and next-gen AI tools to unlock greater margins ahead. The real twist is that the most crucial assumptions powering this target rely on a delicate financial balancing act that could lead to outsized rewards or disappointments. Dive deeper for the decisive numbers and see what’s fueling the optimism.

Result: Fair Value of $24.44 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent revenue declines and slow cloud migration could undermine the bullish narrative and put further pressure on Teradata’s long-term growth story.

Find out about the key risks to this Teradata narrative.

Build Your Own Teradata Narrative

If you see the story differently or want to dig into the numbers yourself, you can shape your own take on Teradata’s outlook in just a few minutes, so why not Do it your way

A great starting point for your Teradata research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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