Shares of Teradata Corp. jumped more than 15% today after the company reported better-than-expected financial results for the fourth quarter.
San Diego-based Teradata is a major provider of data management software. Its flagship offering is Vantage, an analytics platform that companies can use to scan their business data for useful insights. Vantage supports a wide variety of use cases ranging from creating financial forecasts to finding supply chain optimization opportunities.
Vantage can run both on-premises and in the cloud. Teradata also offers a hardware appliance, VantageCore IntelliFlex, that is specifically designed to run the analytics platform. The appliance combines two dozen flash storage drives with networking equipment and servers, as well as reliability features designed to reduce the risk of outages.
Teradata is currently refocusing its business model on the cloud version of its Vantage platform. The company generated sales of $452 million during the fourth quarter, 5% less than a year ago and flat on a constant basis. The annual revenue run rate of Teradata’s cloud software business jumped 77% in the same time frame, to $357 million.
The demand for the cloud edition of Vantage helped Teradata surpass analysts’ revenue expectations. The $452 million in revenue the company posted for the fourth quarter was higher than $423 million projected by the consensus estimate. Teradata’s adjusted earnings, in turn, reached 35 cents per share, less than the 57 cents it posted a year ago but above the 31 cents that analysts had projected.
“Teradata had a strong 2022, including achieving our largest quarter of cloud growth ever, and meeting or beating every element of our annual outlook,” said Chief Executive Officer Steve McMillan. “It was only in the middle of 2020 that we set our sights on our cloud-first future. In that short amount of time, and despite challenging macroeconomic factors, Teradata delivered more than a sixfold growth in cloud ARR.”
Another factor that likely contributed to the jump in Teradata’s stock price today is its 2023 revenue guidance. Last year, the company’s sales declined 6%, to $1.795 billion. But this year, Teradata expects to return to revenue growth and increase its top line by between 1% and 4%.
Teradata expects the rapid growth of its cloud software business to continue into 2023. According to the company’s estimates, the business’ annual revenue run rate is on track to climb between 53% and 57% this year. Thanks to that momentum, Teradata expects to increase its recurring revenue as much as 7% in 2023.
In the longer term, Teradata is seeking to grow the annual revenue run-rate of its cloud software business to $1 billion by 2025. The company also hopes to increase its profit margin and free cash flow along the way.