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Why Teradata Shares Are Soaring Today

By Anders Bylund - Updated Feb 5, 2021 at 12:58PM

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The database analytics specialist beat the Street in an impressive shift toward subscription-style contracts.

What happened

Shares of Teradata (TDC 2.73%) surged as much as 65.9% on Friday, following a great earnings report on Thursday evening. By 12:20 p.m. EST today, shares of the provider of database analytics software had cooled down to a still-impressive gain of 40.2%.

So what

Fourth-quarter revenue fell 1% year over year to $491 million. Within that envelope, the company's recurring revenue rose 9% to $383 million. Zooming even deeper into Teradata's revenue flows, annual recurring revenue (ARR) for public cloud services rose 165% to $106 million. Adjusted earnings jumped 73% to $0.38 per diluted share. Your average Wall Street analyst would have settled for earnings near $0.25 per share on sales in the vicinity of $475 million.

A businessman stands behind charts and data floating in the air, pointing to a large dollar sign.

Image source: Getty Images.

Now what

Teradata is moving away from traditional software licenses and consulting services, focusing instead on subscription-style contracts for cloud-based services. Public cloud ARR is expected to more than double again in the next fiscal year, starting with another 165% jump in the first quarter.

Investors and analysts are embracing this effective shift toward a more profitable and easily scalable business model. It's no surprise to see Teradata's shares make a big move based on this fantastic report, although the size of the jump was greater than expected.

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