What happened

Shares of Teradata (NYSE:TDC) 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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.