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Why Teradata Stock Fell Sharply on Friday

By Daniel Sparks – Nov 5, 2021 at 1:59PM

Key Points

  • The tech company beat expectations for its third-quarter revenue and adjusted earnings per share.
  • Cloud revenue, however, was below analysts' consensus view.
  • Teradata management says volatility in the growth rate of its cloud business is normal.

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The cloud analytics company missed the mark on one key metric.

What happened

Shares of cloud analytics company Teradata (TDC 0.75%) fell on Friday. The tech stock dropped as much as 15.9% but was down 13.8% as of 1:09 p.m. EDT.

Teradata stock's decline follows the company's third-quarter earnings release. While revenue and earnings per share were both ahead of analysts' consensus forecasts for the two metrics, the company missed analysts' average view for cloud annual recurring revenue. 

A chalkboard sketch of a chart showing a stock price declining.

Image source: Getty Images.

So what

Teradata said its third-quarter revenue increased 1% year over year, from $454 million to $460 million. Non-GAAP (adjusted) earnings per share was $0.43 -- in line with last year's levels. Analysts, on average, were expecting revenue of $457.5 million and adjusted earnings per share of $0.33.

Cloud revenue increased 83% year over year to $148 million. Though this growth rate was healthy, it was below expectations.

"We saw a handful of transactions slip out of the last day of the quarter, slightly impacting Q3 Public Cloud ARR growth; however, I am pleased that we have now closed the gap in October," said CEO Steve McMillan in the company's earnings release.

Now what

For the full year of 2021, management said it expects total revenue to grow at a rate in the "low-single-digit to mid-single-digit" percentage year over year.

"We remain on track to achieve or beat our fiscal 2021 outlook on the majority of our key financial targets as we continue on our transformation journey," said CFO Claire Bramley. But she did note that the company could continue to see volatility in its cloud business due to the timing of closing dates on its large enterprise deals in its pipeline.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool recommends Teradata. The Motley Fool has a disclosure policy.

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