Data and analytics software provider Teradata (NYSE:TDC) reported results in line with analysts' expectations in Q3 FY2023, with revenue up 5% year on year to $438 million. Turning to EPS, Teradata made a GAAP profit of $0.12 per share, improving from its profit of $0.08 per share in the same quarter last year.

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“Our best-in-class cloud analytics and data platform for AI delivers harmonized data, trusted AI, and faster innovation for better decision-making,” said Steve McMillan, President and Chief Executive Officer of Teradata.

Part of point-of-sale and ATM company NCR from 1991 to 2007, Teradata (NYSE:TDC) offers a software-as-service platform that helps organizations manage their data across multiple storages and analyze it.

Data Infrastructure

Generating insights from system level data is an increasing priority for most businesses, but to do so requires connecting and analyzing piles of data stored and siloed in separate databases. This is the demand driver for cloud based data infrastructure software providers, who can more readily integrate, distribute and process information vs. legacy on-premise software providers.

Sales Growth

As you can see below, Teradata's revenue has been declining over the last two years, shrinking from $460 million in Q3 FY2021 to $438 million this quarter.

Teradata's quarterly revenue was only up 5% year on year, which isn't particularly great. On top of that, its revenue decreased again in Q3 by $24 million, following the same trend as its $14 million decrease in Q2 2023. While one-off fluctuations aren't always concerning, we have no doubt that shareholders would like to see its revenue rebound soon.

Looking ahead, analysts covering the company were expecting sales to grow 3.9% over the next 12 months before the earnings results announcement.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Teradata's free cash flow came in at $36 million in Q3, up 16.1% year on year.

Teradata has generated $307 million in free cash flow over the last 12 months, a solid 16.7% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.

Key Takeaways from Teradata's Q3 Results

Sporting a market capitalization of $4.4 billion, Teradata is among smaller companies, but its more than $348 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

We struggled to find many strong positives in these results. Although Teradata's EPS guidance for next quarter beat analysts' expectations, its adjusted operating income and free cash flow missed Wall Street's estimates. Zooming out, we think this was still a decent, albeit mixed, quarter. The stock is up 1.1% after reporting and currently trades at $45.5 per share.

So should you invest in Teradata right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.