Teradata stock suffers price drop after mixed quarterly report

The shares of Teradata experienced a dramatic decline on Tuesday, triggered by a mixed quarterly report and weak forecasts. After the data storage specialist's stock fell by as much as 17.6% in morning trading, it recovered slightly and was down 13% by 3:15 PM EDT. The second-quarter report initially left a positive impression. Adjusted earnings rose by 33% year-on-year, significantly exceeding average analyst expectations, which had forecast a stagnant result. Upon closer inspection, however, a different picture emerged. Revenues fell by 6% to $436 million, missing analysts’ consensus expectations of $447 million. Although the company expects solid earnings, it continues to forecast declining revenues. CEO Steve McMillan attributed the weak results to the macroeconomic environment, which has led to longer completion times for testing processes and contract finalizations. Moreover, this trend is expected to worsen. In response, Teradata has launched a cost-cutting program, which will involve laying off about 10% of its workforce. However, this is not a new issue, as the company's stock has already plummeted by 54% over the past year. Although the boom in Artificial Intelligence (AI) appears promising, Teradata has so far been unable to capitalize on it. The competition with cloud computing giants and emerging market leaders is becoming increasingly challenging. Despite the growing need for storage space for AI training and daily operations, which requires advanced data retrieval capabilities and high security, Teradata is no longer the preferred choice in this market. Teradata could boost its earnings through significant cost savings, but the underlying cause of the recent downward trend lies in weak sales. Without sufficient revenue, accelerating growth remains difficult. We wish Teradata success in this turnaround but will be monitoring the situation from the sidelines. Before you invest in Teradata, consider the following: The Motley Fool Stock Advisor analyst team has just identified the top 10 stocks they believe are currently worth buying – and Teradata is not on the list. The 10 recommended stocks could generate remarkable returns in the coming years. For instance, consider when Nvidia was on this list on April 15, 2005. An investment of $1,000 then would be worth $615,516 today! Stock Advisor offers investors an easy-to-follow success strategy, including guidance on portfolio building, regular analyst updates, and two new stock recommendations per month. Since 2002, the Stock Advisor service has outperformed the S&P 500 by more than four times.