What Happened?

A number of stocks fell in the afternoon session after markets pulled back as a report raised concerns about artificial intelligence demand and profitability. 

Oracle shares lost more than 5% following news of its cloud business generating lighter margins than expected. According to internal documents cited in the report, the gross profit margin for this business was only 14%, a figure much lower than what analysts had expected. This suggested that the high costs of running the advanced chip infrastructure were weighing on profitability. Compounding these worries was the ongoing U.S. government shutdown, in its second week, with no clear resolution in sight from Washington. These updates drove investors away from riskier assets and towards safe havens, a trend highlighted by gold futures hitting a record $4,000 per ounce for the first time.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Data Analytics company Amplitude (NASDAQ: AMPL) fell 4%. Is now the time to buy Amplitude? Access our full analysis report here, it’s free for active Edge members.
• Customer Experience Software company Sprinklr (NYSE: CXM) fell 3.5%. Is now the time to buy Sprinklr? Access our full analysis report here, it’s free for active Edge members.
• Marketing Software company Braze (NASDAQ: BRZE) fell 6.1%. Is now the time to buy Braze? Access our full analysis report here, it’s free for active Edge members.
• Data Analytics company Samsara (NYSE: IOT) fell 5.5%. Is now the time to buy Samsara? Access our full analysis report here, it’s free for active Edge members.
• Data Infrastructure company Teradata (NYSE: TDC) fell 6.7%. Is now the time to buy Teradata? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Teradata (TDC)

Teradata’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 11 months ago when the stock dropped 12.7% on the news that the company reported underwhelming third-quarter earnings. Revenue growth was flat, and ARR declined year on year, while the guidance for the next quarter implied further sales declines. Notably, Public cloud ARR growth was revised down to a range of 18% to 22% year-over-year (vs. previous est. of 28% to 32% growth) Its EPS forecast for the next quarter missed. On the other hand, Teradata provided optimistic full-year EPS forecast, which blew past analysts' expectations. Overall, this was a weaker quarter.

Teradata is down 29.9% since the beginning of the year, and at $21.48 per share, it is trading 35.6% below its 52-week high of $33.38 from November 2024. Investors who bought $1,000 worth of Teradata’s shares 5 years ago would now be looking at an investment worth $979.05.

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