Shares of hybrid cloud data manager Teradata (TDC -14.50%) fell 13.3% on Tuesday, as of 1:25 p.m. ET.

The software company fell following its third-quarter earnings report. While beating analyst expectations for both revenue and adjusted earnings per share (EPS), management issued guidance that was somewhat conservative on the growth of its cloud business.

Migration to cloud leads to noisy results

For the third quarter, Teradata saw revenue of $440 million, which was essentially flat from the $438 million it made in the year-ago quarter. Adjusted (non-GAAP) EPS came in at $0.69, which did beat analyst estimates for $0.53.

Of note, Teradata is migrating from an on-premises perpetual license business to a recurring cloud subscription business. When a company does that, it usually sees flattish revenue or even declines, as larger upfront licenses meant to be used for years are replaced by recurring subscriptions billed over time.

That's what's going on with Teradata. While revenue was flat, its public cloud annualized recurring revenue (ARR) increased 26%. That's more along the lines of what one would expect from an enterprise software-as-a-service business.

But therein lies the problem. Management forecast public cloud ARR to decelerate to 18% to 22% growth in Q4. On the call, management noted, "Customers are planning to migrate workloads to the cloud in a more staged process." In other words, the shift from on-premises to cloud is slowing down, with longer cycles. Total ARR guidance for the year, including cloud and on-premises, was unchanged, at a 2% to 4% decline.

Teradata doesn't look exciting near-term

Shares do look somewhat cheap after today's plunge, at around 12.2 times the forecast 2024 adjusted EPS. But with growth hard to come by, that suggests a somewhat competitive environment.

Hybrid cloud data management should be a growth area. So, Teradata bears watching, but investors may want to wait for more clarity in the quarters ahead before buying.