Teradata scraps employee raises to fund AI while CEO takes home $16 million

In January, Teradata told staff that the company's regular annual raises would not happen this year because the money was being redirected to artificial intelligence.

The move applies to all 5,100 employees and comes in the same period that CEO Steve McMillan's total compensation climbed to roughly $16.1 million last year.

What happened?

Business Insider first reported on an internal memo in which McMillan said Teradata would shift the budget for 2026 salary adjustments into AI spending, according to International Business Times. "We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments," he wrote.

For employees at the San Diego cloud software company, that means a freeze on base pay. Two longtime U.S.-based workers told the outlet that annual raises had typically ranged from 2% to 4%, even though they were not guaranteed. Employees can still qualify for performance bonuses and equity awards, but base pay will stay flat.

Why does it matter?

Staff members were told there was no budget for raises, even as McMillan's 2025 pay package totaled $822,616 in base salary, a $1.04 million bonus, and about $14 million in stock awards. The company also used $140 million last year to buy back shares.

Its shares jumped more than 40% in a single February session after strong quarterly results, and they traded around $35 as of early June, giving the company a market capitalization of about $3.3 billion.

A March 2026 ResumeBuilder.com survey found that 54% of U.S. companies expected to reduce employee pay to fund AI by year-end, while 26% had already laid off workers for the same reason.

What are people saying?

Teradata has been publicly touting its AI plans. McMillan has told investors that the company is "uniquely suited" to help enterprises run agentic AI at scale, and Teradata recently created a new Chief Data and AI Officer role.

ResumeBuilder.com's chief career adviser, Stacie Haller, said, "Companies are making a clear calculation: AI investment is the priority, and employee compensation is where the budget will come from." She also warned that the trade-off could ultimately hurt employers.

"When the job market shifts back in employees' favor, these companies will find it much harder to attract and retain the people they need," Haller said.

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