Court, saying it was the only verdict he could reach.
Terry was stripped of the England captaincy in February over the allegations. As a consequence, Fabio Capello resigned as England manager, just months before England, defender Terry included, competed in the 2012 European Championships.
Terry, wearing a white shirt with a grey suit, left court without speaking to media or supporters waiting outside.
He was accused of branding Queens Park Rangers player Ferdinand a "fucking black cunt” during a match between Chelsea and QPR on October 23 last year.
Terry denied committing a racially aggravated public order offence.
He told the court he was sarcastically repeating words he thought Ferdinand had said to him.
In his verdict, Riddle said that after weighing the evidence it was "highly unlikely" Ferdinand accused Terry on the pitch of calling him the words in question.
"However, I accept that it is possible that Mr Terry believed at the time, and believes now, that such an accusation was made," said Riddle. "The prosecution evidence as to what was said by Mr Ferdinand at this point is not strong.
"It is therefore possible that what he (Terry) said was not intended as an insult, but rather as a challenge to what he believed had been said to him.
"In those circumstances, there being a doubt, the only verdict the court can record is one of not guilty."
England's governing Football Association reacted to Friday's verdict by saying it would continue its own disciplinary process regarding the incident, which was suspended so as not to prejudice the trial.
"The FA notes the decision in the John Terry case and will now seek to conclude its own enquiries," it said. "The FA will make no further comment at this time."
Riddle heard three days of evidence, with Terry's fellow Chelsea and England defender Ashley Cole among those taking the witness stand, and one day of summaries.
Though it was not the issue being judged, Riddle said he had substantial evidence to confirm Terry was not a racist. He said there was no dispute that Terry directed the words at Ferdinand, but the issue was whether Terry used the words "by way of insult".