You do probably have java installed at your terminal server.
Turning off Java auto update from control panel will not turn this feature off for all users, but this can be done with Group Policy and the Preferences GPO and Registry.
To do this, simply log on as Administrator, open regedit and browse to HKEY_Current_user -> Software – > JavaSoft -> Java Update
While having the registry window open, browse to control panel and open Java and turn of Check for updates automatically.
After doing that, go back to registry and hit refresh to fetch the newly created Reg_Binary key: “EnableAutoUpdateCheck”
Open Group Policy Management, browse to the Terminal server / Xenapp GPO and go down to Preferences – > Windows Settings. Right click and select NEW-> Registry Wizard
Browse to the REG_BINARY key you just found and use CREATE as action.
Publish this to all users that need Automatic Updates to be turned off.