Kyndryl Holdings Delivers Mixed Q4 Results
Kyndryl Holdings, Inc. (NYSE: KD) reported its fourth fiscal quarter and full-year 2026 results, revealing a revenue shortfall despite progress in key areas like hyperscaler partnerships and consulting services. Revenue for the quarter ended March 31, 2026, reached $3.77 billion, falling short of expectations at $3.98 billion. Earnings per share stood at $0.18, missing the anticipated $0.49.
Full-Year Performance Highlights
For the full fiscal year 2026, revenue remained flat at $15.1 billion, reflecting a 3% decline in constant currency terms. The company achieved adjusted EBITDA of $2.7 billion, marking a 100 basis point margin expansion. Adjusted pretax income rose to $581 million with 60 basis points of margin improvement. Free cash flow hit $406 million, surpassing the guidance midpoint of $325 million to $375 million.
Signings totaled $13.5 billion for the year, while hyperscaler-related revenue surged 59% year-over-year to nearly $2 billion. Kyndryl Consult delivered double-digit growth for the third consecutive year, with signings outpacing revenue.
Strategic Progress and Challenges
Chairman and CEO Martin Schroeter highlighted the company’s focus on high-margin opportunities. “Our focus on high-margin signings and strategic partnerships positions us well for future growth,” Schroeter stated. He noted extended sales cycles and transitions from IBM as short-term headwinds, estimating a 3-point adverse revenue impact from post-spin-off customer shifts.
Interim CFO Harsh Chugh pointed to efficiencies from initiatives like Advanced Delivery, yielding $1 billion in annual savings, and the Accounts program, adding another $1 billion in annualized profit. Hyperscaler alliances drove significant revenue growth from near zero four years ago.
FY2027 Guidance and Long-Term Targets
Looking ahead, Kyndryl projects fiscal 2027 revenue flat to down 2% in constant currency, with 80% derived from higher-margin post-spin signings. Adjusted pretax income is forecasted at $600 million to $700 million, incorporating $200 million in workforce rebalancing charges. Free cash flow guidance stands at $400 million to $500 million.
Schroeter outlined ambitious FY2028 goals: adjusted pretax income exceeding $1.2 billion, free cash flow over $1 billion, and low single-digit constant currency revenue growth. “Modernization is no longer optional. It is a requirement,” he emphasized, underscoring AI-led transformations.
Analyst Q&A Insights
During the call, analysts probed revenue dynamics. Scotiabank’s Kevin Krishnaratne inquired about macro pressures; Schroeter attributed delays to stakeholder decisions and sovereignty issues, while affirming a robust pipeline. Morgan Stanley’s James Faucette discussed customer priorities shifting toward private cloud and AI resilience.
Susquehanna’s James Friedman addressed IBM effects, with Schroeter clarifying customer procurement choices reduced volume but preserved profits. JPMorgan’s Tien-Tsin Huang and Guggenheim’s Jonathan Lee highlighted pipeline strength and book-to-bill ratios exceeding 1x in key areas.
Shares of Kyndryl slipped following the announcement amid the revenue miss and cautious outlook.
