Kyndryl Holdings Earnings Call Transcripts
Fiscal Year 2026
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Cybersecurity, modernization, and sovereignty are driving IT priorities, with AI adoption fueling productivity gains and future growth opportunities. Financial performance is improving through automation and a strong pipeline, while IBM-related headwinds are expected to diminish. Workforce efficiency and trusted customer relationships support ongoing transformation.
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Adjusted pre-tax income and margin expanded in fiscal 2026, with strong free cash flow and double-digit growth in Kyndryl Consult and hyperscaler revenues. Fiscal 2027 guidance anticipates flat to slightly declining revenue, with continued margin discipline and robust cash generation.
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Management is focused on business transformation, expanding beyond IBM to hyperscalers and private cloud, with disciplined, higher-margin signings driving growth. Data sovereignty, AI, and regulatory trends are reshaping customer needs, while capital allocation supports strategic investments and modernization.
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Revenue grew 3% year-over-year to $3.9B, with margin expansion and strong growth in Consult and hyperscaler services, though results were below expectations due to longer sales cycles and evolving IBM partnership. Fiscal 2026 guidance was lowered, but multi-year targets remain intact.
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Q2 2026 saw margin expansion, strong earnings, and growth in consult and hyperscaler revenues, despite revenue coming in $100M below target due to longer sales cycles and content removal. Fiscal 2026 outlook is reaffirmed, with increased share repurchases and a robust pipeline supporting second-half growth.
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Q1 saw strong margin expansion and a 39% rise in adjusted pre-tax income, driven by growth in consulting and hyperscaler revenues. Fiscal 2026 guidance is reaffirmed, with 1% revenue growth, double-digit consulting growth, and $550M free cash flow expected.
Fiscal Year 2025
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Post-spin, the company leveraged new investment and partnership opportunities, transforming its culture and strategy to focus on advanced delivery, alliances, and focus accounts. Strong growth in Consult and alliances, AI-driven efficiency, and disciplined capital allocation underpin a plan for mid-single-digit revenue growth, double profit, and triple cash flow by fiscal 2028.
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The session highlighted strategic transformation, strong consult and managed services growth, and robust financial targets through FY2028. Diversification, sticky client relationships, and end-to-end solutions drive resilience, while IBM-related cost headwinds are set to ease after this year.
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Positive revenue growth and improved profitability mark a new phase, with strong backlog, broad-based signings, and expanding consulting services. Strategic partnerships, AI-driven innovation, and robust cash flow support both reinvestment and shareholder returns.
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Fiscal 2025 saw strong growth in signings, revenue, and profitability, with Kyndryl Consult and hyperscaler-related services driving results. Fiscal 2026 guidance calls for continued margin expansion, double-digit consult growth, and robust free cash flow, supported by a strong backlog and insulation from macro risks.
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Management outlined a 'triple, double, single' strategy to triple free cash flow, double profitability, and achieve single-digit revenue growth, driven by a shift to higher-margin backlog, strong Consult and Alliance performance, and AI-powered innovation. Margin headwinds from IBM software costs are ending, supporting future profit growth.
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Record Q3 margins and earnings driven by strong signings, double-digit growth in Kyndryl Consult, and robust demand for modernization, cloud, and AI services. Raised full-year outlook and initiated share repurchases, with broad-based growth across practices and industries.
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Record signings and double-digit growth in advisory and hyperscaler-related revenues drove strong margin and cash flow improvements, despite a planned revenue decline from exiting low-margin streams. Guidance for fiscal 2025 is reaffirmed, with a return to revenue growth expected in Q4.
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Q1 FY25 saw strong signings, margin expansion, and double-digit growth in advisory and hyperscaler revenues, despite an 8% revenue decline due to strategic exits from low-margin streams. Guidance was raised for adjusted EBITDA margin and pre-tax income, with a return to revenue growth expected in Q4.
Fiscal Year 2024
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Management outlined a strategy of accelerated growth, margin expansion, and capital returns, underpinned by alliances, proprietary platforms, and consulting growth. Financial guidance targets tripling free cash flow and doubling pre-tax income by 2028, with sustainable mid-single-digit revenue growth and a $300 million share buyback.