Core Insights - Kyndryl has announced a strategic collaboration with Nova Intelligence to enhance its SAP Services by integrating AI-driven solutions for faster customer migration to SAP Cloud ERP and achieving cost savings [1][2][4] Partnership Details - The partnership aims to combine Kyndryl's SAP modernization and data transformation services with Nova Intelligence's AI solutions to facilitate quicker and more cost-effective transformations for enterprise customers [2][4] - Kyndryl will utilize Nova Intelligence's AI capabilities to modernize legacy custom code into compliant applications, thereby supporting customers on their SAP Clean Core journey [3][4] Technology and Benefits - Nova Intelligence's AI agents will accelerate the documentation, simplification, generation, and unit testing of custom code, which, when combined with Kyndryl's services, will help customers achieve Clean Core compliance and reduce risks [4] - Kyndryl has already applied Nova Intelligence AI agents to modernize its own legacy SAP applications, resulting in significant reductions in manual development work and transformation costs [5] Company Background - Kyndryl is a leading provider of mission-critical enterprise technology services, offering advisory, implementation, and managed service capabilities globally [7] - Nova Intelligence is recognized as the first provider of a multi-agent platform for SAP transformations, led by a team with extensive experience in SAP projects [8]

Financial Data and Key Metrics Changes - In Q1 2026, revenue totaled $3.7 billion, reflecting a slight increase from the prior year quarter on a reported basis, but a 2.6% decline in constant currency due to focus accounts initiative [21][22] - Adjusted pre-tax income grew 39% to $128 million, with an adjusted pre-tax margin increasing by 100 basis points year over year [22][31] - Adjusted EBITDA was $647 million, with an adjusted EBITDA margin of 17.3%, up 240 basis points year over year [22][31] Business Line Data and Key Metrics Changes - Kindrel Consult revenues grew 30% year over year, indicating strong growth in higher-margin advisory services [21][22] - Hyperscaler-related revenue nearly doubled from a year ago to $400 million in Q1, progressing towards a fiscal 2026 target of $1.8 billion [8][23] - Aggregate signings increased by 2% year over year, totaling $18.3 billion, a 43% increase from the previous year [22][29] Market Data and Key Metrics Changes - The company reported a book-to-bill ratio above 1%, indicating strong demand for services and a healthy pipeline [8][22] - The focus accounts initiative has increased cumulative annualized profit from these accounts by $25 million to $925 million [24][46] Company Strategy and Development Direction - The company is focused on driving margin expansion and sustainable profitable growth through strategic initiatives, including partnerships and innovation in AI, cloud, and cybersecurity [5][8] - Investments in technology alliances and advanced delivery initiatives are central to the company's strategy, enhancing service delivery and operational efficiency [9][23] - The company aims to achieve over $1 billion in adjusted free cash flow and $1.2 billion in adjusted pre-tax income by fiscal 2028, requiring mid-single-digit revenue growth [19][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve financial and operational goals, citing strong customer demand and a solid pipeline [20][75] - The outlook for fiscal 2026 includes expectations for approximately $550 million in free cash flow and positive 1% constant currency revenue growth [19][32] - Management highlighted the importance of AI adoption and modernization initiatives as key drivers of future growth [16][68] Other Important Information - The company repurchased 1.8 million shares at a cost of $65 million during the quarter, with $141 million remaining under the share repurchase authorization [26][50] - The cash balance at June 30 was $1.5 billion, with a net leverage ratio of 0.6 times adjusted EBITDA, indicating a strong financial position [26][27] Q&A Session Summary Question: How did first quarter revenue come in versus planned? - Management indicated good momentum in growth vectors, with Kindrel Consult showing strong growth and a healthy pipeline supporting future revenue [35][37] Question: What trends have been noticed among focus accounts? - Management noted that while some deals were pushed out, they are confident in the ongoing progress and innovation being delivered to these accounts [43][46] Question: What catalysts could drive margin expansion beyond account renegotiation? - Management highlighted the increasing contribution of new contracts to the P&L, reduced software cost increases, and improved efficiency in SG&A as key factors for margin expansion [53][56] Question: What is the visibility on the triple, double, single strategy? - Management expressed strong visibility into achieving the triple, double, single goals, citing a solid cash flow forecast and a favorable margin outlook [64][72]

Financial Data and Key Metrics Changes - In Q1 2026, revenue totaled $3.7 billion, reflecting a slight increase from the prior year but a 2.6% decline in constant currency, primarily due to the focus accounts initiative [21][22] - Adjusted pre-tax income grew 39% to $128 million, with an adjusted pre-tax margin increasing by 100 basis points year over year [22][31] - Adjusted EBITDA was $647 million, with an adjusted EBITDA margin of 17.3%, up 240 basis points year over year [22][31] Business Line Data and Key Metrics Changes - Kindrel Consult revenues grew 30% year over year, indicating strong growth in higher-margin advisory services [21][31] - Hyperscaler-related revenue nearly doubled to $400 million in Q1, progressing towards a fiscal 2026 target of $1.8 billion [9][23] - Aggregate signings increased by 43% year over year to $18.3 billion, with a book-to-bill ratio above 1 [22][30] Market Data and Key Metrics Changes - The company reported a 44% increase in signings in constant currency over the last twelve months, with strong performance in the US market [9][22] - The focus accounts initiative has increased cumulative annualized profit from these accounts by $25 million to $925 million [24][46] Company Strategy and Development Direction - The company is focused on expanding its capabilities in AI, cloud migration, and cybersecurity, positioning itself as a key partner in IT modernization [10][12] - Strategic initiatives include leveraging technology alliances, advanced delivery, and enhancing the Kindrel Consult and Kindrel Bridge offerings [10][19] - The company aims to achieve over $1 billion in adjusted free cash flow and $1.2 billion in adjusted pre-tax income by fiscal 2028, requiring mid-single-digit revenue growth [19][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving fiscal 2026 targets, expecting revenue growth to accelerate from Q1 to Q2 and further in the second half of the year [20][32] - The company anticipates generating approximately $550 million in free cash flow for the fiscal year, with a strong conversion of earnings to cash flow [32][33] - Management highlighted the importance of innovation and customer relationships in driving future growth [10][80] Other Important Information - The company repurchased 1.8 million shares at a cost of $65 million during the quarter, with $141 million remaining under the share repurchase authorization [26][51] - The cash balance at June 30 was $1.5 billion, with a net leverage ratio of 0.6 times adjusted EBITDA [26][27] Q&A Session Summary Question: How did Q1 revenue come in versus planned, and what is the growth cadence for the rest of the year? - Management indicated good momentum in growth vectors, with Kindrel Consult showing strong growth and a solid pipeline for the year [35][39] Question: What trends have been noticed among focus accounts, and what is the confidence level for signings this quarter? - Management noted that while some deals were pushed out, progress continues, and they expect to close some transactions in Q2 [44][50] Question: What are the catalysts for margin expansion beyond account renegotiation? - Management highlighted the increasing contribution of their own margins to the P&L and improved efficiency in SG&A as key factors for margin expansion [55][59] Question: How does the company articulate the opportunity of AI-related technology transitions? - Management emphasized that AI presents both cost-saving and revenue opportunities, with Kindrel Bridge leveraging AI to enhance service delivery [66][70] Question: What is the visibility on the triple, double, single strategy? - Management expressed strong visibility on achieving the triple, double, single goals, supported by a solid cash flow forecast and growth in key business areas [72][76]

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[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) [First Quarter Fiscal 2026 Financial Highlights](index=1&type=section&id=First%20Quarter%20Fiscal%202026%20Financial%20Highlights) For the first quarter of fiscal year 2026, Kyndryl reported revenues of $3.74 billion, a slight year-over-year increase on a reported basis but a 2.6% decrease in constant currency, demonstrating significant profitability improvement with pretax income rising 44% to $92 million and net income surging to $56 million from $11 million in the prior year, while Adjusted EBITDA grew 16% to $647 million, reflecting strong operational performance driven by strategic initiatives Q1 FY2026 Key Financial Results (GAAP) | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Revenues | $3.74 billion | $3.74 billion | ~0% | | Pretax Income | $92 million | $64 million | +44% | | Net Income | $56 million | $11 million | +409% | | Diluted EPS | $0.23 | $0.05 | +360% | Q1 FY2026 Key Financial Results (Adjusted, Non-GAAP) | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Adjusted Pretax Income | $128 million | $92 million | +39% | | Adjusted Net Income | $90 million | $31 million | +190% | | Adjusted Diluted EPS | $0.37 | $0.13 | +185% | | Adjusted EBITDA | $647 million | $556 million | +16% | - Cash used from operations was **$124 million**, and free cash flow was a use of **$222 million**, reflecting typical seasonal outflows for the first fiscal quarter[4](index=4&type=chunk)[5](index=5&type=chunk) [Business and Strategic Progress](index=1&type=section&id=Business%20and%20Strategic%20Progress) Kyndryl demonstrated strong business momentum with a 43% year-over-year increase in trailing twelve-month signings, reaching $18.3 billion, driven by strategic initiatives including a 30% revenue increase in Kyndryl Consult and an 86% surge in revenue from hyperscaler alliances, while also advancing AI capabilities by launching the Kyndryl Agentic AI Framework and continuing its capital return program by repurchasing $65 million in shares - Signings for the trailing twelve months were **$18.3 billion**, representing a **43% year-over-year increase**[7](index=7&type=chunk) - Kyndryl Consult revenues grew **30% year-over-year** in the first quarter, with signings for this segment growing **36%** over the last twelve months[10](index=10&type=chunk) - As part of the Alliances initiative, revenue tied to cloud hyperscalers reached **$400 million** in the quarter, an **86% year-over-year increase**[10](index=10&type=chunk) - The company's Advanced Delivery and Accounts initiatives continued to drive earnings growth and margin expansion[10](index=10&type=chunk) - The company repurchased **1.8 million shares** of its common stock at a cost of **$65 million** in the first quarter[10](index=10&type=chunk) [Fiscal Year 2026 Outlook](index=2&type=section&id=Fiscal%20Year%202026%20Outlook) [Reaffirmed Fiscal Year 2026 Outlook](index=2&type=section&id=Reaffirmed%20Fiscal%20Year%202026%20Outlook) Kyndryl reaffirmed its full-year outlook for fiscal 2026, signaling confidence in its strategic direction, expecting constant-currency revenue growth of 1%, a significant increase in profitability with adjusted pretax income of at least $725 million, an adjusted EBITDA margin of approximately 18%, and strong free cash flow generation of approximately $550 million Fiscal Year 2026 Full-Year Guidance | Metric | Outlook | | :--- | :--- | | Constant-Currency Revenue Growth | 1% | | Adjusted Pretax Income | At least $725 million | | Adjusted EBITDA Margin | Approximately 18% | | Free Cash Flow | Approximately $550 million | - The company is progressing well toward its hyperscaler revenue target of **$1.8 billion** in fiscal 2026[10](index=10&type=chunk) - The projected pretax margin associated with new signings was in the **high-single-digit range**, consistent with recent quarters[10](index=10&type=chunk) [Detailed Financial Statements](index=6&type=section&id=Detailed%20Financial%20Statements) [Consolidated Income Statement](index=6&type=section&id=Consolidated%20Income%20Statement) For the quarter ended June 30, 2025, revenues remained flat year-over-year at approximately $3.74 billion, however, income before taxes increased to $92 million from $64 million in the prior year, primarily due to controlled expenses and a significant reduction in the provision for income taxes, which fell from $53 million to $36 million, resulting in a substantial increase in net income to $56 million, or $0.23 per diluted share Consolidated Income Statement Highlights (in millions) | Line Item | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Revenues | $3,743 | $3,739 | | Total costs and expenses | $3,651 | $3,675 | | Income before income taxes | $92 | $64 | | Provision for income taxes | $36 | $53 | | **Net income** | **$56** | **$11** | [Segment Results and Balance Sheet](index=7&type=section&id=Segment%20Results%20and%20Balance%20Sheet) Revenue performance varied geographically, with the United States segment declining 8%, while Principal Markets and Strategic Markets both grew 3% on a reported basis, and Japan's revenue increased 2% as reported but fell 6% in constant currency, with total adjusted EBITDA growing to $647 million from $556 million, and the company ending the quarter with $1.46 billion in cash and equivalents and $3.14 billion in total debt Revenue by Segment (in millions) | Segment | Q1 FY2026 | Q1 FY2025 | YoY Growth (Reported) | YoY Growth (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | United States | $911 | $986 | (8%) | (8%) | | Japan | $578 | $569 | 2% | (6%) | | Principal Markets | $1,356 | $1,315 | 3% | (1%) | | Strategic Markets | $898 | $869 | 3% | 3% | | **Total revenue** | **$3,743** | **$3,739** | **0%** | **(3%)** | Selected Balance Sheet Data (in millions) | Item | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Cash and equivalents | $1,462 | $1,786 | | Debt (short-term and long-term) | $3,141 | $3,172 | [Consolidated Statement of Cash Flows](index=8&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) In the first quarter, net cash used in operating activities was $124 million, an increase from the $48 million used in the prior-year period, largely influenced by changes in deferred costs and other liabilities, with investing activities using $74 million, a decrease from the prior year, and financing activities using $170 million, which included $62 million for common stock repurchases, resulting in the company ending the period with $1.47 billion in cash, cash equivalents, and restricted cash Cash Flow Summary (in millions) | Cash Flow Activity | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(124) | $(48) | | Net cash used in investing activities | $(74) | $(166) | | Net cash used in financing activities | $(170) | $(51) | | **Net change in cash, cash equivalents and restricted cash** | **$(323)** | **$(281)** | [Non-GAAP Financial Measures and Reconciliations](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) [Definitions of Non-GAAP Metrics](index=9&type=section&id=Definitions%20of%20Non-GAAP%20Metrics) This section defines the non-GAAP financial measures Kyndryl uses to supplement its GAAP results, including Adjusted Pretax Income, Adjusted EBITDA, and Free Cash Flow, which exclude items such as transaction-related costs, stock-based compensation, and certain amortization expenses, providing better insight into operational performance and comparability with peers, while also defining Signings as an estimate of a customer's commitment value under a contract - Adjusted EBITDA is defined as net income excluding items like net interest expense, taxes, depreciation, amortization, transaction-related costs, and stock-based compensation[32](index=32&type=chunk) - Free Cash Flow is defined as cash flows from operating activities less net capital expenditures, with adjusted free cash flow further adding back certain payments like transaction-related costs[35](index=35&type=chunk) - Signings are an initial estimate of the value of a customer's commitment under a contract, used by management to monitor business performance and customer engagement[36](index=36&type=chunk) [Reconciliation of GAAP to Non-GAAP Metrics](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Metrics) This section provides detailed reconciliations of GAAP to non-GAAP results, showing that for Q1 FY2026, GAAP pretax income of $92 million was adjusted for items like stock-based compensation ($24 million) to arrive at an adjusted pretax income of $128 million, GAAP net income of $56 million was adjusted to $90 million, and cash flow from operations of -$124 million resulted in a free cash flow of -$222 million, with signings for the quarter at $3.2 billion and trailing twelve-month signings reaching $18.3 billion, a 43% increase Reconciliation of Net Income to Adjusted Pretax Income & EBITDA (in millions) | Line Item | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Pretax income (GAAP) | $92 | $64 | | Stock-based compensation expense | $24 | $24 | | Other adjustments | $12 | $(12) | | **Adjusted pretax income (non-GAAP)** | **$128** | **$92** | | **Adjusted EBITDA (non-GAAP)** | **$647** | **$556** | Reconciliation of Operating Cash Flow to Free Cash Flow (in millions) | Line Item | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Cash flows from operating activities (GAAP) | $(124) | $(48) | | Less: Net capital expenditures | $(97) | $(98) | | **Free cash flow (non-GAAP)** | **$(222)** | **$(145)** | Signings (in billions) | Period | Q1 FY2026 | Q1 FY2025 | YoY Growth | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $3.2 | $3.1 | +2% | | Last Twelve Months Ended June 30 | $18.3 | $12.8 | +43% |

Core Insights - Kyndryl reported steady progress in key growth areas, including Kyndryl Consult and hyperscaler-related activities, contributing to innovation and growth opportunities [2][3] - The company reaffirmed its fiscal 2026 outlook, targeting adjusted pretax income of at least $725 million, a year-over-year increase of at least $243 million [8] Financial Performance - For the first quarter ended June 30, 2025, Kyndryl reported revenues of $3.74 billion, a slight increase year-over-year, but down 2.6% in constant currency [3][9] - Pretax income was $92 million, a 44% increase from $64 million in the prior-year period, while net income rose to $56 million, or $0.23 per diluted share, compared to $11 million, or $0.05 per diluted share, in the prior-year period [3][9] - Adjusted pretax income was $128 million, a 39% increase from $92 million in the prior-year period, and adjusted net income was $90 million, or $0.37 per diluted share, compared to $31 million, or $0.13 per diluted share, in the prior-year period [4][9] Operational Highlights - Kyndryl's signings for the trailing twelve months reached $18.3 billion, representing a year-over-year increase of 43% [5][9] - Hyperscaler-related revenue generated $400 million in the first quarter, an 86% year-over-year increase, with a target of $1.8 billion in fiscal 2026 [10] - Kyndryl Consult experienced a 30% year-over-year revenue growth in the first quarter, with signings growing 36% over the last twelve months [10] Strategic Initiatives - The company is focused on its three-A initiatives: Alliances, Advanced Delivery, and Accounts, which are driving earnings growth and margin expansion [4][10] - Kyndryl launched the Agentic AI Framework in July, enabling customers to adopt and scale AI solutions across various IT settings [10] Shareholder Returns - Kyndryl repurchased 1.8 million shares at a cost of $65 million in the first quarter, as part of a $300 million share repurchase program authorized in November 2024 [10]

Key Takeaways KD has an Earnings ESP of -4.05% and a Zacks Rank of 2 at present. Kyndryl (KD) will report first-quarter fiscal 2026 results on Aug. 4, after market close. KD's earnings surprise history is impressive. It surpassed the Zacks Consensus Estimate in three of the four trailing quarters and met once, delivering an average earnings surprise of 37.5%. KD's Q1 Expectations The Zacks Consensus Estimate for revenues is set at $3.8 billion, indicating a 1.6% year-over-year rise. We expect Kyndryl Consul ...

Investors interested in stocks from the Technology Services sector have probably already heard of Kyndryl Holdings, Inc. (KD) and AppLovin (APP) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look. KD currently has a forward P/E ratio of 17.78, while APP has a forward P/E of 44.28. We also note that KD has a PEG ratio of 0.71. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's e ...

Core Viewpoint - Kyndryl Holdings, Inc. is anticipated to report a year-over-year increase in earnings driven by higher revenues, with the actual results being a significant factor influencing its near-term stock price [1][2]. Earnings Expectations - The upcoming earnings report is expected to be released on August 4, with a consensus estimate of $0.37 per share, reflecting a year-over-year increase of 184.6%. Revenues are projected to be $3.8 billion, up 1.6% from the previous year [3][2]. Estimate Revisions - The consensus EPS estimate has been revised down by 8.57% over the last 30 days, indicating a collective reassessment by analysts regarding the company's earnings prospects [4][12]. Earnings Surprise Prediction - The Most Accurate Estimate for Kyndryl Holdings is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -4.05%, suggesting a bearish outlook from analysts [12]. The company currently holds a Zacks Rank of 3, complicating predictions of an earnings beat [12]. Historical Performance - In the last reported quarter, Kyndryl Holdings met the expected earnings of $0.52 per share, resulting in no surprise. Over the past four quarters, the company has beaten consensus EPS estimates three times [13][14]. Conclusion - Kyndryl Holdings does not appear to be a strong candidate for an earnings beat based on current estimates and revisions. Investors are advised to consider other factors when making decisions regarding this stock ahead of the earnings release [17].

Core Viewpoint - Kyndryl will release its earnings results for the first quarter of the 2026 fiscal year on August 4, 2025, followed by a conference call on August 5, 2025 [1][2]. Group 1: Earnings Announcement - Kyndryl will announce its quarterly results for the period ending June 30, 2025, after market close on August 4, 2025 [1]. - The earnings conference call will be hosted by Chairman and CEO Martin Schroeter and CFO David Wyshner at 8:30 a.m. ET on August 5, 2025 [1]. Group 2: Access to Information - The live webcast of the earnings call can be accessed through Kyndryl's investor relations website [2]. - A slide presentation will be available on the investor relations website shortly before the call [2]. - Replays of the webcast will be available for twelve months after the event [2]. Group 3: Company Overview - Kyndryl is a leading provider of mission-critical enterprise technology services, offering advisory, implementation, and managed service capabilities to thousands of customers in over 60 countries [3]. - The company is recognized as the world's largest IT infrastructure services provider, focusing on designing, building, managing, and modernizing complex information systems [3].