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]

Group 1 - U.S. stock futures are higher, with Dow futures gaining around 0.1% [1] - Inspire Medical Systems, Inc. shares fell 25% to $98.00 in pre-market trading after reporting second-quarter results and cutting FY25 guidance below estimates [1] - Ichor Holdings, Ltd. declined 24.3% to $15.24 in pre-market trading due to worse-than-expected second-quarter adjusted EPS results and below-estimate third-quarter adjusted EPS guidance [3] Group 2 - Gartner, Inc. shares fell 15% to $287.20 after issuing soft FY25 guidance [3] - Vertex Pharmaceuticals Incorporated declined 14.5% to $403.85 following second-quarter financial results and Vx-993 Phase 2 trial results [3] - Semrush Holdings, Inc. fell 14.1% to $7.91 after reporting a second-quarter EPS miss [3] - Navitas Semiconductor Corporation shares dropped 14.1% to $6.92 after issuing third-quarter sales guidance below estimates [3] - Kyndryl Holdings, Inc. fell 12.2% to $32.21 after reporting a first-quarter revenue miss [3]

[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]

Core Viewpoint - Kyndryl (KD) is set to report its first-quarter fiscal 2026 results on August 4, with expectations of revenue growth driven by consulting services and cost-cutting initiatives [1][11]. Revenue Expectations - The Zacks Consensus Estimate for Kyndryl's revenues is $3.8 billion, reflecting a 1.6% year-over-year increase, primarily attributed to strong performance in Kyndryl Consult [2][11]. - The growth is supported by ongoing demand in security and resiliency, as well as capabilities in data discovery, data integrity, AI assessment, and governance programs [2]. Strategic Alliances and Competitive Edge - The expansion of Kyndryl's alliances with hyperscalers and leading technology providers, along with the advantages provided by AI-powered Kyndryl Bridge operating platforms, is expected to enhance revenue [3]. Earnings Projections - The consensus estimate for earnings is 37 cents per share, indicating a more than 100% increase from the same quarter last year, driven by strong margins and cost reductions from advanced delivery initiatives [4][11]. Earnings Prediction Model - Current analysis indicates that Kyndryl does not have a conclusive prediction for an earnings beat, with an Earnings ESP of -4.05% and a Zacks Rank of 2 (Buy) [5].

Core Insights - Kyndryl Holdings, Inc. (KD) and AppLovin (APP) are being compared for their value to investors in the Technology Services sector [1] - KD has a Zacks Rank of 2 (Buy) while APP has a Zacks Rank of 3 (Hold), indicating a more favorable earnings outlook for KD [3] Valuation Metrics - KD has a forward P/E ratio of 17.78, significantly lower than APP's forward P/E of 44.28 [5] - KD's PEG ratio is 0.71, while APP's PEG ratio is 2.21, suggesting that KD is expected to grow earnings at a more favorable rate relative to its price [5] - KD's P/B ratio is 6.9 compared to APP's P/B of 218.13, indicating that KD is more reasonably valued in terms of its book value [6] Investment Conclusion - Based on stronger estimate revision activity and more attractive valuation metrics, KD is considered the superior investment option for value investors at this time [7]

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].

Core Insights - Kyndryl has launched the Agentic AI Framework, which utilizes intelligent AI agents to enhance human teams and improve enterprise operations [1][4][5] - The framework is designed to self-organize, scale, and execute tasks securely across various IT environments, aiming to increase efficiency and innovation [1][4][7] Company Overview - Kyndryl is a leading provider of mission-critical enterprise technology services, operating in over 60 countries and managing complex information systems [9] - The company leverages its extensive experience from thousands of infrastructure deployments and generates over 12 million AI-driven insights monthly through Kyndryl Bridge [4][9] Framework Features - The Agentic AI Framework allows enterprises to adopt and scale AI solutions in on-premises, cloud, or hybrid IT settings, transforming business operations [4][5] - It incorporates advanced algorithms, self-learning capabilities, and secure AI agents that convert complex data into actionable insights [4][7] Market Positioning - Kyndryl is positioned to help organizations deploy AI confidently, with a focus on security and trust, utilizing industry-standard encryption and privacy principles [7] - The company aims to address the challenges faced by enterprise leaders in realizing the benefits of AI, as highlighted in its 2025 People Readiness Report [6] Customer Engagement - Various industries are exploring the Agentic AI Framework, including a national government aiming to enhance public services and a financial institution focusing on compliance and operational efficiency [5][6] - Kyndryl Consult experts will collaborate with customers to tailor the framework to their specific business needs [8]