Kyndryl (US:KD)2025-11-04 21:22Financial Performance - Kyndryl reported revenues of $3.7 billion for the second quarter of fiscal 2026, a decrease of 1% year-over-year and a 3.7% decline in constant currency[4]. - The company achieved a pretax income of $98 million, a year-over-year increase of $103 million from a pretax loss of $5 million in the prior-year period[4]. - Adjusted EBITDA was $641 million, reflecting a 15% year-over-year increase[6]. - Total revenue for the three months ended September 30, 2025, was $3,721 million, a decrease of 1% year-over-year[25]. - Adjusted EBITDA for the same period was $641 million, up from $557 million in 2024, reflecting a significant improvement[25]. - Net income for the six months ended September 30, 2025, was $124 million, compared to a loss of $32 million in 2024[27]. - The company reported a total adjusted EBITDA of $1,288 million for the six months ended September 30, 2025, an increase from $1,113 million in 2024[27]. - Adjusted earnings per share (EPS) for the three months ended September 30, 2025, was $0.38, compared to $0.01 in 2024[39]. Revenue Sources - Kyndryl generated $440 million in revenue from hyperscaler alliances, marking a 65% year-over-year increase, and is on track to exceed its fiscal 2026 target of $1.8 billion[9]. - Kyndryl Consult revenues grew by 28% year-over-year, with signings increasing by 11% over the last twelve months[9]. - Revenue from the United States decreased by 6% year-over-year to $899 million, while Japan's revenue decreased by 4% to $581 million[25]. Cash Flow and Capital Expenditures - Free cash flow for the quarter was $22 million, a decrease of $2 million compared to the prior-year period[4]. - Cash and equivalents at the end of September 2025 were $1,331 million, down from $1,786 million in March 2025[25]. - The company incurred capital expenditures of $272 million in the six months ended September 30, 2025, compared to $256 million in 2024[27]. - Net capital expenditures for Q3 2025 were $125 million, compared to $104 million in Q3 2024[41]. - Cash flows from operating activities for Q3 2025 were $147 million, compared to $149 million in Q3 2024[41]. - The company reported a net cash provided by operating activities of $22 million for the six months ended September 30, 2025, down from $101 million in 2024[27]. Shareholder Returns - The company announced an additional $400 million share repurchase authorization, complementing the previous $300 million program[8]. Future Outlook - Kyndryl reaffirms its fiscal 2026 outlook, expecting stronger second-half revenue driven by backlog and growth in Kyndryl Consult and hyperscaler-related revenue[11]. - The projected pretax margin associated with recent signings was in the high-single-digit range, indicating strong profit potential in service contracts[9]. Signings and Contracts - Signings for Q3 2025 were $2.8 billion, representing a 49% decrease compared to Q3 2024[41]. - Signings for the six months ended September 30, 2025 decreased by 31% to $5.6 billion compared to the same period in 2024[41]. - Signings for the twelve months ended September 30, 2025 decreased by 3% to $15.6 billion compared to the previous twelve months[41]. - The largest signing in the company's history occurred in Q3 2024, amounting to $1.8 billion[41]. Litigation and Workforce Adjustments - Significant litigation payments in Q3 2024 amounted to $6 million[41]. - Workforce rebalancing payments related to prior charges were $4 million in Q3 2024[41]. AI and Technology Development - Kyndryl is expanding its AI capabilities with new technology hubs and an AI Innovation Lab, with a quarter of its signings already containing AI-related content[9].