Kyndryl Cloud Soars In Q2, Expands Global AI Footprint, Raises Buyback By $400 Million

Core Insights - Kyndryl Holdings, Inc. reported a second-quarter earnings beat with adjusted earnings per share of 38 cents, surpassing the analyst consensus estimate of 36 cents [1] - The company is expanding its AI services in multiple countries, including the U.K., France, Singapore, and India, while also increasing share buybacks [1][5] Financial Performance - Quarterly revenues were $3.721 billion, a 1% decline year over year, which slightly missed the analyst expectations of $3.840 billion [2] - Sales fell 3.7% in constant currency, reflecting efforts to exit low-margin third-party content and longer sales cycles impacting year-over-year comparisons [2][3] - Adjusted EBITDA was $641 million, representing a 15% year-over-year increase [5] Segment Performance - Hyperscaler cloud revenue surged 65% to $440 million, positioning the company to meet its $1.8 billion target for 2026 [4] - Kyndryl Consult revenues grew 28% year-over-year, with signings increasing by 11% over the past twelve months [4] - The book-to-bill ratio remained above 1 for the fifth consecutive quarter, with AI-related signings accounting for about 25% of last quarter's total [4] AI Expansion - Kyndryl is enhancing its AI capabilities by establishing technology hubs in England, France, and Singapore, and launching an AI Innovation Lab in India [5] Share Buyback and Cash Position - The company repurchased 2.9 million shares for $89 million in the second quarter and has approved an additional $400 million for share buybacks [6] - Kyndryl ended the quarter with cash and equivalents of $1.33 billion, down from $1.786 billion as of March 31, 2025 [6] Future Outlook - For fiscal year 2026, Kyndryl anticipates constant-currency revenue growth of 1%, translating to approximately $15.20 billion, compared to the analyst consensus of $15.60 billion [8] - The firm projects an adjusted EBITDA margin of around 18%, reflecting a year-over-year increase of approximately 130 basis points [9] - The CFO stated that the company is on track to meet its fiscal 2028 targets, including generating over $1 billion in free cash flow [7]