Kyndryl Launches Intelligent Recovery Service to Enhance Cyber Resilience and Compliance [Accessibility Statement] Skip NavigationNew service provides faster recovery, real-time visibility and proactive monitoring to enhance customer business continuity and regulatory complianceNEW YORK, Feb. 12, 2026 /PRNewswire/ -- [Kyndryl](NYSE: KD), a leading provider of mission-critical enterprise technology services, today launched Kyndryl Intelligent Recovery Service (KIRS), a cloud-based solution that helps organiz ...

Financial Data and Key Metrics Changes - The company reported revenue of $3.9 billion for the third quarter, reflecting a 3% increase year-over-year on a reported basis, unchanged in constant currency [15][16] - Adjusted EBITDA decreased by 1% year-over-year to $696 million, while Adjusted Pre-Tax Income grew by 5% year-over-year to $168 million [16][18] - Free cash flow generated in the third quarter was $217 million, with a net CapEx of $210 million [18][19] Business Line Data and Key Metrics Changes - Kyndryl Consult experienced a strong performance with a 20% year-over-year growth in constant currency, now representing 25% of total revenue [15][16] - Hyperscaler-related revenue reached $500 million in the third quarter, marking a 58% increase year-over-year, exceeding initial growth expectations [17] - The company signed contracts totaling $3.9 billion in the quarter, with a trailing 12-month revenue book-to-bill ratio remaining above 1.0 [5][16] Market Data and Key Metrics Changes - The company noted a slowdown in attrition rates, particularly in strategic markets and the UK, which has led to increased local hiring costs [31][32] - The evolving partnership with IBM has resulted in a significant reduction in annualized spend from nearly $4 billion to approximately $2 billion, impacting revenue growth [9][58] Company Strategy and Development Direction - The company is focused on expanding its capabilities in AI and private cloud services, responding to increased demand driven by data sovereignty and security requirements [12][66] - The strategic direction emphasizes the importance of long-term customer relationships and adapting to changing market dynamics [13][66] - The company aims to achieve fiscal 2028 targets, projecting approximately $1.1 billion in Adjusted Pre-Tax Income and over $1 billion in adjusted free cash flow [14][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that longer sales cycles and evolving customer consumption models are impacting revenue expectations [24][28] - The company remains confident in its growth strategy despite current challenges, emphasizing the importance of adapting to industry disruptions caused by AI and regulatory changes [7][39] - Management reiterated that they do not expect a restatement of financial statements despite ongoing SEC reviews [25][36] Other Important Information - The company has repurchased 3.7 million shares in the quarter, representing 1.6% of outstanding shares, as part of its capital allocation strategy [18][19] - The financial position remains strong with a cash balance of $1.35 billion and a net leverage ratio of 0.7x Adjusted EBITDA [20][21] Q&A Session Summary Question: Outlook and Revision Factors - Analysts inquired about the reasons behind the revised outlook, focusing on sales cycle delays and the evolving IBM partnership [27][28] - Management explained that the sales cycles have lengthened due to market dynamics and regulatory discussions, impacting growth expectations [28][29] Question: Strategic Market Changes - Questions were raised regarding changes in strategic markets, particularly in the UK, and the associated costs and benefits [30][31] - Management indicated that investments in local markets are necessary but may take time to yield results [31][32] Question: Free Cash Flow and Working Capital - Analysts sought clarification on the factors affecting free cash flow projections, particularly in relation to pre-tax income revisions [49][50] - Management confirmed that the primary driver of the change in free cash flow guidance is linked to the revision in pre-tax income [50] Question: Confidence in Fiscal 2028 Targets - Questions were posed about the building blocks supporting confidence in achieving fiscal 2028 targets despite current shortfalls [56][57] - Management highlighted the importance of cash flow growth, profitability improvements, and the shift towards higher-margin contracts as key factors [58][59]

Financial Data and Key Metrics Changes - The company reported revenue of $3.9 billion for the third quarter, reflecting a 3% increase year-over-year on a reported basis, unchanged in constant currency [15] - Adjusted EBITDA decreased by 1% year-over-year to $696 million, while Adjusted Pre-Tax Income grew by 5% year-over-year to $168 million [16] - Free cash flow generated in the third quarter was $217 million, with a net CapEx of $210 million [18] Business Line Data and Key Metrics Changes - Kyndryl Consult experienced a strong performance with a 20% year-over-year growth in constant currency, now representing 25% of total revenue [15][16] - Hyperscaler-related revenue reached $500 million in the third quarter, marking a 58% increase year-over-year [17] - Signings for the quarter totaled $3.9 billion, with a trailing 12-month revenue book-to-bill ratio remaining above 1.0x [5][15] Market Data and Key Metrics Changes - The company noted a slowdown in attrition rates, which has led to higher labor costs in the near term [7] - The evolving partnership with IBM has resulted in a significant reduction in annualized spend from nearly $4 billion to approximately $2 billion [9] - The company is addressing market dynamics such as data sovereignty and AI, which are impacting customer decision-making processes [39] Company Strategy and Development Direction - The company is focused on expanding its capabilities in AI and private cloud services, responding to increased demand driven by industry trends [12][66] - The strategic partnership with IBM is evolving, with efforts to enhance the value proposition for customers [8][10] - The company aims to achieve fiscal 2028 targets, with a focus on margin expansion and profitability through high-value service offerings [13][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that longer sales cycles and evolving customer consumption models are impacting revenue growth expectations [24] - The company remains confident in its growth strategy despite recent challenges, emphasizing the importance of adapting to market dynamics [7][13] - Management expects to generate approximately $800 million in free cash flow over fiscal 2025 and 2026 combined [14][23] Other Important Information - The company disclosed a delay in filing its quarterly report due to an ongoing review of cash management practices by the SEC, but does not expect a restatement of financial statements [25] - The company has repurchased 3.7 million shares in the quarter, representing 1.6% of outstanding shares, as part of its capital allocation strategy [18][19] Q&A Session Summary Question: Outlook and Revision Factors - Analysts inquired about the reasons behind the revised outlook, focusing on longer sales cycles and the evolving IBM partnership [27][28] - Management explained that the sales cycle extension affected multiple business areas, including Consult and hyperscaler services [28][29] Question: Strategic Markets and UK Operations - Questions were raised regarding changes in Strategic Markets and the UK, with management indicating that local investments are more expensive and adjustments will take time [30][31] Question: Impact of Review on Forward Commentary - Analysts asked about the impact of the SEC review on future guidance, to which management reiterated confidence in achieving fiscal 2028 goals without expecting a restatement [36] Question: Sales Cycle Length and Deal Timelines - Analysts sought clarification on the timeframe for closing deals affected by extended sales cycles, with management indicating that many discussions are linked to customer renewals and should stabilize within a couple of quarters [61][63] Question: Free Cash Flow and Working Capital - Questions were raised about the decrease in free cash flow guidance, attributed primarily to changes in pre-tax income [49][50] Question: Confidence in Fiscal 2028 Targets - Analysts asked about the building blocks supporting confidence in fiscal 2028 targets, with management highlighting improved cash flow and profitability driven by high-margin backlog [56][58]

Financial Data and Key Metrics Changes - Revenue for the third quarter totaled $3.9 billion, representing a 3% increase year-over-year on a reported basis, unchanged in constant currency [16] - Adjusted EBITDA decreased by 1% year-over-year to $696 million, while Adjusted Pre-Tax Income grew by 5% year-over-year to $168 million [17] - Free cash flow generated in the third quarter was $217 million, with a net CapEx of $210 million [19] Business Line Data and Key Metrics Changes - Kyndryl Consult experienced a strong performance with a 20% year-over-year growth in constant currency, now representing 25% of total revenue [16][17] - Hyperscaler-related revenue reached $500 million in the third quarter, a 58% increase year-over-year, putting the company on track to exceed 50% growth for the year [18] - Signings for the quarter totaled $3.9 billion, with a trailing 12-month revenue book-to-bill ratio remaining above 1.0 [5][17] Market Data and Key Metrics Changes - The company noted a slowdown in strategic markets, particularly in the UK, which contributed to longer sales cycles [16][32] - The evolving partnership with IBM has impacted revenue growth, with a noted decline in IBM-related spending from nearly $4 billion to approximately $2 billion [10][53] Company Strategy and Development Direction - The company is focused on expanding its capabilities in AI and private cloud services, responding to increased demand driven by data sovereignty and security requirements [13][61] - Kyndryl aims to drive margin expansion through its Three-A's initiative and is committed to maintaining strong liquidity while investing in business growth [21][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that longer sales cycles and evolving customer consumption models are affecting revenue expectations, particularly in the context of AI and data sovereignty [5][24] - The company remains confident in achieving its fiscal 2028 targets, despite the challenges faced in the current fiscal year [35][53] Other Important Information - The filing of the quarterly report will be delayed due to an ongoing review of cash management practices by the SEC, but no restatement of financial statements is expected [25] - The company has repurchased 3.7 million shares in the quarter, representing 1.6% of outstanding shares, as part of its capital allocation strategy [19][20] Q&A Session Summary Question: Outlook and Revision Factors - The management discussed the unexpected lengthening of sales cycles and the evolving IBM partnership as primary factors affecting the revised outlook [27][30] Question: Strategic Market Changes - Management indicated that investments in strategic markets, particularly in the UK, are being addressed, although changes may take time to implement [31][32] Question: Impact of Review on Forward Commentary - The company cannot comment on the ongoing SEC review until it is complete, but remains confident in its fiscal 2028 goals [35] Question: Sales Cycle Elongation - Management noted that the elongation of sales cycles is not expected to be multi-year and is linked to customer renewals [56] Question: Free Cash Flow Changes - The decrease in expected free cash flow is primarily attributed to changes in pre-tax income, with working capital also playing a role [46][47] Question: Confidence in Fiscal 2028 Targets - Management highlighted the importance of cash flow growth and the shift towards higher-margin contracts as key drivers for achieving fiscal 2028 targets [51][53]

Third Quarter 2026 Earnings February 9, 2026 Disclaimers Forward-looking statements This presentation and the related conference call contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements often contain words such as "aim," "anticipate," "believe," "could," "estimate," "expect," "forecast," "intend," "may," "objectives," "opportunity," "plan," "position," "predict," "project," "should," "seek," "target," "will," "would ...

Core Insights - Kyndryl reported revenues of $3.9 billion for the third quarter of fiscal year 2026, reflecting a 3% year-over-year increase on a reported basis, while remaining unchanged in constant currency [3][6] - The company experienced a decline in pretax income to $91 million from $258 million in the prior-year period, primarily due to a significant transaction-related benefit recorded last year [3][4] - Kyndryl's net income was $57 million, or $0.25 per diluted share, compared to $215 million, or $0.89 per diluted share, in the same quarter last year [3][4] Financial Performance - Adjusted pretax income increased to $168 million, up $8 million from $160 million in the prior-year period, driven by contributions from Kyndryl's three-A initiatives [4][10] - Adjusted net income was $122 million, or $0.52 per diluted share, compared to $124 million, or $0.51 per diluted share, in the prior-year period [4][10] - Cash flow from operations was $427 million, significantly higher than $260 million in the prior-year period [3][21] Business Segments and Growth - Kyndryl Consult achieved double-digit revenue growth of 24% year-over-year in the third quarter, with total revenues of $3.6 billion over the last twelve months [7][10] - The company signed eleven customer contracts exceeding $50 million each during the third quarter, contributing to total signings of $15.4 billion for the trailing twelve months [4][10] - Revenue from hyperscaler alliances reached $500 million, marking a 58% year-over-year increase, and is expected to exceed the initial target of $1.8 billion for fiscal 2026 [7][10] Strategic Initiatives - Kyndryl continues to expand its AI-related capabilities, with a quarter of its signings now including AI-related content [10] - The company announced the acquisition of Solvinity Group, B.V., a provider of secure managed cloud platforms and services, expected to close in the first half of calendar year 2026 [10] - Leadership changes were made, with Harsh Chugh appointed as Interim Chief Financial Officer and other key positions filled [7][10] Fiscal Year 2026 Outlook - Kyndryl provided an outlook for fiscal year 2026, projecting adjusted pretax income of $575 to $600 million and free cash flow of $325 to $375 million [10][10] - The company anticipates a constant-currency revenue decline of 2% to 3% for the fiscal year [10]

Core Insights - Kyndryl has launched new AI-powered services that enhance managed services delivery for IBM Z customers, combining mainframe expertise with agentic AI and hybrid IT capabilities to improve application development and operational agility [1][2][3] AI-Powered Services - The new agentic AI mainframe services are designed to help IBM z/OS customers adopt innovative technologies, facilitating faster decision-making and simplifying complex processes in application and infrastructure management [2][3] - Kyndryl's AI services integrate with the Kyndryl Bridge platform, providing intelligent automation, predictive analytics, and insights across mainframe infrastructure and applications [4][5] Collaboration and Expertise - Kyndryl collaborates with IBM to enhance AI capabilities in core business systems, enabling clients to leverage advanced AI on mainframes for improved decision-making and operational agility [5][6] - The company utilizes its intellectual property and expertise in mainframe transformation, along with technologies from cloud hyperscalers, to drive innovation for customers [6][7] Market Insights - According to Kyndryl's 2025 State of Mainframe Modernization Survey, 88% of respondents have implemented or plan to implement AI in their mainframe environments, with expected benefits including increased business agility (37%), faster operational actions (32%), and cost savings (31%) [8][9] - The survey predicts that AI will generate $12.7 billion in cost savings and $19.5 billion in increased revenues over the next three years, with key use cases in performance enhancement, fraud detection, and security [9]

Core Insights - Kyndryl has renewed its partnership with Vodafone Idea (Vi) for three years, focusing on transforming Vi's IT operations and enhancing cybersecurity measures [1][3] - The collaboration aims to implement a next-generation IT operations delivery model that emphasizes automation and data-driven insights, leading to improved service delivery and operational efficiency [2][4] Company Collaboration - Kyndryl will develop a cyber resilience framework for Vi, which includes security governance, zero-touch services, data protection, and incident recovery services [1][3] - The partnership will leverage Kyndryl Bridge, an AI-powered integration platform, which has already deployed over 1,000 automations at Vi, reducing delivery event noise by 15% [2][3] Strategic Objectives - The collaboration is designed to align Vi's IT strategy with its business objectives, maximizing returns on IT investments and accelerating the time-to-market for new digital services [4] - Kyndryl's expertise in managing mission-critical systems has been recognized by Vi, highlighting the importance of this partnership in driving business agility and operational efficiencies [3]

Core Insights - Kyndryl has been recognized as a Leader in the 2025 Gartner Magic Quadrant for Data Center Outsourcing Services, highlighting its strong execution capabilities and innovative solutions [1][2][5] - The report evaluates 17 global providers based on their Ability to Execute and Completeness of Vision, with Kyndryl demonstrating significant strengths in both areas [1][4] Company Capabilities - Kyndryl's AI-powered solutions, particularly through Kyndryl Bridge, are designed to deliver real-time insights and drive customer outcomes in complex IT environments [2][3] - The company emphasizes a shift from traditional infrastructure management to AI-led capability orchestration, which is seen as a critical evolution in data center services [3] - Kyndryl offers a comprehensive suite of services that includes deployment, consolidation, optimization, and managed services for various IT infrastructures, including data centers and private clouds [3][4] Market Position - Gartner describes Leaders as those who not only perform skillfully but also shape the market with a clear vision of its direction, which includes digital transformation and intelligent automation [4] - Kyndryl's strategic approach combines advisory-led delivery with managed services, aligning IT solutions with customer business priorities [8] Industry Context - The data center outsourcing services market is evolving rapidly, driven by increasing demands for AI capabilities and digital transformation [3] - Kyndryl's expertise in IBM Z and Power systems positions it well to support customers in modernizing and optimizing their core systems [8]

Financial Data and Key Metrics Changes - Revenue for the second quarter totaled $3.7 billion, down 1% from the prior year quarter on a reported basis and 3.7% in constant currency [22] - Adjusted EBITDA increased 15% year over year to $641 million, with an Adjusted EBITDA margin of 17.2%, up 250 basis points year over year [23] - Adjusted Pre-Tax Income grew 171% to $123 million, with an Adjusted Pre-Tax margin increasing by 210 basis points year over year [23] - Free cash flow generated in the second quarter was $22 million, with a cash balance of $1.3 billion at the end of the quarter [26][31] Business Line Data and Key Metrics Changes - Kyndryl Consult revenues grew 32% in constant currency over the last 12 months, now running at an annual pace of $3.4 billion [10] - Hyperscaler-related revenues doubled since last year, tracking above the initial $1.8 billion fiscal 2026 target [10] - The last 12 months signings total was $15.6 billion, giving a book to bill ratio above 1 [22] Market Data and Key Metrics Changes - Strongest geographies for growth included Canada, Spain, India, and Latin America [10] - Fastest growing practices were in applications, data and AI, and digital workplace [22] Company Strategy and Development Direction - The company is focused on margin expansion and has removed low-margin hardware and software content from customer relationships, which is expected to lead to positive constant currency revenue growth [5][9] - The strategy includes expanding Kyndryl Consult capabilities and alliances, driving scope expansion with existing customers, and adding new logos [8][13] - The company aims to achieve fiscal year 2028 objectives, including over $1 billion in adjusted free cash flow and more than $1.2 billion in adjusted pre-tax income [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue growth in the second half of the year, supported by a record pipeline and committed backlog [6][34] - The demand for IT modernization, AI, and cybersecurity is driving customer demand for Kyndryl's services [13][33] - Management noted that customer decision cycles remain normal, with a cautious approach due to the mission-critical nature of services [58] Other Important Information - The company announced a $400 million increase in its share repurchase program, reflecting confidence in its earnings trajectory and cash flow growth [26] - The company is pursuing tuck-in acquisitions, with a recent agreement to acquire a midsize cloud services provider in Europe [20][54] Q&A Session Summary Question: Capital allocation opportunities for the company - Management highlighted the balance between investing in the business, accelerating capabilities, and returning capital to shareholders through share repurchases [40][41] Question: AI's impact on competitive position - About 25% of signings have AI-related content, with a focus on data architecture and migration services to support customer AI models [42][46] Question: Insights on customer decision cycles - Management noted that decision-making remains cautious but normal, especially when adding new scope or customers [58] Question: Revenue expectations and risks - Management indicated that the second half has a stronger contracted backlog and investments in consult resources will drive acceleration [66] Question: Strong verticals and examples of expanded scope - Strongest verticals include retail, travel, and technology, with examples of expanding services into new geographies and additional cybersecurity content [70][72]