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]

Financial Performance & Outlook - Kyndryl's Q2 2026 adjusted EBITDA reached $641 million, a year-over-year increase from $557 million in Q2 2025[43] - The adjusted EBITDA margin increased by 250 basis points, reaching 17.2% in Q2 2026 compared to 14.8% in Q2 2025[43] - Adjusted pretax income for Q2 2026 was $123 million, significantly up from $45 million in Q2 2025[43] - The company reaffirms its fiscal year 2026 outlook, projecting adjusted pretax income of at least $725 million, a year-over-year increase of at least 50%[51] - Kyndryl anticipates approximately 1% constant-currency revenue growth for fiscal year 2026[51] Growth Drivers - Kyndryl Consult revenue reached $3.4 billion (LTM Sept 2025), a 32% increase compared to $2.5 billion (LTM Sept 2024)[19] - Hyperscaler-related revenue increased by 94%, reaching $1.5 billion (LTM Sept 2025) compared to $0.8 billion (LTM Sept 2024)[19] - The company's signings reached $15.6 billion[19] Capital Allocation - The company increased its repurchase authorization by $400 million[17]

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 and has increased share buybacks [1] Financial Performance - Quarterly revenues were $3.721 billion, a 1% decline year over year, which slightly missed the expected $3.840 billion [2] - Sales fell 3.7% in constant currency, reflecting efforts to exit low-margin third-party content and longer sales cycles [3] - Adjusted EBITDA was $641 million, marking 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%, equating to approximately $15.20 billion, below the analyst consensus of $15.60 billion [8] - The company projects an adjusted EBITDA margin of around 18%, reflecting a year-over-year increase of approximately 130 basis points [8] - Kyndryl expects activity to strengthen in the second half of fiscal 2026, supported by a robust pipeline and positive discussions with customers [9] Long-term Goals - The company aims to more than double adjusted pretax income by fiscal year 2028, contingent on achieving sustainable mid-single-digit revenue growth [10]

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]

Core Insights - Kyndryl's second quarter performance indicates momentum in key growth areas such as Kyndryl Consult, partnerships with hyperscalers, and innovative services in AI, cloud, and security [1][2] Financial Performance - Kyndryl reported revenues of $3.7 billion for the second quarter, a decrease of 1% year-over-year and 3.7% in constant currency [2][6] - The company achieved pretax income of $98 million, a significant increase from a pretax loss of $5 million in the prior-year period [2][6] - Net income was $68 million, or $0.29 per diluted share, compared to a net loss of $43 million, or ($0.19) per diluted share, in the same quarter last year [2][6] - Adjusted pretax income rose to $123 million, up from $45 million year-over-year, reflecting contributions from Kyndryl's three-A initiatives [3][6] - Adjusted EBITDA increased by 15% year-over-year to $641 million [3][6] Strategic Initiatives - Kyndryl's signings for the trailing twelve months reached $15.6 billion, surpassing the previous twelve months' revenue of $15.0 billion [4][6] - The company is focused on expanding customer relationships and maintaining attractive margins, with a goal of generating over $1 billion in free cash flow by fiscal 2028 [4][6] - Kyndryl announced a $400 million increase in its share repurchase program, in addition to the previously authorized $300 million buyback [5][6] Market Outlook - Kyndryl reaffirms its fiscal 2026 outlook, expecting stronger second-half revenue driven by backlog contributions and growth in Kyndryl Consult and hyperscaler-related revenue [8][6] - The company generated $440 million in revenue from cloud hyperscaler alliances, marking a 65% year-over-year increase, and is on track to exceed its initial hyperscaler revenue target of $1.8 billion for fiscal 2026 [11][6] - Kyndryl Consult revenues grew by 28% year-over-year, with signings increasing by 11% over the last twelve months [11][6]

Group 1 - Kyndryl Holdings Inc. is recognized as a promising stock with significant upside potential following a new global partnership with VML, a WPP company, aimed at enhancing customer experiences through AI and modern infrastructure [1][3] - The partnership will integrate Kyndryl's services, including Kyndryl Consult and Kyndryl Vital, with VML's expertise in experience transformation, focusing on scalable AI-driven solutions [2][3] - Potential applications of this collaboration include utilizing AI for personalized banking in financial services and enhancing omnichannel commerce for retailers [3]

Core Insights - Kyndryl reported a significant earnings and revenue miss for Q1 FY26, with non-GAAP EPS at $0.37, missing the estimate of $0.83, and GAAP revenue flat at $3.74 billion, missing expectations of $3.92 billion by 4.6% [1][5] - Despite the shortfall, the company achieved a 16% year-over-year increase in adjusted EBITDA and improved profitability, with management reaffirming full-year guidance [1][13] Financial Performance - Non-GAAP EPS was $0.37, missing the estimate of $0.83, and showing a 184.6% increase from $0.13 in Q1 FY25 [2] - GAAP revenue was $3.74 billion, unchanged from the prior year, but below the consensus estimate of $3.92 billion [2] - Adjusted EBITDA reached $647 million, a 16.4% increase from $556 million in Q1 FY25, with adjusted EBITDA margin rising to 17.3% from 14.9% [2][6] - Free cash flow was negative $222 million, reflecting typical seasonal outflows, and higher than the prior year's outflow [2][9] Business Focus and Strategy - Kyndryl specializes in designing, managing, and modernizing IT systems for enterprise clients, focusing on cloud, data management, security, AI, and networking [3] - The company is expanding higher-value services, particularly in consulting and cloud partnerships, and developing AI tools for enterprise clients [4] - Kyndryl Consult saw a revenue increase of 30% year-over-year, with signings for consulting services up 36% [7] Market Trends and Product Development - The hyperscaler alliances, which integrate clients with major cloud providers, generated significant revenue, with cloud-related revenue soaring 86% to $400 million [7][11] - The launch of the Agentic AI Framework aims to help businesses adopt advanced AI solutions, enhancing Kyndryl's position in automation and AI-enabled IT operations [8][11] Future Outlook - Management reaffirmed guidance for FY2026, projecting at least $725 million in adjusted pre-tax income, an adjusted EBITDA margin of approximately 18%, and free cash flow of approximately $550 million [13] - The company emphasizes the importance of converting contract signings into recognized revenue, particularly in consulting and cloud alliance segments [14]

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].