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].

Financial Performance & Growth - Kyndryl's FY25 signings increased by 48% year-over-year in constant currency, reaching $182 billion[12, 15] - Adjusted pretax income for FY25 was $482 million, up $317 million year-over-year[12] - Adjusted free cash flow for FY25 was $446 million[12] - Kyndryl Consult revenue grew by 29% in constant currency, reaching $30 billion[25] - The company projects at least $725 million in adjusted pretax income for fiscal year 2026, an increase of at least $243 million year-over-year[51] Strategic Initiatives & Market Position - Kyndryl is positioned at the nexus of key secular trends including artificial intelligence, cloud migration, and cybersecurity risks[14] - The company is seeing demand across a range of geographies, verticals, and practices, with 55 large contract signings totaling $10 billion in fiscal year 2025[18] - Alliances generated $12 billion in hyperscaler revenue, more than double the prior year[12] - Advanced Delivery achieved $775 million in annualized savings in Q4, exceeding the FY25 target[12] - Accounts generated $900 million in annualized profit in Q4, exceeding the FY25 target[12]