KYNDRYL REPORTS FIRST QUARTER FISCAL 2027 RESULTS
Rhea-AI Summary
Kyndryl (NYSE: KD) reported first-quarter fiscal 2027 revenues of $3.6 billion, down 3% year-over-year on both reported and constant-currency bases, for the quarter ended June 30, 2026. The company posted a pretax loss of $69 million and a net loss of $55 million ($0.25 per diluted share), versus pretax income of $92 million and net income of $56 million a year earlier. Adjusted EBITDA was $512 million, with an adjusted pretax loss of $37 million and adjusted net loss of $26 million ($0.12 per diluted share).
Kyndryl incurred $152 million of workforce rebalancing charges in the quarter and expects about $200 million for fiscal 2027, targeting annualized operating expense savings of $400–$500 million in fiscal 2028. Cash used in operations was $310 million, and free cash flow was a use of $401 million. The company ended the quarter with $2.1 billion in cash and equivalents and $4.1 billion of debt. Trailing-twelve-month signings were $14.2 billion, including $3.9 billion in the quarter; hyperscaler-related revenue exceeded $530 million, up 34% year-over-year, and Kyndryl Consult revenue grew 10% year-over-year. Kyndryl repurchased 5.0 million shares for $64 million in the quarter and reaffirmed fiscal 2027 guidance for adjusted pretax income of $600–$700 million, free cash flow of $400–$500 million, and constant-currency revenue ranging from flat to down 2%.
Positive
- Trailing-twelve-month signings $14.2 billion, including $3.9 billion in Q1
- Kyndryl Consult revenue up 10% year-over-year in the quarter
- Hyperscaler-related revenue > $530 million, up 34% year-over-year
- Share repurchases of 5.0 million shares for $64 million in Q1
- Cumulative buybacks 19.3 million shares for $462 million since November 2024 (~8% of shares)
- Reaffirmed fiscal 2027 guidance: adjusted pretax income $600–$700 million, FCF $400–$500 million
- Workforce rebalancing expected to yield $400–$500 million annualized operating expense savings in fiscal 2028
Negative
- Quarterly revenue $3.618 billion, down 3% year-over-year
- Swing to GAAP net loss of $55 million from prior-year net income of $56 million
- Adjusted EBITDA declined to $512 million from $647 million year-over-year
- Adjusted net result moved to $26 million loss from $90 million adjusted net income
- Cash used in operations $310 million versus $124 million used in prior-year quarter
- Free cash flow use widened to $401 million from $222 million
- Workforce rebalancing charges of $152 million recorded in Q1 fiscal 2027
Key Figures
Historical Context
| Date | Event | Sentiment | 24h Move | Catalyst |
|---|---|---|---|---|
| Jul 22 | Community services initiative | Positive | -4.4% | Kyndryl supported Arizona counties with a community re-entry services platform. |
| Jul 15 | Workplace recognition | Positive | +0.9% | Kyndryl received workplace certifications and recognition across multiple countries. |
| Jul 14 | Strategic partnership | Positive | -5.8% | Kyndryl and Aptiv announced collaboration involving Wind River technology services. |
| Jul 06 | Leadership appointments | Neutral | +0.2% | Kyndryl named an incoming CFO and general counsel ahead of quarterly reporting. |
| Jul 01 | Earnings release scheduling | Neutral | +6.1% | Kyndryl scheduled its fiscal first-quarter results release for August 5, 2026. |
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
Recent news reactions were mixed, with positive announcements producing both aligned and divergent price responses.
Key Terms
adjusted ebitda financial
constant-currency revenues financial
free cash flow financial
agentic ai technical
AI-generated analysis. How Rhea-AI works. Not financial advice.
- Revenues for the quarter ended June 30, 2026 total
$3.6 billion $69 million $55 - Adjusted EBITDA is
$512 million $37 million $26 - Actions to streamline operations resulted in
$152 million - Company reaffirms fiscal 2027 outlook for revenue, earnings and free cash flow
"Our first quarter results reflected strong momentum in signings, supported by strength in Kyndryl Consult and hyperscalers, with an increasing demand for AI-led modernization solutions," said Chairman and Chief Executive Officer Martin Schroeter. "We're encouraged by the progress we're making to improve business fundamentals and remain focused on driving consistent execution and delivering our fiscal 2027 and multi-year objectives."
Results for the Fiscal First Quarter Ended June 30, 2026
For the first quarter, Kyndryl reported revenues of
Adjusted pretax loss was
Highlights
- Signings – In the trailing twelve months signings were
$14.2 billion $3.9 billion the United States segment. Kyndryl signed 40 customer contracts exceeding$50 million - Kyndryl Consult revenue – In the first quarter, Kyndryl Consult revenues grew
10% year-over-year. Over the last twelve months, Kyndryl Consult revenues were$3.6 billion 14% increase year-over-year. Kyndryl Consult signings were$4.4 billion 8% increase year-over-year. - Hyperscaler-related revenue – In the first quarter, hyperscaler-related revenues of more than
$530 million 34% year-over-year, exiting the quarter at an annualized revenue run-rate of more than$2.1 billion - AI-led modernization – During the quarter, Kyndryl expanded its AI capabilities to support AI-led modernization with the launch of Kyndryl AI Orchestration for Business and a patented agentic AI capability in Kyndryl Bridge. Kyndryl also released its People Readiness Report, which found that
57% of enterprises have embedded AI in core business processes, but only32% have achieved their AI goals, underscoring the opportunity to help enterprises realize greater value from their AI investments. - Actions to streamline operations – In the first quarter, Kyndryl incurred
$152 million $200 million $400 $500 million - Share repurchases – In the first quarter, the Company repurchased 5.0 million shares of its common stock at a cost of
$64 million $462 million 8% of its shares outstanding.
Reaffirms Fiscal Year 2027 Outlook
Kyndryl reaffirms its outlook for its fiscal 2027, which runs from April 2026 to March 2027:
- Adjusted pretax income of
$600 $700 million - Consistent with our definition of adjusted pretax income since fiscal 2025, this includes workforce rebalancing charges
- Free cash flow of
$400 $500 million - Constant-currency revenue flat to down
2%
See "Non-GAAP Metric Definitions and Reconciliations."
Earnings Webcast
Kyndryl's earnings call for the first fiscal quarter is scheduled to begin at 8:30 a.m. ET on August 5, 2026. The live webcast can be accessed by visiting investors.kyndryl.com on Kyndryl's investor relations website. A slide presentation will be made available on Kyndryl's investor relations website before the call on August 5, 2026. Following the event, a replay will be available via webcast for twelve months at investors.kyndryl.com.
About Kyndryl
Kyndryl (NYSE: KD) is a leading provider of mission-critical enterprise technology services, offering advisory, implementation and managed service capabilities to thousands of customers in more than 60 countries. As the world's largest IT infrastructure services provider, the Company designs, builds, manages and modernizes the complex information systems that the world depends on every day. For more information, visit www.kyndryl.com.
Forward-Looking and Cautionary Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements concerning the Company's plans, objectives, goals, beliefs, business strategies, future events, business condition, results of operations, financial position, business outlook and business trends and other non-historical statements, including without limitation the outlook and financial objectives in this press release (which does not assume any future acquisitions or divestitures), are forward-looking statements. 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" and other similar words or expressions or the negative thereof or other variations thereon. Forward-looking statements are based on the Company's current assumptions and beliefs regarding future business and financial performance.
The Company's actual business, financial condition or results of operations may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties which include, among others: failure to attract new customers, retain existing customers or sell services to customers; failure to meet growth and productivity objectives and maintain our capital allocation strategy; competition; impacts of relationships with critical suppliers and partners; failure to address and adapt to technological developments and trends; inability to attract and retain key personnel and other skilled employees; impact of economic, geopolitical, public health and other conditions; damage to the Company's reputation and impact on the Company and our stock price resulting from negative publicity; inability to accurately estimate the cost of services and the timeline for completion of contracts; service delivery issues; the Company's ability to successfully manage acquisitions and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities and higher debt levels; the Company's ability to refinance maturing debt on favorable terms in a timely manner, or at all, and risks related to the Company's access to capital and credit markets; failure of the Company's intellectual property rights to prevent competitive offerings and the failure of the Company to obtain, retain and extend necessary licenses; the impairment of our goodwill or long-lived assets; risks relating to cybersecurity, data governance and privacy; risks relating to non-compliance with legal and regulatory requirements and changes in laws, regulations and policies in the
Additional risks and uncertainties include, among others, those risks and uncertainties described in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026, as such factors may be updated from time to time in the Company's subsequent filings with the Securities and Exchange Commission. Any forward-looking statement in this press release speaks only as of the date on which it is made. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In this release, certain amounts may not add due to the use of rounded numbers; percentages presented are calculated based on the underlying amounts. Forecasted amounts are based on currency exchange rates as of July 2026.
Non-GAAP Financial Measures
In an effort to provide investors with additional information regarding its results, the Company has provided certain metrics that are not calculated based on generally accepted accounting principles (GAAP), such as constant-currency results, adjusted EBITDA, adjusted pretax income (loss), adjusted net income (loss), adjusted EPS, adjusted EBITDA margin, adjusted pretax margin, adjusted net margin, net debt and free cash flow. Such non-GAAP metrics are intended to supplement GAAP metrics, but not to replace them. The Company's non-GAAP metrics may not be comparable to similarly titled metrics used by other companies. Definitions and additional information about our calculation of non-GAAP metrics and reconciliations of non-GAAP metrics for historical periods to GAAP metrics are included in the tables in this release.
A reconciliation of forward-looking non-GAAP financial information is not included in this release because the Company is unable to predict with reasonable certainty some individual components of such reconciliation without unreasonable effort. These items are uncertain, depend on various factors and could have a material impact on future results computed in accordance with GAAP.
Investor Contact:
investors@kyndryl.com
Media Contact:
press@kyndryl.com
Table 1 | ||||||||||||
CONSOLIDATED INCOME STATEMENT | ||||||||||||
(in millions, except per share amounts) | ||||||||||||
Three Months Ended June 30, | ||||||||||||
2026 | 2025 | |||||||||||
Revenues | $ | 3,618 | $ | 3,743 | ||||||||
Cost of services | $ | 2,842 | $ | 2,947 | ||||||||
Selling, general and administrative expenses | 668 | 646 | ||||||||||
Workforce rebalancing charges | 152 | 25 | ||||||||||
Transaction-related costs (benefits) | (38) | — | ||||||||||
Impairment expense | 38 | — | ||||||||||
Interest expense | 34 | 19 | ||||||||||
Other expense (income) | (10) | 13 | ||||||||||
Total costs and expenses | $ | 3,687 | $ | 3,651 | ||||||||
Income (loss) before income taxes | $ | (69) | $ | 92 | ||||||||
Provision for income taxes | (14) | 36 | ||||||||||
Net income (loss) | $ | (55) | $ | 56 | ||||||||
Earnings (loss) per share data | ||||||||||||
Basic earnings (loss) per share | $ | (0.25) | $ | 0.24 | ||||||||
Diluted earnings (loss) per share | (0.25) | 0.23 | ||||||||||
Weighted-average basic shares outstanding | 220.6 | 230.2 | ||||||||||
Weighted-average diluted shares outstanding | 220.6 | 239.1 | ||||||||||
Table 2 | ||||||||||||||||||||
SEGMENT RESULTS | ||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Three Months Ended June 30, | Year-over-Year Growth | |||||||||||||||||||
As | Constant | |||||||||||||||||||
Segment Results | 2026 | 2025 | Reported | Currency | ||||||||||||||||
Revenue | ||||||||||||||||||||
$ | 954 | $ | 911 | 5 % | 5 % | |||||||||||||||
534 | 578 | (8 %) | 2 % | |||||||||||||||||
Principal Markets | 1,262 | 1,356 | (7 %) | (8 %) | ||||||||||||||||
Strategic Markets | 868 | 898 | (3 %) | (8 %) | ||||||||||||||||
Total revenue | $ | 3,618 | $ | 3,743 | (3 %) | (3 %) | ||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||
$ | 220 | $ | 196 | |||||||||||||||||
109 | 115 | |||||||||||||||||||
Principal Markets | 151 | 197 | ||||||||||||||||||
Strategic Markets | 62 | 163 | ||||||||||||||||||
Corporate and other | (30) | (26) | ||||||||||||||||||
Total adjusted EBITDA | $ | 512 | $ | 647 | ||||||||||||||||
June 30, | March 31, | |||||||||||||||||||
Balance Sheet Data | 2026 | 2026 | ||||||||||||||||||
Cash and equivalents | $ | 2,104 | $ | 2,623 | ||||||||||||||||
Debt (short-term and long-term) | 4,070 | 4,089 | ||||||||||||||||||
Table 3 | |||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||||||
(dollars in millions) | |||||||||||
Three Months Ended June 30, | |||||||||||
2026 | 2025 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | (55) | $ | 56 | |||||||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Depreciation of property, equipment and capitalized software | 183 | 191 | |||||||||
Depreciation of right-of-use assets | 68 | 73 | |||||||||
Amortization of transition costs and prepaid software | 331 | 308 | |||||||||
Amortization of capitalized contract costs | 94 | 106 | |||||||||
Amortization of acquisition-related intangible assets | 6 | 7 | |||||||||
Stock-based compensation | 21 | 24 | |||||||||
Deferred taxes | (50) | (10) | |||||||||
Net (gain) loss on asset sales and other | 6 | — | |||||||||
Change in operating assets and liabilities: | |||||||||||
Right-of-use assets and liabilities (excluding depreciation) | (81) | (88) | |||||||||
Workforce rebalancing liabilities | 132 | 3 | |||||||||
Current accounts receivable | 18 | 114 | |||||||||
Lease and other receivables | (51) | (67) | |||||||||
Accounts payable | (320) | (269) | |||||||||
Taxes | (32) | 27 | |||||||||
Deferred transition costs and prepaid software (excluding amortization)1 | (246) | (1,259) | |||||||||
Capitalized contract costs (excluding amortization) | (108) | (122) | |||||||||
Other assets and other liabilities1 | (228) | 781 | |||||||||
Net cash provided by (used in) operating activities | $ | (310) | $ | (124) | |||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | $ | (149) | $ | (143) | |||||||
Proceeds from disposition of property and equipment | 58 | 45 | |||||||||
Acquisitions and divestitures, net of cash acquired | 31 | 1 | |||||||||
Other investing activities, net | 11 | 22 | |||||||||
Net cash used in investing activities | $ | (49) | $ | (74) | |||||||
Cash flows from financing activities: | |||||||||||
Debt repayments | $ | (52) | $ | (36) | |||||||
Common stock repurchases | (64) | (62) | |||||||||
Common stock repurchases for tax withholdings | (13) | (67) | |||||||||
Other financing activities, net | (23) | (5) | |||||||||
Net cash used in financing activities | $ | (152) | $ | (170) | |||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | $ | (4) | $ | 46 | |||||||
Net change in cash, cash equivalents and restricted cash | $ | (515) | $ | (323) | |||||||
Cash, cash equivalents and restricted cash at beginning of period | $ | 2,626 | $ | 1,789 | |||||||
Cash, cash equivalents and restricted cash at end of period | $ | 2,111 | $ | 1,466 | |||||||
Supplemental data | |||||||||||
Income taxes paid, net of refunds received | $ | 76 | $ | 67 | |||||||
Interest paid on debt | $ | 50 | $ | 39 | |||||||
_______________ | |
1 | Includes |
Table 4
DEFINITIONS AND NON-GAAP RECONCILIATIONS
(dollars in millions, except signings)
Non-GAAP Metrics
We report our financial results in accordance with GAAP. We also present certain non-GAAP financial measures to provide useful supplemental information to investors. We provide these non-GAAP financial measures as we believe it enhances investors' visibility to management decisions and their impacts on operational performance; enables better comparison to peer companies; and allows us to provide a long-term strategic view of the business going forward. Moreover, we use certain of these non-GAAP financial metrics in measuring performance under our executive compensation plans.
Constant-currency information compares results between periods as if exchange rates had remained constant period over period. We define constant-currency revenues as total revenues excluding the impact of foreign exchange rate movements and use it to determine the constant-currency revenue growth on a year-over-year basis. Constant-currency revenues are calculated by translating current period revenues using corresponding prior-period exchange rates.
Adjusted pretax income (loss) is defined as pretax income (loss) excluding transaction-related costs and benefits, charges related to ceasing to use leased / fixed assets, charges related to lease terminations, pension costs other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, amortization of acquisitionrelated intangible assets, impairment expense, significant litigation costs and benefits, and currency impacts of highly inflationary countries. Adjusted pretax margin is calculated by dividing adjusted pretax income (loss) by revenue.
Adjusted EBITDA is defined as net income (loss) excluding net interest expense, income taxes, depreciation and amortization (excluding depreciation of right-of-use assets and amortization of capitalized contract costs), charges related to ceasing to use leased / fixed assets, charges related to lease terminations, transaction-related costs and benefits, pension costs other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, impairment expense, significant litigation costs and benefits, and currency impacts of highly inflationary countries. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue.
Adjusted net income (loss) is defined as adjusted pretax income (loss) less the reported provision for income taxes, minus or plus the tax effect of the non-GAAP adjustments made to calculate adjusted pretax income (loss), and excluding exceptional items impacting the reported provision for income taxes. Adjusted net margin is calculated by dividing adjusted net income (loss) by revenue.
Adjusted earnings (loss) per share (EPS) is defined as adjusted net income (loss) divided by diluted weighted average shares outstanding to reflect shares that are dilutive or anti-dilutive based on the amount of adjusted net income (loss). The weighted average common shares outstanding used to calculate adjusted earnings (loss) per share will differ from such shares used to calculate diluted earnings (loss) per share (GAAP) when the inclusion of dilutive shares has an antidilutive effect for one calculation but not for the other.
Free cash flow is defined as cash flows from operating activities (GAAP), less net capital expenditures. Management uses free cash flow as a measure to evaluate our operating results, plan strategic investments and assess our ability and need to incur and service debt. We believe this metric is useful supplemental financial measures to aid investors in assessing our ability to pursue business opportunities and investments and to service our debt. Free cash flow is a financial measure that is not recognized under
Other Metrics
Signings are defined by Kyndryl as an initial estimate of the value of a customer's commitment under a contract. The calculation involves estimates and judgments to gauge the extent of a customer's commitment. We calculate this based on various considerations including the type and duration of the agreement as well as the presence of termination charges or wind-down costs. Contract extensions and increases in scope are treated as signings only to the extent of the incremental new value. Signings can vary over time due to a variety of factors including, but not limited to, the timing of signing a small number of larger outsourcing contracts, as well as the length of those contracts. Signings should not be considered a comprehensive measure of future revenue, and the conversion of signings into revenue may vary based on the types of services and solutions, customer decisions and other factors, which may include, but are not limited to, macroeconomic environment or external events. Management uses signings to monitor the performance of the business, as a measure of customer engagement and our ability to drive growth.
Hyperscaler-related annualized revenue run-rate is a metric that we define as revenue for the most recently completed fiscal quarter multiplied by four. Management believes this metric provides investors with an additional perspective regarding the current revenue-generating capacity based on recent operating performance and to assess business momentum over time. Hyperscaler-related annualized revenue run-rate is not a forecast, projection, or prediction of future revenue and should not be viewed as an indication of expected revenue for any future period.
Reconciliation of net income (loss) | Three Months Ended June 30, | |||||
(in millions, except per share amounts) | 2026 | 2025 | ||||
Net income (loss) (GAAP) | $ | (55) | $ | 56 | ||
Provision for income taxes | (14) | 36 | ||||
Pretax income (loss) (GAAP) | $ | (69) | $ | 92 | ||
Transaction-related costs (benefits)1 | (38) | — | ||||
Stock-based compensation expense | 21 | 24 | ||||
Amortization of acquisition-related intangible assets | 6 | 7 | ||||
Impairment expense2 | 38 | — | ||||
Other adjustments3 | 5 | 5 | ||||
Adjusted pretax income (loss) (non-GAAP) | $ | (37) | $ | 128 | ||
Interest expense | 34 | 19 | ||||
Depreciation of property, equipment and capitalized software | 183 | 191 | ||||
Amortization of transition costs and prepaid software | 331 | 308 | ||||
Adjusted EBITDA (non-GAAP) | $ | 512 | $ | 647 | ||
Net income (loss) margin | (1.5) % | 1.5 % | ||||
Adjusted EBITDA margin | 14.2 % | 17.3 % | ||||
Adjusted pretax income (loss) (non-GAAP) | $ | (37) | $ | 128 | ||
Provision for income taxes (GAAP) | 14 | (36) | ||||
Tax effect of non-GAAP adjustments | (4) | (3) | ||||
Adjusted net income (loss) (non-GAAP) | $ | (26) | $ | 90 | ||
Diluted weighted average shares outstanding for calculating adjusted EPS | 220.6 | 239.1 | ||||
Diluted earnings (loss) per share (GAAP) | $ | (0.25) | $ | 0.23 | ||
Adjusted earnings (loss) per share (non-GAAP) | $ | (0.12) | $ | 0.37 | ||
_______________ | |
1 | Kyndryl's reported results for the three months ended June 30, 2026 include a transaction-related gain of |
2 | Kyndryl's reported results for the three months ended June 30, 2026 include an impairment expense for the sale of a facility in |
3 | Other adjustments represent pension costs other than pension servicing costs and multi-employer plan costs, significant litigation costs and benefits, and currency impacts of highly inflationary countries. |
Reconciliation of cash flows from operations | Three Months Ended June 30, | |||||
to free cash flow (in millions) | 2026 | 2025 | ||||
Cash flows from operating activities (GAAP) | $ | (310) | $ | (124) | ||
Less: Net capital expenditures1 | (91) | (97) | ||||
Free cash flow (non-GAAP)2 | $ | (401) | $ | (222) | ||
_______________ | |
1 | Net capital expenditures consists of capital expenditures less proceeds from dispositions of property and equipment. |
2 | Free cash flow for the three months ended June 30, 2026 includes transaction-related payments of |
Three Months Ended June 30, | Last Twelve Months Ended June 30, | |||||||||||||||||
Signings (in billions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||
Signings1 | $ | 3.9 | $ | 3.2 | $ | 14.2 | $ | 18.3 | ||||||||||
_______________ | |
1 | Currency movements did not have a material impact on the year-over-year change in the three-month period ended June 30, 2026. Currency movements favorably impacted the year‑over‑year change by approximately 2 points in the twelve‑month period ended June 30, 2026. |
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SOURCE Kyndryl