KYNDRYL REPORTS SECOND QUARTER FISCAL 2027 RESULTS

Quarterly pretax income increased, but net income declined and free cash flow shifted from an inflow to an outflow.

Rhea-AI Summary

Kyndryl (KD) reported fiscal second-quarter revenue of $3.651 billion, down year over year, and reaffirmed its fiscal 2027 outlook. For the quarter ended September 30, 2026, revenue fell 1.9% reported and 0.8% in constant currency. Pretax income rose to $112 million from $98 million, while net income fell to $59 million, or $0.27 per diluted share, from $68 million, or $0.29. Adjusted EBITDA rose to $699 million from $641 million.

Operating cash flow increased to $172 million, but free cash flow was a $34 million outflow. Quarterly signings totaled $4.1 billion. Kyndryl completed its Healthcare IT Leaders acquisition and issued $1 billion of senior notes for refinancing. The company expects fiscal 2027 adjusted pretax income of $600–$700 million, including workforce rebalancing charges, free cash flow of $400–$500 million, and constant-currency revenue flat to down 2%.

24 points · 2 major

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1 major · 26 points

Hollow bars mark forward-looking points. How the balance works

Positive

• Major pointSenior note offerings completed September 28, 2026, raised $1 billion for refinancing. 35% of market cap
• Major pointDebt repayments included the $1 billion revolving balance in September and $700 million of maturing notes in October.
• Moderate pointQuarterly pretax income rose to $112 million from $98 million a year earlier.
• Moderate pointQuarterly adjusted pretax income increased to $150 million from $123 million a year earlier.
• Moderate pointQuarterly adjusted EBITDA increased to $699 million from $641 million a year earlier.
• Moderate pointQuarterly operating cash flow increased to $172 million from $147 million a year earlier.
• Moderate pointSignings totaled $15.5 billion over twelve months, including $4.1 billion in the second quarter.
• Moderate pointKyndryl Consult quarterly revenue grew 4.2% year over year.
• Moderate pointKyndryl Consult twelve-month revenue reached $3.6 billion, up 8.1% year over year.
• Moderate pointKyndryl Consult twelve-month signings reached $4.6 billion, up 19.1% year over year.
• Moderate pointQuarterly hyperscaler-related revenue exceeded $550 million, growing 27.2% year over year.
• Moderate pointTwelve-month hyperscaler-related revenue reached $2.1 billion, up 38.5% year over year.
• Moderate pointU.S. quarterly revenue increased 9.0% to $980 million; six-month revenue rose 6.8% to $1,933 million.
• Moderate pointU.S. quarterly adjusted EBITDA rose to $273 million from $195 million; six-month EBITDA rose to $493 million from $391 million.
• Moderate point. Forward-looking: it has not happened yet and may not happen.Workforce actions are expected to deliver approximately $400–$500 million in annualized operating expense savings in fiscal 2028.
• Moderate point. Forward-looking: it has not happened yet and may not happen.Reaffirmed fiscal 2027 adjusted pretax income outlook is $600–$700 million, including workforce rebalancing charges.
• Moderate point. Forward-looking: it has not happened yet and may not happen.Reaffirmed fiscal 2027 free cash flow outlook is $400–$500 million.

7 minor points

• Minor pointQuarterly adjusted net income rose to $92 million, or $0.42 per diluted share, from $89 million, or $0.38.
• Minor pointCustomer contracts exceeding $50 million each numbered 43 over twelve months, including 11 in the quarter.
• Minor pointPrincipal Markets quarterly adjusted EBITDA increased to $201 million from $200 million a year earlier.
• Minor pointHealthcare IT Leaders acquisition completed in mid-September, adding healthcare application implementation and managed services capabilities.
• Minor point. Forward-looking: it has not happened yet and may not happen.Workforce savings are expected to begin in second-half fiscal 2027 and largely offset fiscal 2027 charges.
• Minor pointSix-month common stock repurchases totaled $97 million.
• Minor pointTotal debt declined to $4,059 million at September 30, 2026, from $4,089 million at March 31.

Negative

• Major pointNew debt comprises $600 million at 7.80% due 2029 and $400 million at 7.875% due 2032.
• Moderate pointQuarterly revenue fell 1.9% to $3,651 million; the constant-currency decline was 0.8%.
• Moderate pointQuarterly net income fell to $59 million, or $0.27 per diluted share, from $68 million, or $0.29.
• Moderate pointQuarterly free cash flow was a $34 million outflow, versus a $22 million inflow a year earlier.
• Moderate point. Forward-looking: it has not happened yet and may not happen.Fiscal 2027 workforce charges remain expected at approximately $200 million, with $190 million incurred in the first half. 7.1% of market cap
• Moderate pointQuarterly interest expense rose to $37 million from $20 million; six-month expense rose to $71 million from $39 million.
• Moderate point. Forward-looking: it has not happened yet and may not happen.Reaffirmed fiscal 2027 revenue outlook remains flat to down 2% in constant currency.
• Moderate pointStrategic Markets quarterly adjusted EBITDA fell to $142 million from $152 million; six-month EBITDA fell to $210 million from $322 million.
• Moderate pointSix-month pretax income fell to $43 million from $190 million a year earlier.
• Moderate pointSix-month net income fell to $4 million from $124 million a year earlier.
• Moderate pointSix-month adjusted EBITDA fell to $1,211 million from $1,288 million a year earlier.
• Moderate pointSix-month operating cash flow was a $137 million outflow, versus a $22 million inflow a year earlier.
• Moderate pointCash and equivalents fell to $1,659 million at September 30, 2026, from $2,623 million at March 31.

13 minor points

• Minor pointQuarterly workforce rebalancing charges increased to $38 million from $19 million a year earlier.
• Minor pointJapan quarterly revenue fell 4.6% to $555 million, despite 2.9% constant-currency growth.
• Minor pointJapan quarterly adjusted EBITDA fell to $108 million from $123 million; six-month EBITDA fell to $218 million from $238 million.
• Minor pointPrincipal Markets quarterly revenue fell 6.1% to $1,177 million, down 4.8% in constant currency.
• Minor pointStrategic Markets quarterly revenue fell 4.8% to $939 million, down 6.7% in constant currency.
• Minor pointSix-month revenue fell 2.6% to $7,269 million, down 2.1% in constant currency.
• Minor pointSix-month diluted earnings per share fell to $0.02 from $0.52 a year earlier.
• Minor pointSix-month Japan revenue fell 6.1% to $1,089 million, despite 2.4% constant-currency growth.
• Minor pointSix-month Principal Markets revenue fell 6.6% to $2,380 million, down 6.8% in constant currency.
• Minor pointSix-month Principal Markets adjusted EBITDA fell to $346 million from $391 million a year earlier.
• Minor pointSix-month Strategic Markets revenue fell 4.0% to $1,867 million, down 6.8% in constant currency.
• Minor pointSix-month impairment expense totaled $38 million, versus none a year earlier.
• Minor pointSix-month capital expenditures increased to $363 million from $272 million a year earlier.

News Explained

Kyndryl says it incurred $190 million of workforce-rebalancing charges in the first half and expects about $200 million for fiscal 2027, and savings are expected to start in the second half, with $400 million to $500 million in annualized run-rate operating expense savings expected in fiscal 2028 once the actions are complete.

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Key Figures

Revenue: $3.651 billion, down 1.9% Pretax income: $112 million vs. $98 million Net income: $59 million vs. $68 million +5 more

Revenue

$3.651 billion, down 1.9%

Fiscal 2027 second quarter; year-over-year, reported basis

Pretax income

$112 million vs. $98 million

Fiscal 2027 second quarter vs. prior-year period

Net income

$59 million vs. $68 million

Fiscal 2027 second quarter vs. prior-year period

Adjusted EBITDA

$699 million vs. $641 million

Fiscal 2027 second quarter vs. prior-year period

Free cash flow

Use of $34 million vs. source of $22 million

Fiscal 2027 second quarter vs. prior-year period

Adjusted pretax income outlook

$600 million to $700 million

Fiscal 2027 outlook reaffirmed

Free cash flow outlook

$400 million to $500 million

Fiscal 2027 outlook reaffirmed

Constant-currency revenue outlook

Flat to down 2%

Fiscal 2027 outlook reaffirmed

Key Terms

adjusted ebitda, constant currency, free cash flow, senior notes, +1 more

5 terms

adjusted ebitda financial

"Adjusted EBITDA was $699 million compared to $641 million in the prior-year period."

Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.

constant currency financial

"down 0.8% year-over-year in constant currency."

Constant currency is a way of measuring financial results that removes the effects of changes in currency exchange rates. It allows for a clearer comparison of a company's performance over time by showing what the numbers would look like if exchange rates had stayed the same. This helps investors understand whether growth comes from actual business improvements or just currency fluctuations.

free cash flow financial

"Free cash flow was a use of $34 million in the quarter"

Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.

View in glossary

senior notes financial

"completed an offering of $600 million of 7.80% Senior Notes due 2029"

Senior notes are a type of loan that a company borrows from investors, promising to pay it back with interest. They are called "senior" because in case the company faces financial trouble, these lenders are paid back before others. This makes senior notes safer for investors compared to other types of loans or bonds.

revolving credit agreement financial

"repay the $1 billion outstanding balance under the Company's revolving credit agreement"

A revolving credit agreement is a flexible loan arrangement where a borrower can borrow, repay, and borrow again up to a set limit, similar to a credit card. It matters because it gives businesses or individuals quick access to funds whenever needed, helping manage cash flow and cover expenses without applying for a new loan each time.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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• Revenues for the quarter ended September 30, 2026 total $3.7 billion, pretax income is $112 million, and net income is $59 million
  
  
• Adjusted EBITDA is $699 million, adjusted pretax income is $150 million, and adjusted net income is $92 million
  
  
• Company reaffirms fiscal 2027 outlook

NEW YORK, Nov. 4, 2026 /PRNewswire/ -- Kyndryl (NYSE: KD), a leading provider of mission-critical enterprise technology services, today released financial results for the quarter ended September 30, 2026, the second quarter of its 2027 fiscal year.   

"Strong signings and continued growth in Kyndryl Consult and hyperscaler-related revenue reinforce our confidence in our fiscal 2027 outlook," said Chairman and Chief Executive Officer Martin Schroeter. "Our performance reflects demand for Kyndryl's AI-led modernization capabilities and deep mission-critical expertise that help customers evolve their complex technology environments, strengthen cybersecurity and achieve measurable business outcomes."

Results for the Fiscal Second Quarter Ended September 30, 2026

For the second quarter, Kyndryl reported revenues of $3.7 billion, down 1.9% year-over-year on a reported basis and down 0.8% year-over-year in constant currency.  The Company reported pretax income of $112 million, compared to pretax income of $98 million in the prior-year period.  Net income was $59 million, or $0.27 per diluted share, in the quarter, compared to net income of $68 million, or $0.29 per diluted share, in the prior-year period.  The second quarter 2027 results include workforce rebalancing charges of $38 million compared to $19 million in the prior-year period.  Cash provided by operations was $172 million, compared to $147 million in the prior-year period.

Adjusted pretax income was $150 million, compared to adjusted pretax income of $123 million in the prior-year period. Adjusted net income was $92 million, or $0.42 per diluted share, compared to adjusted net income of $89 million, or $0.38 per diluted share, in the prior-year period.  Adjusted EBITDA was $699 million compared to $641 million in the prior-year period.  The second quarter 2027 results include workforce rebalancing charges as described above.  Free cash flow was a use of $34 million in the quarter, compared to a source of cash of $22 million in the prior year.  See "Definitions and Non-GAAP Reconciliations."

"Our results reflect continued progress against our strategic and financial priorities," said Chief Financial Officer Ellen Johnson.  "We remain focused on disciplined execution to strengthen our fundamentals, support margin expansion and drive free cash flow growth."

Highlights

• Signings – In the trailing twelve months signings were $15.5 billion, including $4.1 billion in the second quarter.  Kyndryl signed 43 customer contracts exceeding $50 million each in the last twelve months, of which 11 were in the second quarter.
  
  
• Kyndryl Consult revenue – In the second quarter, Kyndryl Consult revenues grew 4.2% year-over-year. Over the last twelve months, Kyndryl Consult revenues were $3.6 billion, a 8.1% increase year-over-year. Kyndryl Consult signings were $4.6 billion over the last twelve months, a 19.1% increase year-over-year.
  
  
• Hyperscaler-related revenue – In the second quarter, hyperscaler-related revenues of more than $550 million grew 27.2% year-over-year.  Over the last twelve months, hyperscaler-related revenues were $2.1 billion, a 38.5% increase year-over-year.
  
  
• AI-led modernization – Kyndryl's 2026 State of Modernization Report found that AI is driving new modernization demands even as 51% of organizations cite legacy integration as their top obstacle to progress. To support our customers, Kyndryl expanded its AI-led modernization capabilities through new Agentic Modernization services-as-software and the continued expansion of its global AI Innovation Lab network in Dallas, Texas and Luxembourg.
  
  
• Actions to streamline operations – In the second quarter, Kyndryl incurred $38 million of charges related to workforce-rebalancing actions.  The Company continues to expect approximately $200 million of charges in fiscal 2027, of which $190 million were incurred in the first half, with savings expected to begin in the second half of fiscal 2027 that will largely offset the charges. These workforce rebalancing efforts, once completed, are expected to result in annualized run-rate operating expense savings of approximately $400 to $500 million in the Company's fiscal year 2028.
  
  
• Company closes Healthcare IT Leaders, LLC acquisition – In mid-September, Kyndryl announced the completion of its acquisition of Healthcare IT Leaders, an enterprise IT services provider serving hospitals and health systems across the U.S. The acquisition strengthens Kyndryl's capabilities in healthcare application implementation and managed services and expands Kyndryl's ability to help healthcare customers modernize mission-critical systems and accelerate digital transformation.
  
  
• Debt refinancing reinforces financial flexibility and strong liquidity – On September 28, 2026, Kyndryl completed an offering of $600 million of 7.80% Senior Notes due 2029 and $400 million of 7.875% Senior Notes due 2032.  The Company used the net proceeds of this offering to repay at maturity the $700 million of 2.05% Senior Notes in October 2026.  Kyndryl used the remaining net proceeds, together with cash on hand, to repay the $1 billion outstanding balance under the Company's revolving credit agreement at the end of September.

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 to $700 million
  
  
  • Consistent with our definition of adjusted pretax income since fiscal 2025, this includes workforce rebalancing charges
    
    
• Free cash flow of $400 to $500 million
  
  
• Constant-currency revenue flat to down 2%

See "Definitions and Non-GAAP Reconciliations."

Earnings Webcast

Kyndryl's earnings call for the second fiscal quarter is scheduled to begin at 8:30 a.m. ET on November 4, 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 November 4, 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," "seek," "should," "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 U.S. and countries where the Company and its customers do business, including with respect to tariffs, taxes and other controls on imports or exports; adverse effects from tax matters; risks related to legal and regulatory claims, suits, investigations, proceedings and other matters, and consequences relating thereto; the Company's ability to remediate, and the timing and costs related to the remediation of, material weaknesses in internal control over financial reporting, as well as the Company's ability to maintain effective controls in the future; the impact of changes in market liquidity conditions and customer credit risk on receivables; the Company's pension plans; the impact of currency fluctuations; and risks related to the Company's common stock and the securities market.

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 October 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, adjusted net income, adjusted EPS, adjusted EBITDA margin, adjusted pretax income 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						Six Months Ended
		September 30,						September 30,
		2026			2025			2026			2025
Revenues		$	3,651		$	3,721		$	7,269		$	7,464
Cost of services		$	2,794		$	2,920		$	5,636		$	5,867
Selling, general and administrative expenses			669			659			1,337			1,305
Workforce rebalancing charges			38			19			190			44
Transaction-related costs (benefits)			3			—			(36)			—
Impairment expense			—			—			38			—
Interest expense			37			20			71			39
Other expense (income)			(1)			5			(11)			18
Total costs and expenses		$	3,539		$	3,622		$	7,226		$	7,274
Income before income taxes		$	112		$	98		$	43		$	190
Provision for income taxes			53			30			39			66
Net income		$	59		$	68		$	4		$	124
Earnings per share data
Basic earnings per share		$	0.27		$	0.29		$	0.02		$	0.54
Diluted earnings per share			0.27			0.29			0.02			0.52
Weighted-average basic shares outstanding			218.0			230.6			219.3			230.4
Weighted-average diluted shares outstanding			219.1			235.9			221.3			237.5

 

Table 2
SEGMENT RESULTS
AND SELECTED BALANCE SHEET INFORMATION
(dollars in millions)
		Three Months Ended September 30,						Year-over-Year Growth
								As		Constant
Segment Results		2026			2025			Reported		Currency
Revenue
United States		$	980	1	$	899		9.0 %		9.0 %
Japan			555			581		(4.6 %)		2.9 %
Principal Markets2			1,177			1,254		(6.1 %)		(4.8 %)
Strategic Markets2			939			987		(4.8 %)		(6.7 %)
Total revenue		$	3,651		$	3,721		(1.9 %)		(0.8 %)
Adjusted EBITDA
United States		$	273	1	$	195
Japan			108			123
Principal Markets2			201			200
Strategic Markets2			142			152
Corporate and other			(26)			(28)
Total adjusted EBITDA		$	699	1	$	641
		Six Months Ended September 30,						Year-over-Year Growth
								As		Constant
Segment Results		2026			2025			Reported		Currency
Revenue
United States		$	1,933		$	1,810		6.8 %		6.8 %
Japan			1,089			1,160		(6.1 %)		2.4 %
Principal Markets2			2,380			2,549		(6.6 %)		(6.8 %)
Strategic Markets2			1,867			1,945		(4.0 %)		(6.8 %)
Total revenue		$	7,269		$	7,464		(2.6 %)		(2.1 %)
Adjusted EBITDA
United States		$	493		$	391
Japan			218			238
Principal Markets2			346			391
Strategic Markets2			210			322
Corporate and other			(56)			(53)
Total adjusted EBITDA		$	1,211		$	1,288
		September 30,			March 31,
Balance Sheet Data		2026			2026
Cash and equivalents		$	1,659		$	2,623
Debt (short-term and long-term)			4,059			4,089

1	United States includes a 3 point favorable impact on revenue growth and a 15 point favorable impact on adjusted EBITDA growth from the resolution of a commercial matter. The favorable impact to adjusted EBITDA growth was mitigated at the total company level.
2	Principal Markets represents the aggregation of Kyndryl's operations in Canada, the United Kingdom/Ireland and certain European markets comprised of France, Germany, Italy, and Spain/Portugal.  Strategic Markets represents the aggregation of Kyndryl's operations in all other countries in which we operate, which includes countries in regions such as Latin America, Europe, Middle East & Africa, as well as Asia Pacific (including India and excluding Japan).  Kyndryl's operations in India transitioned from Principal Markets to Strategic Markets in the quarter ended September 30, 2026; historical segment information has been updated to reflect this change.

 

Table 3
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in millions)
		Six Months Ended September 30,
		2026			2025
Cash flows from operating activities:
Net income		$	4		$	124
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Depreciation of property, equipment and capitalized software			372			384
Depreciation of right-of-use assets			139			147
Amortization of transition costs and prepaid software			655			613
Amortization of capitalized contract costs			196			231
Amortization of acquisition-related intangible assets			13			14
Stock-based compensation			43			50
Deferred taxes			(55)			(17)
Net (gain) loss on asset sales and other			22			—
Change in operating assets and liabilities:
Right-of-use assets and liabilities (excluding depreciation)			(155)			(173)
Workforce rebalancing liabilities			94			(1)
Current accounts receivable			91			71
Lease and other receivables			(40)			(64)
Accounts payable			(396)			(328)
Taxes			(54)			23
Deferred transition costs and prepaid software (excluding amortization)1			(564)			(1,469)
Capitalized contract costs (excluding amortization)			(250)			(228)
Other assets and other liabilities1			(250)			645
Net cash provided by (used in) operating activities		$	(137)		$	22
Cash flows from investing activities:
Capital expenditures		$	(363)		$	(272)
Proceeds from disposition of property and equipment			66			51
Acquisitions and divestitures, net of cash acquired			(275)			1
Other investing activities, net			4			26
Net cash used in investing activities		$	(568)		$	(196)
Cash flows from financing activities:
Debt repayments		$	(88)		$	(70)
Repayment of the revolving credit facility			(1,000)			—
Proceeds from issuance of debt, net of debt issuance costs			986			—
Common stock repurchases			(97)			(151)
Common stock repurchases for tax withholdings			(20)			(89)
Other financing activities, net			(23)			(1)
Net cash used in financing activities		$	(242)		$	(310)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		$	(6)		$	30
Net change in cash, cash equivalents and restricted cash		$	(953)		$	(453)
Cash, cash equivalents and restricted cash at beginning of period		$	2,626		$	1,789
Cash, cash equivalents and restricted cash at end of period		$	1,672		$	1,336
Supplemental data
Income taxes paid, net of refunds received		$	109		$	92
Interest paid on debt		$	89		$	58

1	Includes $938 million non-cash offsetting increases in deferred costs and other liabilities related to an extended and amended multi-year software license in the six months ended September 30, 2025.
Net cash provided by (used in) operating activities was $172 million in the three months ended September 30, 2026 and ($310) million in the three months ended June 30, 2026.

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 is defined as pretax income 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 acquisition-related intangible assets, impairment expense, the impact of significant legal and related regulatory matters, and currency impacts of highly inflationary countries.  Adjusted pretax income margin is calculated by dividing adjusted pretax income by revenue.

Adjusted EBITDA is defined as net income excluding net interest expense, income taxes, depreciation of property, equipment and capitalized software and amortization of transition costs and prepaid software, 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, the impact of significant legal and related regulatory matters, and currency impacts of highly inflationary countries.  Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue.

Adjusted net income is defined as adjusted pretax income less the reported provision for income taxes, minus or plus the tax effect of the non-GAAP adjustments made to calculate adjusted pretax income, and excluding exceptional items impacting the reported provision for income taxes.  

Adjusted earnings per share (EPS) is defined as adjusted net income divided by diluted weighted average shares outstanding to reflect shares that are dilutive or anti-dilutive based on the amount of adjusted net income.  The weighted average common shares outstanding used to calculate adjusted earnings per share will differ from such shares used to calculate diluted earnings per share (GAAP) when the inclusion of dilutive shares has an anti-dilutive 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 (consisting of capital expenditures less proceeds from disposition of property and equipment).  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 a useful supplemental financial measure 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 U.S. GAAP and should not be considered as an alternative to cash flows from operations or liquidity derived in accordance with U.S. GAAP.  For more information about the Company's ongoing cash and commercial management strategy, see our latest Form 10-K or Form 10-Q filing with the Securities and Exchange Commission, including in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources" of our second quarter 2027 Form 10-Q expected to be filed later today.

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.

Reconciliation of net income
to adjusted pretax income,
adjusted EBITDA, adjusted net		Three Months Ended						Six Months Ended
income and adjusted EPS		September 30,						September 30,
(in millions, except per share amounts)		2026			2025			2026			2025
Net income (GAAP)		$	59		$	68		$	4		$	124
Provision for income taxes			53			30			39			66
Pretax income (GAAP)		$	112		$	98		$	43		$	190
Transaction-related costs (benefits)1			3			—			(36)			—
Stock-based compensation expense			22			26			43			50
Amortization of acquisition-related intangible assets			6			7			13			14
Impairment expense2			—			—			38			—
Other adjustments3			7			(9)			12			(4)
Adjusted pretax income (non-GAAP)		$	150		$	123		$	113		$	251
Interest expense			37			20			71			39
Depreciation of property, equipment and capitalized software			189			193			372			384
Amortization of transition costs and prepaid software			323			306			655			613
Adjusted EBITDA (non-GAAP)		$	699		$	641		$	1,211		$	1,288
Net income margin			1.6 %			1.8 %			0.1 %			1.7 %
Adjusted EBITDA margin			19.1 %			17.2 %			16.7 %			17.3 %
Adjusted pretax income (non-GAAP)		$	150		$	123		$	113		$	251
Provision for income taxes (GAAP)			(53)			(30)			(39)			(66)
Tax effect of non-GAAP adjustments			(4)			(3)			(8)			(6)
Adjusted net income (non-GAAP)		$	92		$	89		$	66		$	179
Diluted weighted average shares outstanding for calculating adjusted EPS			219.1			235.9			221.3			237.5
Diluted earnings per share (GAAP)		$	0.27		$	0.29		$	0.02		$	0.52
Adjusted earnings per share (non-GAAP)		$	0.42		$	0.38		$	0.30		$	0.75

1	Kyndryl's reported results for the six months ended September 30, 2026 include a transaction-related gain of $40 million from the sale of a digital solutions subsidiary in the Principal Markets segment.
2	Kyndryl's reported results for the six months ended September 30, 2026 include an impairment expense for the sale of a facility in the United States.
3	Other adjustments represent pension costs other than pension servicing costs and multi-employer plan costs, the impact of significant legal and related regulatory matters, and currency impacts of highly inflationary countries.

 

		Three Months Ended						Six Months Ended
Reconciliation of cash flows from operations		September 30,						September 30,
to free cash flow (in millions)		2026			2025			2026			2025
Cash flows from operating activities (GAAP)		$	172		$	147		$	(137)		$	22
Less: Net capital expenditures1			(206)			(125)			(297)			(222)
Free cash flow (non-GAAP)2		$	(34)		$	22		$	(434)		$	(200)

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 September 30, 2026 includes transaction-related payments of $4 million and the impact of significant legal and related regulatory matters of $5 million.  Free cash flow for the six months ended September 30, 2026 includes transaction-related payments of $6 million and payments for significant legal and related regulatory matters of $17 million.  See "Definitions and Non-GAAP Reconciliations" for more information about our calculation of free cash flow.

 

		Three Months Ended						Six Months Ended						Last Twelve Months Ended
		September 30,						September 30,						September 30,
Signings (in billions)		2026			2025			2026			2025			2026			2025
Signings1		$	4.1		$	2.8		$	8.0		$	6.0		$	15.5		$	15.6

1	Currency movements unfavorably impacted the year-over-year change by approximately 1.4 points in the three-month period and 0.8 points in the six-month period ended September 30, 2026.  Currency movements favorably impacted the year‑over‑year change by approximately 1.7 points in the twelve‑month period ended September 30, 2026.

 

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SOURCE Kyndryl

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were Kyndryl's fiscal second-quarter 2027 earnings?

Kyndryl earned $59 million, or $0.27 per diluted share, in the quarter ended September 30, 2026. A year earlier, net income was $68 million, or $0.29 per diluted share. Revenue declined 1.9% to $3,651 million, while pretax income increased to $112 million from $98 million.

What is Kyndryl's fiscal 2027 outlook?

Kyndryl reaffirmed expected adjusted pretax income of $600 to $700 million, free cash flow of $400 to $500 million, and constant-currency revenue flat to down 2%. The adjusted pretax income outlook includes workforce rebalancing charges. Fiscal 2027 runs from April 2026 through March 2027.

What are the terms and uses of Kyndryl's September 2026 debt refinancing?

Kyndryl issued $600 million of 7.80% senior notes due 2029 and $400 million of 7.875% senior notes due 2032 on September 28, 2026. Net proceeds repaid $700 million of 2.05% notes at maturity in October. Remaining proceeds, together with cash on hand, repaid the $1 billion revolving credit balance at September-end.

What affected Kyndryl's U.S. revenue and adjusted EBITDA growth?

Resolution of a commercial matter contributed a 3 percentage-point favorable impact on U.S. revenue growth and a 15 percentage-point favorable impact on U.S. adjusted EBITDA growth in the quarter. The favorable effect on adjusted EBITDA growth was mitigated at the total-company level.