Kyndryl six-month net income falls to $4M from $124M
Six-month operating activities used $137 million of cash, compared with $22 million provided in 2025.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Kyndryl Holdings, Inc. reported revenue of $3.651 billion for the three months ended September 30, 2026, versus $3.721 billion a year earlier; net income was $59 million versus $68 million, while adjusted EBITDA was $699 million versus $641 million. For the six months, revenue was $7.269 billion versus $7.464 billion, net income was $4 million versus $124 million, and adjusted EBITDA was $1.211 billion versus $1.288 billion.
Kyndryl completed its acquisition of Healthcare IT Leaders in September 2026. It issued $600 million of 2029 notes and $400 million of 2032 notes, then repaid $700 million of 2026 notes at maturity in October using net proceeds. The company temporarily paused its share repurchase program, with approximately $205 million of capacity remaining as of September 30, 2026. Fiscal 2027 workforce actions are expected to continue through year-end, with approximately $200 million of charges. Kyndryl also disclosed that it had identified material weaknesses in internal control over financial reporting.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointQuarterly adjusted EBITDA rose 9% to $699 million.
Negative
- Major pointKyndryl disclosed identified material weaknesses in internal control over financial reporting.
- Moderate pointSix-month net income fell to $4 million from $124 million.
- Moderate pointOperating activities used $137 million of cash, versus $22 million provided.
- Minor pointQuarterly net income was $59 million, versus $68 million.
- Minor pointSix-month adjusted EBITDA declined 6% to $1.211 billion from $1.288 billion.
Filing Explained
The Solvinity purchase remains blocked, and potential recovery claims are unresolved.
Kyndryl established a commercial-paper program in
The Dutch State Secretary reaffirmed on
Kyndryl says it continues to cooperate with the SEC Division of Enforcement’s ongoing investigation into its cash-management practices, related disclosures, internal controls and other matters; it cannot predict the outcome.
A putative stockholder class action alleging misleading company disclosures also remains pending; the defendants moved to dismiss the amended complaint in
Key Figures
Key Terms
Adjusted EBITDA financial
remaining performance obligation financial
contingent consideration financial
cash flow hedges financial
material weaknesses in internal control over financial reporting financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were KD's revenue and net income for the quarter ended September 30, 2026?
What were KD's six-month financial results through September 30, 2026?
What were the terms of Kyndryl's Healthcare IT Leaders acquisition?
What terms did KD disclose for its 2029 and 2032 notes?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
OR
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
(Commission file number)
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | | (IRS employer identification number) |
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(Address of principal executive offices) | | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading symbol(s) | | Name of each exchange |
| |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding at October 28, 2026 was
Table of Contents
Index
9 | |
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| Page |
Part I - Financial Information: | |
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Item 1. Consolidated Financial Statements (Unaudited): | 3 |
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Consolidated Income Statement for the three and six months ended September 30, 2026 and 2025 | 3 |
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Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended September 30, 2026 and 2025 | 4 |
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Consolidated Balance Sheet at September 30, 2026 and March 31, 2026 | 5 |
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Consolidated Statement of Cash Flows for the six months ended September 30, 2026 and 2025 | 6 |
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Consolidated Statement of Equity for the three and six months ended September 30, 2026 and 2025 | 7 |
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Notes to Consolidated Financial Statements | 8 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk | 46 |
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Item 4. Controls and Procedures | 46 |
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Part II - Other Information: | |
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Item 1. Legal Proceedings | 48 |
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Item 1A. Risk Factors | 48 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 48 |
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Item 3. Defaults Upon Senior Securities | 48 |
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Item 4. Mine Safety Disclosures | 48 |
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Item 5. Other Information | 48 |
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Item 6. Exhibits | 50 |
2
Table of Contents
Part I - Financial Information
Item 1. Consolidated Financial Statements (Unaudited):
KYNDRYL HOLDINGS, INC.
CONSOLIDATED INCOME STATEMENT
(In millions, except per share amounts)
(Unaudited)
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Revenues | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Cost of services | | $ | | | $ | | | $ | | | $ | |
Selling, general and administrative expenses | | | | | | | | | | | | |
Workforce rebalancing charges | | | | | | | | | | | | |
Transaction-related costs (benefits) | | | | | | — | | | ( | | | — |
Impairment expense | | | — | | | — | | | | | | — |
Interest expense | | | | | | | | | | | | |
Other expense (income) | | | ( | | | | | | ( | | | |
Total costs and expenses | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Income before income taxes | | $ | | | $ | | | $ | | | $ | |
Provision for income taxes | | $ | | | $ | | | $ | | | $ | |
Net income | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Basic earnings per share | | $ | | | $ | | | $ | | | $ | |
Diluted earnings per share | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Weighted-average basic shares outstanding | | | | | | | | | | | | |
Weighted-average diluted shares outstanding | | | | | | | | | | | | |
The accompanying notes are an integral part of the financial statements.
3
Table of Contents
KYNDRYL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Net income | | $ | | | $ | | | $ | | | $ | |
Other comprehensive income (loss), before tax: | | | | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | | | | |
Foreign currency translation adjustments | | | ( | | | ( | | | ( | | | |
Unrealized gains (losses) on net investment hedges | | | ( | | | | | | ( | | | ( |
Total foreign currency translation adjustments | | | ( | | | ( | | | ( | | | |
Unrealized gains (losses) on cash flow hedges: | | | | | | | | | | | | |
Unrealized gains (losses) arising during the period | | | ( | | | | | | | | | ( |
Reclassification of (gains) losses to net income | | | | | | ( | | | | | | |
Total unrealized gains (losses) on cash flow hedges | | | ( | | | | | | | | | ( |
Retirement-related benefit plans: | | | | | | | | | | | | |
Amortization of prior service costs (credits) | | | | | | — | | | | | | — |
Amortization of net (gains) losses | | | — | | | | | | | | | |
Total retirement-related benefit plans | | | | | | | | | | | | |
Other comprehensive income (loss), before tax | | | ( | | | | | | ( | | | |
Income tax (expense) benefit related to items of other comprehensive income (loss) | | | — | | | ( | | | ( | | | ( |
Other comprehensive income (loss), net of tax | | | ( | | | | | | ( | | | |
Total comprehensive income (loss) | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of the financial statements.
4
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KYNDRYL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(In millions, except per share amount)
(Unaudited)
| | | | | | |
| | September 30, | | March 31, | ||
| | 2026 | | 2026 | ||
Assets: | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | | | $ | |
Restricted cash | | | | | | |
Accounts receivable (net of allowances for credit losses of $ | | | | | | |
Deferred costs (current portion) | |
| | |
| |
Prepaid expenses and other current assets | | | | | | |
Total current assets | | $ | | | $ | |
| | | | | | |
Property and equipment, net | | $ | | | $ | |
Operating right-of-use assets, net | | | | | | |
Deferred costs (noncurrent portion) | | | | | | |
Deferred taxes | | | | | | |
Goodwill | | | | | | |
Intangible assets, net | | | | | | |
Pension assets | | | | | | |
Other noncurrent assets | | | | | | |
Total assets | | $ | | | $ | |
| | | | | | |
Liabilities: | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | | | $ | |
Value-added tax and income tax liabilities | | | | | | |
Current portion of long-term debt and short-term debt | | | | | | |
Accrued compensation and benefits | |
| | |
| |
Deferred income (current portion) | |
| | |
| |
Operating lease liabilities (current portion) | |
| | |
| |
Accrued contract costs | | | | | | |
Other accrued expenses and liabilities | | | | | | |
Total current liabilities | | $ | | | $ | |
| | | | | | |
Long-term debt | | $ | | | $ | |
Retirement and nonpension postretirement benefit obligations | | | | | | |
Deferred income (noncurrent portion) | | | | | | |
Operating lease liabilities (noncurrent portion) | | | | | | |
Other noncurrent liabilities | | | | | | |
Total liabilities | | $ | | | $ | |
Commitments and contingencies | | | | | | |
| | | | | | |
Equity: | | | | | | |
Stockholders’ equity | | | | | | |
Common stock, par value $ | | $ | | | $ | |
Accumulated deficit | | | ( | | | ( |
Treasury stock, at cost (shares: September 30, 2026 – | | | ( | | | ( |
Accumulated other comprehensive income (loss) | | | ( | | | ( |
Total stockholders’ equity before non-controlling interests | | $ | | | $ | |
Non-controlling interests | | | | | | |
Total equity | | $ | | | $ | |
Total liabilities and equity | | $ | | | $ | |
The accompanying notes are an integral part of the financial statements.
5
Table of Contents
KYNDRYL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
| | | | | | |
| | Six Months Ended September 30, | ||||
| | 2026 | | 2025 | ||
Cash flows from operating activities: | | | |
| | |
Net income | | $ | | | $ | |
Adjustments to reconcile net income to cash provided by operating activities: | |
| | |
| |
Depreciation and amortization: | |
| | |
| |
Depreciation of property, equipment and capitalized software | | | | | | |
Depreciation of right-of-use assets | | | | | | |
Amortization of transition costs and prepaid software | |
| | |
| |
Amortization of capitalized contract costs | | | | | | |
Amortization of acquisition-related intangible assets | |
| | |
| |
Stock-based compensation | | | | | | |
Deferred taxes | | | ( | | | ( |
Net (gain) loss on asset sales and other | | | | | | — |
Change in operating assets and liabilities: | | | | | | |
Right-of-use assets and liabilities (excluding depreciation) | | | ( | | | ( |
Workforce rebalancing liabilities | | | | | | ( |
Current accounts receivable | |
| | |
| |
Lease and other receivables | | | ( | | | ( |
Accounts payable | | | ( | | | ( |
Taxes | | | ( | | | |
Deferred transition costs and prepaid software (excluding amortization) | | | ( | | | ( |
Capitalized contract costs (excluding amortization) | | | ( | | | ( |
Other assets and other liabilities | |
| ( | |
| |
Net cash provided by (used in) operating activities | | $ | ( | | $ | |
| | | | | | |
Cash flows from investing activities: | |
| | |
| |
Capital expenditures | | $ | ( | | $ | ( |
Proceeds from disposition of property and equipment | |
| | |
| |
Acquisitions and divestitures, net of cash acquired | | | ( | | | |
Other investing activities, net | | | | | | |
Net cash used in investing activities | | $ | ( | | $ | ( |
| | | | | | |
Cash flows from financing activities: | |
| | |
| |
Debt repayments | | $ | ( | | $ | ( |
Repayment of the revolving credit facility | | | ( | | | — |
Proceeds from issuance of debt, net of debt issuance costs | | | | | | — |
Common stock repurchases | | | ( | | | ( |
Common stock repurchases for tax withholdings | |
| ( | |
| ( |
Other financing activities, net | | | ( | | | ( |
Net cash used in financing activities | | $ | ( | | $ | ( |
| | | | | | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | | $ | ( | | $ | |
Net change in cash, cash equivalents and restricted cash | | $ | ( | | $ | ( |
| | | | | | |
Cash, cash equivalents and restricted cash at beginning of period | | $ | | | $ | |
Cash, cash equivalents and restricted cash at end of period | | $ | | | $ | |
| | | | | | |
Supplemental data: | | | | | | |
Income taxes paid, net of refunds received | | $ | | | $ | |
Interest paid on debt | | $ | | | $ | |
The accompanying notes are an integral part of the financial statements.
6
Table of Contents
KYNDRYL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EQUITY
(In millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | |
| | Common Stock and | | Accumulated | | | | | | | | | | ||||||||
| | Additional | | Other | | | | | | | Non- | | | | |||||||
| | Paid-In Capital | | Comprehensive | | Treasury | | Accumulated | | Controlling | | Total | |||||||||
| | Shares | | Amount | | Income (Loss) | | Stock | | Deficit | | Interests | | Equity | |||||||
Equity – July 1, 2026 | | | | | $ | | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | |
Net income | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax | | | | | | | | | ( | | | | | | | | | | | | ( |
Activity related to employee stock plans | | | | | | | | | | | | | | | | | | | | ||
Purchases of treasury stock | | | ( | | | | | | | | | ( | | | | | | | | | ( |
Changes in non-controlling interests | | | | | | | | | | | | | | | | | | | | | |
Equity – September 30, 2026 | | | | $ | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | | ||
| | | | | | | | | | | | | | | | | | | | | |
| | Common Stock and | | Accumulated | | | | | | | | | |||||||||
| | Additional | | Other | | | | | | | Non- | | | | |||||||
| | Paid-In Capital | | Comprehensive | | Treasury | | Accumulated | | Controlling | | Total | |||||||||
| | Shares | | Amount | | Income (Loss) | | Stock | | Deficit | | Interests | | Equity | |||||||
Equity – July 1, 2025 | | | | | $ | | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | |
Net income | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax | | | | | | | | | | | | | | | | | | | | | |
Activity related to employee stock plans | | | | | | | | | | | | | | | | | | | | ||
Purchases of treasury stock | | | ( | | | | | | | | | ( | | | | | | | | | ( |
Changes in non-controlling interests | | | | | | | | | | | | | | | | | | | | | |
Equity – September 30, 2025 | | | | | | | ( | | | ( | | | ( | | | | | | | ||
| | | | | | | | | | | | | | | | | | | | | |
| | Common Stock and | | Accumulated | | | | | | | | | | ||||||||
| | Additional | | Other | | | | | | | Non- | | | | |||||||
| | Paid-In Capital | | Comprehensive | | Treasury | | Accumulated | | Controlling | | Total | |||||||||
| | Shares | | Amount | | Income (Loss) | | Stock | | Deficit | | Interests | | Equity | |||||||
Equity – April 1, 2026 | | | | | $ | | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | |
Net income | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax | | | | | | | | | ( | | | | | | | | | | | | ( |
Activity related to employee stock plans | | | | | | | | | | | | | | | | | | | | ||
Purchases of treasury stock | | | ( | | | | | | | | | ( | | | | | | | | | ( |
Changes in non-controlling interests | | | | | | | | | | | | | | | | | | ( | | | ( |
Equity – September 30, 2026 | | | | $ | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | | ||
| | | | | | | | | | | | | | | | | | | | | |
| | Common Stock and | | Accumulated | | | | | | | | | |||||||||
| | Additional | | Other | | | | | | | Non- | | | | |||||||
| | Paid-In Capital | | Comprehensive | | Treasury | | Accumulated | | Controlling | | Total | |||||||||
| | Shares | | Amount | | Income (Loss) | | Stock | | Deficit | | Interests | | Equity | |||||||
Equity – April 1, 2025 | | | | | $ | | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | |
Net income | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax | | | | | | | | | | | | | | | | | | | | | |
Activity related to employee stock plans | | | | | | | | | | | | | | | | | | | | ||
Purchases of treasury stock | | | ( | | | | | | | | | ( | | | | | | | | | ( |
Changes in non-controlling interests | | | | | | | | | | | | | | | | | | — | | | — |
Equity – September 30, 2025 | | | | $ | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | | ||
The accompanying notes are an integral part of the financial statements.
7
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Kyndryl Holdings, Inc. (“we”, “the Company” or “Kyndryl”) is a leading provider of mission-critical enterprise technology services, offering advisory, implementation and managed service capabilities to thousands of customers in more than
Kyndryl was formed in November 2021 from a spin-off (the “Separation,” the “Spin-off” or “spin”) from International Business Machines Corporation (“IBM” or “former Parent”) of the infrastructure services unit of IBM’s Global Technology Services segment.
Basis of Presentation
The accompanying condensed Consolidated Financial Statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes the accompanying financial statements include all adjustments necessary to state fairly the Company’s financial position and its results of operations for all the periods presented. The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain items have been recast to conform to current-period presentation, as further described in these footnotes to the accompanying financial statements.
Principles of Consolidation
The accompanying financial statements are presented on a consolidated basis. All significant transactions and intercompany accounts between Kyndryl entities were eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts that are reported in the consolidated financial statements and accompanying disclosures. Estimates are used in determining the following, among others: revenue, costs to complete service contracts, income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, the depreciable and amortizable lives of long-lived assets, loss contingencies, allowance for credit losses and deferred transition costs. We prepared these estimates based on the most current and best available information, but actual results could differ materially from these estimates and assumptions.
The Company uses the estimated annual effective tax rate method in computing its interim tax provision in accordance with U.S. GAAP. The estimated annual effective tax rate is applied to the year-to-date ordinary income, exclusive of discrete items, to arrive at the reported interim tax provision.
NOTE 2. ACCOUNTING PRONOUNCEMENTS
Standards Implemented
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, which is intended to enhance the transparency and usefulness of income tax disclosures through improved reporting related to the rate reconciliation
8
Table of Contents
Notes to Consolidated Financial Statements (continued)
and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company adopted the guidance prospectively for the fiscal year ended March 31, 2026.
Recent Pronouncements
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which is intended to improve the usefulness of expense information contained in public entity income statements through the disaggregation of relevant expense captions in the notes to the financial statements. The guidance should be applied prospectively, effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the disclosures in its consolidated financial statements.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity, which amends the guidance for determining the acquirer in certain transactions. The guidance should be applied prospectively, effective for the fiscal years beginning after December 15, 2026 and interim reporting periods within fiscal years beginning after December 15, 2026, with early adoption permitted. The Company has evaluated the impact of the guidance and does not expect it to have a material impact on the Company’s consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software, which amends the criteria for capitalization of internal-use software costs. The guidance is effective for the fiscal years beginning after December 15, 2027 and interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company has evaluated the impact of the guidance and does not expect it to have a material impact on the Company’s consolidated financial statements.
NOTE 3. REVENUE RECOGNITION
Disaggregation of Revenue
The Company views its segment results to be the best view of disaggregated revenue. Refer to Note 4 – Segments.
Remaining Performance Obligations
The remaining performance obligation (“RPO”) represents the aggregate amount of contractual deliverables yet to be recognized as revenue at the end of the reporting period. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed. The customer is not considered committed when it is able to terminate for convenience without payment of a substantive penalty. The RPO also includes estimates of variable consideration. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
At September 30, 2026, the aggregate amount of RPO related to customer contracts that are unsatisfied or partially unsatisfied was $
During the three and six months ended September 30, 2026, revenue increased by $
9
Table of Contents
Notes to Consolidated Financial Statements (continued)
Contract Balances
The following table provides information about receivables, contract assets and deferred income balances:
| | | | | | |
| | September 30, | | March 31, | ||
(Dollars in millions) | | 2026 | | 2026 | ||
Assets | | | | | | |
Accounts receivable (net of allowances for credit losses of $ | | $ | | | $ | |
Long-term accounts receivable(2) | | | | | | |
Sales-type leases receivable(3) | | | | | | |
Contract assets(4) | |
| | |
| |
Total | | $ | | | $ | |
Liabilities | | | | | | |
Deferred income (current) | | $ | | | $ | |
Deferred income (noncurrent) | |
| | |
| |
Total | | $ | | | $ | |
| (1) | Includes unbilled receivable balances of $ |
| (2) | Long-term accounts receivable includes unbilled receivable balances of $ |
| (3) | The current portion of sales-type leases receivable was $ |
| (4) | Contract assets represent services performed by the Company prior to billing the client, which give the Company the right to consideration that is typically subject to milestone completion or client acceptance. They are included within Prepaid expenses and other current assets in the Consolidated Balance Sheet. |
The amount of revenue recognized during the three and six months ended September 30, 2026 that was included within the deferred income balance at the beginning of the period was $
The following table provides roll-forwards of the accounts receivable allowance for expected credit losses for the six months ended September 30, 2026 and 2025:
| | | | | | |
| | Six Months Ended September 30, | ||||
(Dollars in millions) | | 2026 | | 2025 | ||
Beginning balance | | $ | | | $ | |
Additions (releases) | | | | | | |
Write-offs | | | ( | | | ( |
Other* | | | — | | | |
Ending balance | | $ | | | $ | |
* | Primarily represents translation adjustments. |
The allowance for expected credit losses of long-term accounts receivable, sales-type leases receivable, and contract assets was not material in any of the periods presented.
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Notes to Consolidated Financial Statements (continued)
Major Clients
Deferred Costs
The following table provides amounts of capitalized costs to acquire and fulfill customer contracts at September 30, 2026 and March 31, 2026:
| | | | | | |
| | September 30, | | March 31, | ||
(Dollars in millions) | | 2026 | | 2026 | ||
Deferred transition costs | | $ | | | $ | |
Prepaid software costs(1) | |
| | |
| |
Capitalized costs to fulfill contracts | |
| | |
| |
Capitalized costs to obtain contracts | |
| | |
| |
Total deferred costs(2) | | $ | | | $ | |
| (1) | Prepaid software costs include deferred costs for committed multi-year, on-premises software purchase contracts. |
| (2) | Of the total deferred costs, $ |
The amount of total deferred costs amortized for the three months ended September 30, 2026 was $
NOTE 4. SEGMENTS
Our reportable segments correspond to how the chief operating decision maker (“CODM”), our chief executive officer, reviews performance and allocates resources. Our
United States: This reportable segment is comprised of Kyndryl’s operations in the United States.
Japan: This reportable segment is comprised of Kyndryl’s operations in Japan.
Principal Markets: This reportable segment represents the aggregation of our operations in Canada, the United Kingdom / Ireland and certain European markets comprised of France, Germany, Italy and Spain / Portugal.
Strategic Markets: This reportable segment represents the aggregation of our 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).
The Company made a minor change to its geographic reportable segments effective during the quarter ended September 30, 2026 to reflect how the Company manages its operations and measures business performance,
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Notes to Consolidated Financial Statements (continued)
transitioning the reporting and management of its operations in India from the Principal Markets segment to the Strategic Markets segment to strengthen coordination across the Asia Pacific region, outside of Japan. All historical reportable segment information has been recast to reflect this change.
The measure of segment operating performance used by Kyndryl’s CODM is adjusted EBITDA, which allows our CODM to evaluate operating results excluding certain items whose fluctuation from period to period do not necessarily correspond to changes in the operations of our business. Adjusted EBITDA is defined as net income excluding income taxes, interest expense, depreciation of property, equipment and capitalized software, amortization of transition costs and prepaid software, amortization of acquisition-related intangible assets, charges related to ceasing to use leased and owned fixed assets, charges related to lease terminations, transaction-related costs and benefits, pension expenses 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. The CODM reviews budget-to-actual variances of revenue and adjusted EBITDA to assess performance and allocate resources to the segments. The Company does not allocate assets to the above reportable segments for our CODM’s review.
Our geographic markets frequently work together to sell and implement certain contracts. The resulting revenues and costs from these contracts may be apportioned among the participating geographic markets. The economic environment and its effects on the industries served by our geographic markets affect revenues and operating expenses within our geographic markets to differing degrees. Currency fluctuations also tend to affect our geographic markets differently, depending on the geographic concentrations and locations of their businesses.
The following tables reflect the results of the Company’s segments:
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2026 | |||||||||||||
| | United | | | | | Principal | | Strategic | | Total | ||||
(Dollars in millions) | | States | | Japan | | Markets | | Markets | | Segments | |||||
Revenue | | $ | | | $ | | | $ | | | $ | | | $ | |
Cost of service, excluding depreciation and amortization(1) | | | | | | | | | | | | | | | |
Selling, general and administrative expenses, excluding depreciation and amortization(1) | | | | | | | | | | | | | | | |
Other items(2) | | | ( | | | | | | | | | | | | |
Segment adjusted EBITDA | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2025 | |||||||||||||
| | United | | | | | Principal | | Strategic | | Total | ||||
(Dollars in millions) | | States | | Japan | | Markets | | Markets | | Segments | |||||
Revenue | | $ | | | $ | | | $ | | | $ | | | $ | |
Cost of service, excluding depreciation and amortization(1) | | | | | | | | | | | | | | | |
Selling, general and administrative expenses, excluding depreciation and amortization(1) | | | | | | | | | | | | | | | |
Other items(2) | | | | | | | | | | | | | | | |
Segment adjusted EBITDA | | $ | | | $ | | | $ | | | $ | | | $ | |
| (1) | Cost of service and general and administrative expenses are both used in calculating segment adjusted EBITDA and exclude depreciation of property, equipment and capitalized software and amortization of transition costs and prepaid software. |
| (2) | Other items include workforce rebalancing charges and other expense (income). |
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Notes to Consolidated Financial Statements (continued)
| | | | | | | | | | | | | | | |
| | Six Months Ended September 30, 2026 | |||||||||||||
| | United | | | | | Principal | | Strategic | | Total | ||||
(Dollars in millions) | | States | | Japan | | Markets | | Markets | | Segments | |||||
Revenue | | $ | | | $ | | | $ | | | $ | | | $ | |
Cost of service, excluding depreciation and amortization(1) | | | | | | | | | | | | | | | |
Selling, general and administrative expenses, excluding depreciation and amortization(1) | | | | | | | | | | | | | | | |
Other items(2) | | | | | | | | | | | | | | | |
Segment adjusted EBITDA | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | |
| | Six Months Ended September 30, 2025 | |||||||||||||
| | United | | | | | Principal | | Strategic | | Total | ||||
(Dollars in millions) | | States | | Japan | | Markets | | Markets | | Segments | |||||
Revenue | | $ | | | $ | | | $ | | | $ | | | $ | |
Cost of service, excluding depreciation and amortization(1) | | | | | | | | | | | | | | | |
Selling, general and administrative expenses, excluding depreciation and amortization(1) | | | | | | | | | | | | | | | |
Other items(2) | | | | | | | | | | | | | | | |
Segment adjusted EBITDA | | $ | | | $ | | | $ | | | $ | | | $ | |
| (1) | Cost of service and general and administrative expenses are both used in calculating segment adjusted EBITDA and exclude depreciation of property, equipment and capitalized software and amortization of transition costs and prepaid software. |
| (2) | Other items include workforce rebalancing charges and other expense (income). |
The following table reconciles segment adjusted EBITDA to consolidated pretax income:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Segment adjusted EBITDA | | $ | | | $ | | | $ | | | $ | |
Transaction-related (costs) benefits | | | ( | | | — | | | | | | — |
Stock-based compensation expense | | | ( | | | ( | | | ( | | | ( |
Impairment expense | | | — | | | — | | | ( | | | — |
Interest expense | | | ( | | | ( | | | ( | | | ( |
Depreciation of property, equipment and capitalized software | | | ( | | | ( | | | ( | | | ( |
Amortization of transition costs and prepaid software(1) | | | ( | | | ( | | | ( | | | ( |
Amortization of acquisition-related intangible assets(1) | | | ( | | | ( | | | ( | | | ( |
Corporate expense not allocated to the segments | | | ( | | | ( | | | ( | | | ( |
Other adjustments(2) | | | ( | | | | | | ( | | | |
Pretax income | | $ | | | $ | | | $ | | | $ | |
| (1) | Amounts have been recast to conform to current period presentation. |
| (2) | Other adjustments represent pension expenses other than pension servicing costs and multi-employer plan costs, significant litigation costs and benefits, and currency impacts of highly inflationary countries. |
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Notes to Consolidated Financial Statements (continued)
NOTE 5. TAXES
For the three months ended September 30, 2026, the Company’s effective tax rate was
The Company’s effective tax rate for the three and six months ended September 30, 2026 and 2025 exceeded the Company’s statutory tax rate primarily due to taxes on foreign operations, uncertain tax positions, and valuation allowances recorded in certain jurisdictions. For the six months ended September 30, 2026, the effective tax rate was additionally impacted by the finalization of the prior-year income tax returns and the level of year-to-date pretax income.
NOTE 6. EARNINGS PER SHARE
We did not declare any dividends in the periods presented. The following table provides the computation of basic and diluted earnings per share of common stock for the three and six months ended September 30, 2026 and 2025.
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||
(In millions, except per share amounts) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Net income on which basic and diluted earnings per share is calculated | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Number of shares on which basic earnings per share is calculated | | | | | | | | | | | | |
Dilutive effect of stock options and equity awards | | | | | | | | | | | | |
Number of shares on which diluted earnings per share is calculated | | | | | | | | | | | | |
| | | | | | | | | | | | |
Basic earnings per share | | $ | | | $ | | | $ | | | $ | |
Diluted earnings per share | |
| | | | | |
| | | | |
The following securities were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive:
| | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||
(In millions) | | 2026 | | 2025 | | 2026 | | 2025 |
Nonvested restricted stock units | | | | | | | | |
Nonvested performance-conditioned stock units | | | | | | | | |
Nonvested market-conditioned stock units | | | | — | | | | — |
Stock options issued and outstanding | | | | — | | | | — |
Total | | | | | | | | |
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Notes to Consolidated Financial Statements (continued)
NOTE 7. FINANCIAL ASSETS AND LIABILITIES
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company classifies certain assets and liabilities based on the following fair value hierarchy:
| ● | Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date, |
| ● | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly and |
| ● | Level 3 – Unobservable inputs for the asset or liability. |
The level of an asset or liability within the fair value hierarchy is determined based on the lowest level of any input that is significant to the fair value measurement. The determination of fair value considers various factors including yield curves and time value underlying the financial instruments. For derivatives and debt securities, the Company uses a discounted cash flow analysis using discount rates commensurate with the duration of the instrument.
In determining the fair value of financial instruments, the Company considers certain market valuation adjustments to the “base valuations” using the methodologies described below for several parameters that market participants would consider in determining fair value:
| ● | Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument. |
| ● | Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s credit risk as observed in the credit default swap market. |
Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are recorded at fair value or at cost, as appropriate, in the period they are initially recognized, and such balances may be adjusted in subsequent periods if an event occurs or circumstances change that indicate that the asset may be impaired. The impairment models used for non-financial assets depend on the type of asset. The fair value measurements, in such instances, would be classified in Level 3 of the fair value hierarchy.
We perform a qualitative assessment of asset impairments on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value is less than carrying value. During the three months ended June 30, 2026, the Company recorded an impairment of $
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Notes to Consolidated Financial Statements (continued)
Financial Assets and Liabilities Measured at Fair Value
The following table presents the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at September 30, 2026 and March 31, 2026:
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | | | | | | | | | | | | | | | | | |
| | Hierarchy | | At September 30, 2026 | | At March 31, 2026 | ||||||||||||||
(Dollars in millions) | | Level | | Assets | | Liabilities | | Fair Value | | Assets | | Liabilities | | Fair Value | ||||||
Derivatives designated as hedging instruments: | | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | 2 | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( |
Cross-currency swap contracts | | 2 | | | | | | | | | | | | | | | | | | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | 2 | | | | | | | | | ( | | | | | | | | | ( |
Total | | | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( |
The gross balances of derivative assets, including accrued interest, are contained within Prepaid expenses and other current assets, and Other noncurrent assets in the Consolidated Balance Sheet. The gross balances of derivative liabilities are contained within Other accrued expenses and liabilities, and Other noncurrent liabilities in the Consolidated Balance Sheet. The Company may enter into master netting agreements with certain counterparties that allow for netting of exposures. There was
Financial Assets and Liabilities Not Measured at Fair Value
Accounts receivable are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt are financial liabilities with carrying values that approximate fair value. If measured at fair value in the consolidated financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy, except for short-term debt, which would be classified as Level 2.
The Company also has time deposits that have maturities of 90 days or less, and their carrying values approximate fair value. They are measured for impairment on a recurring basis by comparing their fair value with their amortized cost basis. There were
The Company’s long-term debt is comprised primarily of registered debt, and its fair value is based on quoted prices in active markets for identical debt instruments, which is a Level 1 measurement. The fair value of our other long-term debt (excluding finance lease obligations) is calculated using an expected present value technique that uses rates currently available to the Company for debt in active markets with similar terms and remaining maturities, which is a Level 2 measurement. Our outstanding debt (excluding finance lease obligations) had a carrying value of $
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Notes to Consolidated Financial Statements (continued)
Transfers of Financial Assets
The Company has entered into arrangements with third-party financial institutions to sell certain financial assets (primarily accounts receivables) without recourse. The Company has determined these are true sales. The carrying value of the financial asset sold is derecognized, and a net gain or loss on the sale is recognized, at the time of the transfer.
The net proceeds from these arrangements are reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows. Gross proceeds from receivables sold to third parties were $
Derivative Financial Instruments
The following table summarizes the notional amounts of the Company’s outstanding derivatives:
| | | | | | | | | | | | | | | | | | |
| | At September 30, 2026 | | At March 31, 2026 | ||||||||||||||
(Dollars in millions) | | Foreign Exchange Contracts | | Cross-currency Swap Contracts | | Total Notional Amount | | Foreign Exchange Contracts | | Cross-currency Swap Contracts | | Total Notional Amount | ||||||
Derivatives designated as hedging instruments | | | | | | | | | | | | | | | | | | |
Cash flow hedges | | $ | | | $ | — | | $ | | | $ | | | $ | — | | $ | |
Net investment hedges | | | — | | | | | | | | | | | | | | | |
Derivatives not designated as hedging instruments | | $ | | | $ | — | | $ | | | $ | | | $ | — | | $ | |
The notional amounts of derivative instruments do not necessarily represent the amounts exchanged by the Company with third parties and are not necessarily a direct measure of the financial exposure.
Derivatives Designated as Hedging Instruments
Cash Flow Hedges
The Company has foreign exchange derivative financial instruments designated as cash flow hedges to manage the volatility of cash flows that relate to operating expenses and intercompany payments for royalties denominated in certain currencies. Changes in fair value of derivatives designated as cash flow hedges are recorded, net of applicable taxes, in other comprehensive income (“OCI”) and subsequently reclassified into the same income statement line item as the hedged exposure when the underlying hedged item is recognized in earnings. The cash flows associated with derivatives designated as cash flow hedges are reported as cash flows from operating activities in the Consolidated Statement of Cash Flows.
At September 30, 2026, the maximum remaining length of time over which the Company has hedged its exposure is approximately one year. At September 30, 2026 and March 31, 2026, the weighted-average remaining maturity of these instruments was approximately
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Notes to Consolidated Financial Statements (continued)
reclassified to net income within the next twelve months, providing an offsetting economic impact against the underlying anticipated transactions.
Net Investment Hedges
The Company has entered into and designated cross-currency interest rate swap contracts and currency forward contracts as net investment hedges to mitigate foreign exchange exposure related to net investments. Under the terms of the cross-currency swaps, the Company makes fixed-rate payments in foreign currencies and receives fixed-rate amounts in U.S. dollars, with the exchange of the underlying notional amounts at maturity whereby the Company will receive U.S. dollars and pay foreign currencies at exchange rates which are determined at contract inception. Under the terms of the currency forward contracts, the Company commits to sell the local currency of certain subsidiaries in exchange for U.S. dollars at specified forward rates. Derivatives designated as net investment hedges are accounted for using the spot method, with changes in the fair value of the derivatives attributable to changes in spot rates recorded within foreign currency translation adjustments (“CTA”) as a component of other comprehensive income (loss) and remaining there until the hedged net investments are sold or substantially liquidated. The difference between the forward rate and spot rate is excluded from the assessment of hedge effectiveness. Excluded components are recognized in interest expense on the Consolidated Income Statement on a systematic and rational basis over the life of the derivative instruments. Cash flows from derivatives designated as net investment hedges are reported as cash flows from investing activities in the Consolidated Statement of Cash Flows, except for cash flows from the periodic interest settlements of cross-currency interest rate swaps designated as net investment hedges, which are reported as cash flows from operating activities in the Consolidated Statement of Cash Flows.
At September 30, 2026, the maximum remaining length of time over which the Company has hedged its exposure is approximately
In September 2026, the Company entered into non-designated foreign currency forward contracts to lock in the expected settlement amounts of its remaining foreign currency forward net investment hedge positions scheduled to mature in October 2026. These contracts, together with the net investment hedges that were de-designated, were the primary driver of the increase in the notional amount of derivatives not designated as hedging instruments and were subsequently settled in October 2026.
Derivatives Not Designated as Hedging Instruments
The Company enters into currency forward and swap contracts to hedge exposures related to assets, liabilities and earnings across its subsidiaries. These contracts are not designated as hedging instruments, and therefore changes in fair value of these contracts are reported in earnings in Other expense (income) in the Consolidated Income Statement. The gains and losses on these contracts generally offset the gains and losses in the underlying hedged exposures, which are also reported in Other expense (income) in the Consolidated Income Statement. Cash flows from derivatives not designated as hedges are reported as cash flows from investing activities in the Consolidated Statement of Cash Flows. The terms of these swap contracts are generally less than
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Notes to Consolidated Financial Statements (continued)
The Effect of Derivative Instruments in the Consolidated Income Statement
The effects of derivatives designated as hedging instruments on the Consolidated Income Statement and Other Comprehensive Income are as follows:
| | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | Unrealized Gain (Loss) | | Consolidated | | Gain (Loss) Reclassified | | Amounts Excluded from | ||||||||||||
Three months ended | | Recognized in OCI | | Income Statement | | from AOCI to Income | | Effectiveness Testing | ||||||||||||
September 30: | | 2026 | | 2025 | | Line Item | | 2026 | | 2025 | | 2026 | | 2025 | ||||||
Derivative instruments in cash flow hedges: | | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | $ | ( | | $ | | | Cost of services | | $ | ( | | $ | ( | | $ | — | | $ | — |
| | | | | | | | Other expense (income) | | | — | | | | | | — | | | — |
Derivative instruments in net investment hedges: | | | | | | | | | | | | | | | | | | | | |
Cross-currency swaps | | | ( | | | | | Interest expense | | | — | | | — | | | | | | |
Foreign exchange contracts | | | ( | | | | | Interest expense | | | — | | | — | | | | | | |
Total | | $ | ( | | $ | | | | | $ | ( | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | Unrealized Gain (Loss) | | Consolidated | | Gain (Loss) Reclassified | | Amounts Excluded from | ||||||||||||
Six months ended | | Recognized in OCI | | Income Statement | | from AOCI to Income | | Effectiveness Testing | ||||||||||||
September 30: | | 2026 | | 2025 | | Line Item | | 2026 | | 2025 | | 2026 | | 2025 | ||||||
Derivative instruments in cash flow hedges: | | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | $ | | | $ | ( | | Cost of services | | $ | — | | $ | ( | | $ | — | | $ | — |
| | | | | | | | Other expense (income) | | | — | | | | | | — | | | — |
Derivative instruments in net investment hedges: | | | | | | | | | | | | | | | | | | | | |
Cross-currency swaps | | | ( | | | ( | | Interest expense | | | — | | | — | | | | | | |
Foreign exchange contracts | | | — | | | ( | | Interest expense | | | — | | | — | | | | | | |
Total | | $ | ( | | $ | ( | | | | $ | ( | | $ | ( | | $ | | | $ | |
For the three and six months ended September 30, 2026 and 2025, the gains or losses due to underlying exposure that did not occur or was not expected to occur were immaterial.
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Notes to Consolidated Financial Statements (continued)
The effects of derivatives not designated as hedging instruments on the Consolidated Income Statement are as follows:
| | | | | | | | |
| | Consolidated | | Gain (Loss) | ||||
(Dollars in millions) | | Income Statement | | Recognized on Derivatives | ||||
Three months ended September 30: | | Line Item | | 2026 | | 2025 | ||
Foreign exchange contracts | | Other expense (income) | | $ | ( | | $ | ( |
Total | | | | $ | ( | | $ | ( |
| | | | | | | | |
| | Consolidated | | Gain (Loss) | ||||
(Dollars in millions) | | Income Statement | | Recognized on Derivatives | ||||
Six months ended September 30: | | Line Item | | 2026 | | 2025 | ||
Foreign exchange contracts | | Other expense (income) | | $ | | | $ | |
Total | | | | $ | | | $ | |
For the three months ended September 30, 2026 and 2025, our net income included a loss of $
NOTE 8. ACQUISITIONS AND DIVESTITURES
Acquisition of Healthcare IT Leaders, LLC
In September 2026, the Company completed the acquisition of Healthcare IT Leaders, LLC (“Healthcare IT Leaders”), an enterprise IT services provider serving hospitals and health systems across the United States, by acquiring all outstanding equity interests of Healthcare IT Leaders. The acquisition strengthens the Company’s capabilities in healthcare application implementation and managed services and expands the Company’s ability to help healthcare customers modernize mission-critical systems and accelerate digital transformation. The acquisition of Healthcare IT Leaders was accounted for as a business combination in accordance with ASC 805, Business Combinations. Costs associated with this acquisition were immaterial. The operations of Healthcare IT Leaders are included in the Company’s operating results beginning on the acquisition date. Historical and pro forma disclosures are not provided as the historical operating results of Healthcare IT Leaders were not material to the Company’s consolidated financial statements.
The total purchase consideration consisted of $
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Notes to Consolidated Financial Statements (continued)
The purchase price allocation resulted in approximately $
Proposed Acquisition of Solvinity
In November 2025, the Company entered into an agreement to acquire all outstanding equity interests of Solvinity Group B.V. (“Solvinity”), a provider of managed cloud platforms and services in the Netherlands, for cash consideration of approximately €
Other Disposal Activity
In April 2026, the Company entered into a definitive agreement to sell a wholly-owned digital solutions subsidiary within the Company's Principal Markets segment. During the three months ended June 30, 2026, the Company completed the sale of the business. In connection with the sale, the Company recognized a $
NOTE 9. INTANGIBLE ASSETS INCLUDING GOODWILL
Intangible Assets
The following table presents the Company’s intangible asset balances by major asset class.
| | | | | | | | | | | | | | | | | | |
| | At September 30, 2026 | | At March 31, 2026 | ||||||||||||||
| | Gross Carrying | | Accumulated | | Net Carrying |
| Gross Carrying | | Accumulated | | Net Carrying | ||||||
(Dollars in millions) | | Amount | | Amortization | | Amount |
| Amount | | Amortization | | Amount | ||||||
Capitalized software | | $ | | | $ | ( | | $ | | | $ | | | $ | ( | | $ | |
Customer relationships* | | | | |
| ( | |
| | |
| | |
| ( | |
| |
Completed technology | |
| | |
| ( | |
| | |
| | |
| ( | |
| |
Patents and trademarks* | |
| | |
| ( | |
| | |
| | |
| ( | |
| |
Total | | $ | | | $ | ( | | $ | | | $ | | | $ | ( | | $ | |
| * | Amounts include effects from foreign currency translation. |
The net carrying amount of intangible assets increased by $
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Notes to Consolidated Financial Statements (continued)
million and $
The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet was estimated to be the following at September 30, 2026:
| | | | | | | | | | | | | | | |
| | Capitalized | | Customer | | Completed | | Patents and | | | |||||
(Dollars in millions) | | Software | | Relationships | | Technology | | Trademarks | | Total | |||||
Year ending March 31: | | | | | | | | | | | | | | | |
2027 (remaining six months) | | $ | | | $ | | $ | | $ | | $ | ||||
2028 | | | | | | | | | | | |
| |||
2029 | | | | | | | | | | | |
| |||
2030 | | | | | | | | | | | | |
| ||
2031 | | | | | | | | — | | | | |
| ||
Thereafter | | | | | | | | | — | | | | |
| |
Goodwill
The changes in the goodwill balances by segment for the six months ended September 30, 2026 were as follows:
| | | | | | | | | | | | | | | |
| | | | | | | | Foreign Currency | | | | | | ||
(Dollars in millions) | | Balance at | | | | Translation | | | | | Balance at | ||||
Segment | | March 31, 2026 | | Acquisitions* | | Adjustments | | Reallocation | | September 30, 2026 | |||||
United States | | $ | | | $ | | | $ | — | | $ | — | | $ | |
Japan | | | | | | — | | | | | | — | | | |
Principal Markets | |
| | |
| — | |
| — | |
| ( | |
| |
Strategic Markets | |
| | |
| — | |
| — | |
| | |
| |
Total | | $ | | | $ | | | $ | | | $ | — | | $ | |
| * | This amount represent the goodwill acquired as part of the purchase of Healthcare IT Leaders. See Note 8 – Acquisitions and Divestitures for additional details. |
As disclosed in Note 4 – Segments, Kyndryl’s operations in India transitioned from the Principal Markets segment to the Strategic Markets segment in the quarter ended September 30, 2026. In addition to reallocating goodwill from Principal Markets to Strategic Markets, the Company further refined its reporting unit structure within Strategic Markets. This resulted in a reallocation of goodwill within Strategic Markets reporting units using the relative fair value approach.
The Company performed a quantitative impairment test immediately before and after the change in reporting units and concluded that their fair values exceeded carrying values, including goodwill. Accordingly, the Company concluded that the goodwill related to those reporting units was not impaired.
There were
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Notes to Consolidated Financial Statements (continued)
NOTE 10. BORROWINGS
The Company’s total current portion of long-term debt and short-term debt as of September 30, 2026 and March 31, 2026 was $
Debt
The following table presents the components of our long-term debt:
| | | | | | | | | | |
| | | | | | September 30, | | March 31, | ||
(Dollars in millions) | | Interest Rate | | Maturity | | 2026 | | 2026 | ||
Unsecured senior notes due 2026 | | | October 2026 | | $ | | | $ | | |
Unsecured senior notes due 2028 | | | October 2028 | | | | | | | |
Unsecured senior notes due 2029 | | | September 2029 | | | | | | — | |
Unsecured senior notes due 2031 | | | October 2031 | | | | | | | |
Unsecured senior notes due 2032 | | | January 2032 | | | | | | — | |
Unsecured senior notes due 2034 | | | February 2034 | | | | | | | |
Unsecured senior notes due 2041 | | | October 2041 | | | | | | | |
Finance lease and other obligations | | | 2027-2032 | | | | | | | |
| | | | | | $ | | | $ | |
Less: Unamortized discount | | | | | | | | | | |
Less: Unamortized debt issuance costs | | | | | | | | | | |
Less: Current portion of long-term debt | | | | | | | | | | |
Total long-term debt | | | | | | $ | | | $ | |
| (1) | Including the cross-currency swaps that the Company entered into subsequent to the issuance of the unsecured senior notes due 2034, the effective interest rate on such notes was approximately |
| (2) | Weighted-average discount rate. |
Contractual obligations of long-term debt outstanding at September 30, 2026, exclusive of finance lease obligations, are as follows:
| | | |
(Dollars in millions)* | | Principal | |
Year ending March 31: | | | |
2027 (remaining six months) | | $ | |
2028 | |
| |
2029 | |
| |
2030 | |
| |
2031 | | | |
Thereafter | |
| |
Total | | $ | |
| * | Contractual obligations approximate scheduled repayments. |
In February 2026, the Company borrowed $
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Notes to Consolidated Financial Statements (continued)
In September 2026, the Company completed a registered offering of $
In October 2026, the Company repaid at maturity the $
In November 2026, the Company established a commercial paper program, under which we may issue short-term commercial paper notes from time to time of up to a maximum aggregate principal amount of $
The Company is in compliance with its debt covenants in all periods presented.
NOTE 11. COMMITMENTS AND CONTINGENCIES
The Company guarantees certain loans and financial commitments. The maximum potential future payment under these financial guarantees and the fair value of these guarantees recognized in the Consolidated Balance Sheet at September 30, 2026 and March 31, 2026 were not material. Additionally, the Company has contractual commitments that are noncancellable with certain software, hardware and cloud partners used in the delivery of services to customers. During the six months ended September 30, 2026, contractual commitments decreased due to satisfaction of existing commitments outpacing new additions.
As a Fortune 500 company with customers and employees around the world, Kyndryl is subject to, and could become subject to, either as plaintiff or defendant, a variety of contingencies, including claims, demands and suits, investigations, tax matters and other legal proceedings that arise from time to time, including in the ordinary course of its business. In addition, given the rapidly evolving external landscape of cybersecurity, privacy and data protection laws, regulations and threat actors, the Company or its clients have and could become subject to actions or proceedings in various jurisdictions. The Company is also subject to, and could become subject to, actions and proceedings in various jurisdictions involving a wide range of labor and employment issues (including matters related to contested employment decisions, country-specific labor and employment laws, and the Company’s benefit plans), as well as actions with respect to commercial matters, contracts, securities, foreign operations, competition law, environmental matters and regulatory compliance matters, among others. These actions have been and may be commenced by a number of different parties, including competitors, clients, suppliers, service providers, licensees, employees, government and regulatory agencies, stockholders and representatives of the locations in which the Company does business. Some of the actions to which the Company is, or may become, party involve particularly complex technical issues, and some actions raise novel questions under the laws of the various jurisdictions in which these matters arise. Additionally, the Company is, and may become, a party to agreements pursuant to which it may be obligated to indemnify the other party with respect to certain disputed matters. The Company cannot predict the final outcome in any type of legal proceeding described above and there can be no assurance that the Company will be successful or obtain any requested relief or outcome in any matter.
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Notes to Consolidated Financial Statements (continued)
Matters often develop over a long period of time and expectations can change as a result of new findings, rulings, appeals, settlements, legal or regulatory changes or other factors. From time to time, the Company may discontinue or settle matters as appropriate in the Company’s best interest.
The Company records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If the Company is unable to assess the outcome of a matter or estimate the possible loss or range of losses that could potentially result from such matter, a liability is not recorded.
The Company reviews claims, suits, investigations and proceedings, and decisions are made with respect to recording or adjusting provisions and relevant disclosures to reflect the impact and status of settlement discussions, discovery, procedural and substantive rulings, reviews by counsel and other information pertinent to a particular matter.
Whether any losses, damages or remedies finally determined in any claim, suit, investigation or proceeding could reasonably have a material effect on the Company’s business, financial condition, results of operations or cash flows will depend on a number of variables, including the timing and amount of such losses or damages; the structure and type of any such remedies; the significance of the impact any such losses, damages or remedies may have in the consolidated financial statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors. While the Company will continue to prosecute or defend itself vigorously, as appropriate, it is possible that the Company’s business, financial condition, results of operations or cash flows could be affected overall or in any particular fiscal period by any of these matters or any claims or legal proceedings that arise as a result of these matters. In addition, the legal costs associated with the foregoing could be substantial, regardless of their outcome.
SEC Matter
The Company continues to cooperate with the Division of Enforcement of the Securities and Exchange Commission (the “SEC”) in its investigation relating to the Company’s cash management practices, related disclosures, the efficacy of the Company’s internal control over financial reporting, and certain other matters. The matter is ongoing and the Company cannot currently predict its final outcome.
Securities Litigation
In March 2026, a purported Company stockholder filed a putative class action in the U.S. District Court for the Southern District of New York against the Company and certain current and former officers, alleging false and misleading statements in the Company’s disclosures. Following the appointment of a lead plaintiff, an amended complaint was filed in August 2026, and the defendants filed a motion to dismiss it in November 2026. The plaintiff seeks monetary damages and costs and expenses. The matter is ongoing and the Company cannot currently predict its final outcome.
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Notes to Consolidated Financial Statements (continued)
NOTE 12. EQUITY
The following tables present reclassifications and taxes related to items of other comprehensive income (loss) for the three and six months ended September 30, 2026 and 2025:
| | | | | | | | | |
| | Pretax | | Tax (Expense) | | Net-of-Tax | |||
(Dollars in millions) | | Amount | | Benefit | | Amount | |||
For the three months ended September 30, 2026: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Foreign currency translation adjustments | | $ | ( | | $ | — | | $ | ( |
Unrealized gains (losses) on net investment hedges | | | ( | | | — | | | ( |
Total foreign currency translation adjustments | | $ | ( | | $ | — | | $ | ( |
Unrealized gains (losses) on cash flow hedges: | | | | | | | | | |
Unrealized gains (losses) arising during the period | | $ | ( | | $ | — | | $ | ( |
Reclassification of (gains) losses to net income | | | | | | — | | | |
Total unrealized gains (losses) on cash flow hedges | | $ | ( | | $ | — | | $ | ( |
Retirement-related benefit plans: | | | | | | | | | |
Amortization of prior service costs (credits) | | $ | | | $ | — | | $ | |
Amortization of net (gains) losses | | | — | | | — | | | — |
Total retirement-related benefit plans | | $ | | | $ | ( | | $ | |
Other comprehensive income (loss) | | $ | ( | | $ | — | | $ | ( |
| | | | | | | | | |
For the three months ended September 30, 2025: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Foreign currency translation adjustments | | $ | ( | | $ | — | | $ | ( |
Unrealized gains (losses) on net investment hedges | | | | | | — | | | |
Total foreign currency translation adjustments | | $ | ( | | $ | — | | $ | ( |
Unrealized gains (losses) on cash flow hedges: | | | | | | | | | |
Unrealized gains (losses) arising during the period | | $ | | | $ | — | | $ | |
Reclassification of (gains) losses to net income | | | ( | | | — | | | ( |
Total unrealized gains (losses) on cash flow hedges | | $ | | | $ | — | | $ | |
Retirement-related benefit plans – amortization of net (gains) losses | | $ | | | $ | ( | | $ | |
Other comprehensive income (loss) | | $ | | | $ | ( | | $ | |
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Notes to Consolidated Financial Statements (continued)
| | | | | | | | | |
| | Pretax | | Tax (Expense) | | Net-of-Tax | |||
(Dollars in millions) | | Amount | | Benefit | | Amount | |||
For the six months ended September 30, 2026: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Foreign currency translation adjustments | | $ | ( | | $ | — | | $ | ( |
Unrealized gains (losses) on net investment hedges | | | ( | | | — | | | ( |
Total foreign currency translation adjustments | | $ | ( | | $ | — | | $ | ( |
Unrealized gains (losses) on cash flow hedges: | | | | | | | | | |
Unrealized gains (losses) arising during the period | | $ | | | $ | — | | $ | |
Reclassification of (gains) losses to net income | | | | | | — | | | — |
Total unrealized gains (losses) on cash flow hedges | | $ | | | $ | — | | $ | |
Retirement-related benefit plans: | | | | | | | | | |
Amortization of prior service costs (credits) | | $ | | | $ | ( | | $ | |
Amortization of net (gains) losses | | | | | | — | | | |
Total retirement-related benefit plans | | $ | | | $ | ( | | $ | |
Other comprehensive income (loss) | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | |
For the six months ended September 30, 2025: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Foreign currency translation adjustments | | $ | | | $ | — | | $ | |
Unrealized gains (losses) on net investment hedges | | | ( | | | — | | | ( |
Total foreign currency translation adjustments | | $ | | | $ | — | | $ | |
Unrealized gains (losses) on cash flow hedges: | | | | | | | | | |
Unrealized gains (losses) arising during the period | | $ | ( | | $ | — | | $ | ( |
Reclassification of (gains) losses to net income | | | | | | | | | |
Total unrealized gains (losses) on cash flow hedges | | $ | ( | | $ | | | $ | — |
Retirement-related benefit plans – amortization of net (gains) losses | | $ | | | $ | ( | | $ | |
Other comprehensive income (loss) | | $ | | | $ | ( | | $ | |
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Notes to Consolidated Financial Statements (continued)
The following tables present the components of accumulated other comprehensive income (loss), net of taxes:
| | | | | | | | | | | | |
| | Net Unrealized | | Foreign | | Net Change | | Accumulated | ||||
| | Gain (Losses) | | Currency | | Retirement- | | Other | ||||
| | on Cash | | Translation | | Related | | Comprehensive | ||||
(Dollars in millions) | | Flow Hedges | | Adjustments* | | Benefit Plans | | Income (Loss) | ||||
July 1, 2026 | | $ | — | | $ | ( | | $ | ( | | $ | ( |
Other comprehensive income (loss) | | | ( | | | ( | | | | | | ( |
September 30, 2026 | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | | | | |
July 1, 2025 | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Other comprehensive income (loss) | | | | | | ( | | | | | | |
September 30, 2025 | | $ | — | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | | | | |
| | Net Unrealized | | Foreign | | Net Change | | Accumulated | ||||
| | Gain (Losses) | | Currency | | Retirement- | | Other | ||||
| | on Cash | | Translation | | Related | | Comprehensive | ||||
(Dollars in millions) | | Flow Hedges | | Adjustments* | | Benefit Plans | | Income (Loss) | ||||
April 1, 2026 | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Other comprehensive income (loss) | | | | | | ( | | | | | | ( |
September 30, 2026 | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | | | | |
April 1, 2025 | | $ | | | $ | ( | | $ | ( | | $ | ( |
Other comprehensive income (loss) | | | — | | | | | | | | | |
September 30, 2025 | | $ | — | | $ | ( | | $ | ( | | $ | ( |
* | Foreign currency translation adjustments are presented gross except for any associated hedges, which are presented net of tax. |
Share Repurchase Program
In November 2024, the Company’s Board of Directors authorized a share repurchase program of up to $
During the three and six months ended September 30, 2026, the Company repurchased
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Notes to Consolidated Financial Statements (continued)
NOTE 13. RETIREMENT-RELATED BENEFITS
The following table presents the components of net periodic pension cost for the defined benefit pension plans recognized in the Consolidated Income Statement for the three and six months ended September 30, 2026 and 2025.
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Service cost |
| $ | |
| $ | |
| $ | |
| $ | |
Interest cost* | |
| | |
| | |
| | |
| |
Expected return on plan assets* | |
| ( | |
| ( | |
| ( | |
| ( |
Amortization of prior service costs (credits)* | |
| | |
| — | |
| | |
| — |
Recognized actuarial losses (gains)* | | | | | | | | | | | | |
Net periodic pension cost |
| $ | |
| $ | |
| $ | |
| $ | |
* These components of net periodic pension cost are included in Other expense (income) in the Consolidated Income Statement.
The components of net periodic benefit cost for the nonpension postretirement benefit plans and multi-employer plans recognized in the Consolidated Income Statement were not material for any period presented.
NOTE 14. WORKFORCE REBALANCING CHARGES
During the six months ended September 30, 2026, the Company initiated actions to reduce our overall cost structure and increase our operating efficiency, which we expect to continue through the end of the fiscal year 2027 (the “Fiscal 2027 Actions”). We expect these actions will result in workforce rebalancing charges of approximately $
During the year ended March 31, 2026, the Company initiated actions to reduce our overall cost structure and increase our operating efficiency which continued through the end of the fiscal year 2026 (the “Fiscal 2026 Program”). The total charges incurred related to the Fiscal 2026 Program were $
The following table presents the segment breakout of charges incurred during the three and six months ended September 30, 2026 and 2025. These charges are recorded within workforce rebalancing charges on the Consolidated Income Statement.
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Costs Incurred to Date | ||||||||||||
| | September 30, | | September 30, | | Fiscal 2027 | | Fiscal 2026 | ||||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | | Actions | | Program | ||||||
United States | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Japan | | | | | | | | | | | | | | | | | | |
Principal Markets* | | | | | | | | | | | | | | | | | | |
Strategic Markets* | | | | | | | | | | | | | | | | | | |
Total charges | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| * | Kyndryl’s operations in India transitioned from Principal Markets to Strategic Markets in the quarter ended September 30, 2026; historical segment information has been recast to reflect this change. |
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Notes to Consolidated Financial Statements (continued)
The following table presents the components of and changes in our workforce rebalancing liabilities during the six months ended September 30, 2026. Workforce rebalancing liabilities are recorded within other liabilities in the Consolidated Balance Sheet.
| | | | | | |
| | Workforce | | Workforce | ||
| | Fiscal 2027 | | Fiscal 2026 | ||
(Dollars in millions) | | Actions | | Program* | ||
Balance at March 31, 2026 | | $ | — | | $ | |
Charges | | | | | | — |
Cash payments | | | ( | | | ( |
Non-cash adjustments | | | ( | | | — |
Balance at September 30, 2026 | | $ | | | $ | |
| * | The Fiscal 2026 Program balance excludes workforce rebalancing liabilities inherited from our former Parent of $ |
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Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2026
Overview
Kyndryl 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.
The Company is organized, managed and classified into four reportable segments by geography: United States, Japan, Principal Markets and Strategic Markets. For additional information on these segments, refer to Note 4 – Segments to our consolidated financial statements included elsewhere in this report. The Company made a minor change to its geographic reportable segments effective during the quarter ended September 30, 2026 to reflect how the Company manages its operations and measures business performance, transitioning the reporting and management of its operations in India from the Principal Markets segment to the Strategic Markets segment to strengthen coordination across the Asia Pacific region, outside of Japan. All historical reportable segment information has been recast to reflect this change.
Financial Performance Summary
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||||||
Revenue | | $ | 3,651 | | | $ | 3,721 | | | $ | 7,269 | | | $ | 7,464 | |
Revenue growth (GAAP) | | | (1.9) | % | | | (1.4) | % | | | (2.6) | % | | | (0.7) | % |
Revenue growth in constant currency* | | | (0.8) | % | | | (3.7) | % | | | (2.1) | % | | | (3.2) | % |
Net income | | $ | 59 | | | $ | 68 | | | $ | 4 | | | $ | 124 | |
Adjusted EBITDA* | | $ | 699 | | | $ | 641 | | | $ | 1,211 | | | $ | 1,288 | |
| * | Revenue growth in constant currency and adjusted EBITDA are non-GAAP financial metrics. For definitions of these metrics and a reconciliation of adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, see “Segment Results” below. |
| | | | | | |
| | September 30, | | March 31, | ||
(Dollars in millions) | | 2026 | | 2026 | ||
Assets | | $ | 11,866 | | $ | 12,551 |
Liabilities | | | 10,689 | | | 11,259 |
Equity | | | 1,176 | | | 1,293 |
For the three months ended September 30, 2026, we reported $3.7 billion in revenue, a decrease of 1.9 percent, and 0.8 percent in constant currency, compared to the prior-year period. United States revenue increased 9.0 percent; Japan revenue decreased 4.6 percent, and in constant currency, revenue increased 2.9 percent; Principal Markets revenue decreased 6.1 percent, and decreased 4.8 percent in constant currency; and Strategic Markets revenue decreased 4.8 percent, and decreased 6.7 percent in constant currency, in each case compared to the three months ended September 30, 2025. Net income was $59 million in the three months ended September 30, 2026 compared to net income of $68 million in the three months ended September 30, 2025.
For the six months ended September 30, 2026, we reported $7.3 billion in revenue, a decrease of 2.6 percent, and a decrease of 2.1 percent in constant currency, compared to the prior-year period. United States revenue increased 6.8 percent; Japan revenue decreased 6.1 percent, and in constant currency, revenue increased 2.4 percent; Principal Markets revenue decreased 6.6 percent, and in constant currency, revenue decreased 6.8 percent; and Strategic Markets revenue decreased 4.0 percent, and decreased 6.8 percent in constant currency, in each case compared to the six months ended September 30, 2025. During the period, Kyndryl Consult and hyperscaler-related revenues grew and overall
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Management Discussion (continued)
revenue trends improved as signings gained momentum. Customer decisions involving mission-critical systems remain complex amid the pace of technological innovation and regulatory uncertainty, and factor into the sales cycle timeline. Net income was $4 million in the six months ended September 30, 2026 compared to net income of $124 million in the six months ended September 30, 2025, driven by a $146 million increase in workforce rebalancing charges and a $38 million increase in impairment expense driven by the sale of a facility in the United States, partially offset by a $40 million gain from the sale of a wholly-owned digital solutions subsidiary in the Principal Markets segment (classified as a transaction-related benefit) in the current period.
Macro Dynamics
Global markets have continued to experience volatility in 2026, amid ongoing trade tensions and heightened macroeconomic uncertainties, driven by geopolitical developments and conflicts, concerns over changes in global trade policies and the imposition of import tariffs by the United States, reactions from other nations, proposed U.S. government spending reductions, and AI-related developments and opportunities in our customers’ industries. Increased economic uncertainty has impacted and may continue to impact the level and composition of global macroeconomic activity.
Recent Developments
The Company continues to cooperate with the SEC Division of Enforcement’s investigation relating to the Company’s cash management practices, related disclosures, the efficacy of the Company’s internal control over financial reporting, and certain other matters. The matter is ongoing and the Company cannot currently predict its final outcome. See Note 11 – Commitments and Contingencies in the consolidated financial statements included elsewhere in this report for further information about this and other contingency matters.
In addition, as previously disclosed, the Company identified material weaknesses in internal control over financial reporting. For more information, see “Controls and Procedures” in Part I, Item 4 in this report.
Acquisitions and Divestitures Update
In September, the Company completed its acquisition of Healthcare IT Leaders, an enterprise IT services provider serving hospitals and health systems across the United States, for up to $350 million, including a contingent performance-based earnout. For further information concerning our recent acquisitions and divestitures activity, see Note 8 – Acquisitions and Divestitures in the consolidated financial statements included elsewhere in this report.
Segment Results
The Company made a minor change to its geographic reportable segments effective during the quarter ended September 30, 2026 to reflect how the Company manages its operations and measures business performance, transitioning the reporting and management of its operations in India from the Principal Markets segment to the Strategic Markets segment to strengthen coordination across the Asia Pacific region, outside of Japan. All historical reportable segment information has been recast to reflect this change.
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Management Discussion (continued)
The following table presents our reportable segments’ revenue and adjusted EBITDA for the three and six months ended September 30, 2026 and 2025. Segment revenue and revenue growth in constant currency exclude any transactions between the segments.
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Year-over-Year Change | | Six Months Ended September 30, | | Year-over-Year Change | ||||||||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 vs. 2025 | | 2026 | | 2025 | | 2026 vs. 2025 | ||||||||||
Revenue | | | | | | | | | | | | | | | | | | | | | | |
United States | | $ | 980 | | | $ | 899 | | | 9.0 | % | | $ | 1,933 | | | $ | 1,810 | | | 6.8 | % |
Japan | | | 555 | | | | 581 | | | (4.6) | % | | | 1,089 | | | | 1,160 | | | (6.1) | % |
Principal Markets | | | 1,177 | | | | 1,254 | | | (6.1) | % | | | 2,380 | | | | 2,549 | | | (6.6) | % |
Strategic Markets | | | 939 | | | | 987 | | | (4.8) | % | | | 1,867 | | | | 1,945 | | | (4.0) | % |
Total revenue | | $ | 3,651 | | | $ | 3,721 | | | (1.9) | % | | $ | 7,269 | | | $ | 7,464 | | | (2.6) | % |
Revenue growth in constant currency(1) | | | (0.8) | % | | | (3.7) | % | | | | | | (2.1) | % | | | (3.2) | % | | | |
Adjusted EBITDA(1) | | | | | | | | | | | | | | | | | | | | | | |
United States | | $ | 273 | | | $ | 195 | | | 40 | % | | $ | 493 | | | $ | 391 | | | 26 | % |
Japan | | | 108 | | | | 123 | | | (12) | % | | | 218 | | | | 238 | | | (8) | % |
Principal Markets | | | 201 | | | | 200 | | | 1 | % | | | 346 | | | | 391 | | | (12) | % |
Strategic Markets | | | 142 | | | | 152 | | | (7) | % | | | 210 | | | | 322 | | | (35) | % |
Corporate and other(2) | | | (26) | | | | (28) | | | NM | | | | (56) | | | | (53) | | | NM | |
Total adjusted EBITDA(1) | | $ | 699 | | | $ | 641 | | | 9 | % | | $ | 1,211 | | | $ | 1,288 | | | (6) | % |
NM – not meaningful
| (1) | Revenue growth in constant currency and adjusted EBITDA are non-GAAP financial metrics. See the information below for definitions of these metrics and a reconciliation of adjusted EBITDA to net income. |
| (2) | Represents net amounts not allocated to segments. |
We report our financial results in accordance with U.S. 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 they enhance visibility to underlying results and the impact of management decisions on operational performance, enable better comparison to peer companies and allow us to provide a long-term strategic view of the business going forward.
Revenue growth in constant currency is a non-GAAP measure that eliminates the effects of exchange rate fluctuations when translating from foreign currencies to the United States dollar. It is calculated by using the average exchange rates that existed for the same period of the prior year. Constant-currency measures are provided so that revenue can be viewed without the effect of fluctuations in currency exchange rates, which is consistent with how management evaluates our revenue results and trends.
Additionally, management uses adjusted EBITDA to evaluate our performance. Adjusted EBITDA is a non-GAAP measure and defined as net income excluding income taxes, interest expense, depreciation of property, equipment and capitalized software, amortization of transition costs and prepaid software, amortization of acquisition-related intangible assets, charges related to ceasing to use leased/fixed assets, charges related to lease terminations, transaction-related costs and benefits, pension expenses 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. We believe that adjusted EBITDA is a helpful supplemental measure to assist investors in evaluating our operating results as it excludes certain items whose fluctuation from period to period does not necessarily correspond to changes in the operations of our business.
These disclosures are provided in addition to and not as a substitute for the percentage change in revenue and profit or loss measures on a U.S. GAAP basis compared to the corresponding period in the prior year. Other companies
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may calculate and define similarly labeled items differently, which may limit the usefulness of these measures for comparative purposes.
The following table provides a reconciliation of U.S. GAAP net income to adjusted EBITDA:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Net income | | $ | 59 | | $ | 68 | | $ | 4 | | $ | 124 |
Provision for income taxes | | | 53 | | | 30 | | | 39 | | | 66 |
Interest expense | | | 37 | | | 20 | | | 71 | | | 39 |
Depreciation of property, equipment and capitalized software | | | 189 | | | 193 | | | 372 | | | 384 |
Amortization of transition costs and prepaid software(1) | | | 323 | | | 306 | | | 655 | | | 613 |
Amortization of acquisition-related intangible assets(1) | | | 6 | | | 7 | | | 13 | | | 14 |
Transaction-related costs (benefits) | | | 3 | | | — | | | (36) | | | — |
Stock-based compensation expense | | | 22 | | | 26 | | | 43 | | | 50 |
Impairment expense | | | — | | | — | | | 38 | | | — |
Other adjustments(2) | | | 7 | | | (9) | | | 12 | | | (4) |
Adjusted EBITDA (non-GAAP) | | $ | 699 | | $ | 641 | | $ | 1,211 | | $ | 1,288 |
| (1) | Amounts have been recast to conform to current period presentation. |
| (2) | Other adjustments represent pension expenses other than pension servicing costs and multi-employer plan costs, significant litigation costs and benefits, and currency impacts of highly inflationary countries. |
United States
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||||||
Revenue | | $ | 980 | | | $ | 899 | | | $ | 1,933 | | | $ | 1,810 | |
Revenue year-over-year change | | | 9.0 | % | | | (6.3) | % | | | 6.8 | % | | | (7.0) | % |
Adjusted EBITDA | | $ | 273 | | | $ | 195 | | | $ | 493 | | | $ | 391 | |
Adjusted EBITDA year-over-year change | | | 40 | % | | | | | | | 26 | % | | | | |
For the three months ended September 30, 2026, United States revenue of $980 million increased 9.0 percent compared to the prior-year quarter, primarily driven by higher revenue from recent signings and additional resource usage under managed services contracts, and included the resolution of a commercial matter which contributed 3 points of growth in revenue. Adjusted EBITDA increased $78 million from the prior-year quarter, driven by the higher revenue and progress on our key initiatives to drive operating efficiencies, as well as the resolution of a commercial matter, which contributed 15 points of growth.
For the six months ended September 30, 2026, United States revenue of $1.9 billion increased 6.8 percent compared to the prior-year period, driven by higher revenue from recent signings. Adjusted EBITDA increased $102 million from the prior-year period, driven by the higher revenue and progress on our key initiatives to drive operating efficiencies, partially offset by a $14 million increase in workforce rebalancing charges.
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Japan
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||||||
Revenue | | $ | 555 | | | $ | 581 | | | $ | 1,089 | | | $ | 1,160 | |
Revenue year-over-year change | | | (4.6) | % | | | (3.8) | % | | | (6.1) | % | | | (1.2) | % |
Revenue growth in constant currency | | | 2.9 | % | | | (4.6) | % | | | 2.4 | % | | | (5.2) | % |
Adjusted EBITDA | | $ | 108 | | | $ | 123 | | | $ | 218 | | | $ | 238 | |
Adjusted EBITDA year-over-year change | | | (12) | % | | | | | | | (8) | % | | | | |
For the three months ended September 30, 2026, Japan revenue of $555 million decreased 4.6 percent and included a 7.5-point impact from currency. Revenue growth in constant currency of 2.9 percent was primarily driven by higher revenue in Kyndryl Consult. Adjusted EBITDA decreased $15 million from the prior-year quarter, driven by lower revenue and a $4 million increase in workforce rebalancing charges.
For the six months ended September 30, 2026, Japan revenue of $1.1 billion decreased 6.1 percent and included an 8.5-point impact from currency. Revenue growth in constant currency of 2.4 percent was primarily driven by higher revenue from recent signings. Adjusted EBITDA decreased $20 million from the prior-year period, driven by lower revenue and a $9 million increase in workforce rebalancing charges.
Principal Markets
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||||||
Revenue | | $ | 1,177 | | | $ | 1,254 | | | $ | 2,380 | | | $ | 2,549 | |
Revenue year-over-year change | | | (6.1) | % | | | 1.3 | % | | | (6.6) | % | | | 2.2 | % |
Revenue growth in constant currency | | | (4.8) | % | | | (3.8) | % | | | (6.8) | % | | | (2.1) | % |
Adjusted EBITDA | | $ | 201 | | | $ | 200 | | | $ | 346 | | | $ | 391 | |
Adjusted EBITDA year-over-year change | | | 1 | % | | | | | | | (12) | % | | | | |
For the three months ended September 30, 2026, Principal Markets revenue of $1.2 billion decreased 6.1 percent, and decreased 4.8 percent in constant currency, compared to the prior-year quarter, which primarily reflects the completion of lower-margin customer projects and contracts. Adjusted EBITDA increased $1 million from the prior-year quarter.
For the six months ended September 30, 2026, Principal Markets revenue of $2.4 billion decreased 6.6 percent compared to the prior-year period, which primarily reflects the completion of lower-margin customer projects and contracts. Adjusted EBITDA decreased $45 million from the prior-year period, primarily driven by a $36 million increase in workforce rebalancing charges and lower revenue.
Strategic Markets
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||||||
Revenue | | $ | 939 | | | $ | 987 | | | $ | 1,867 | | | $ | 1,945 | |
Revenue year-over-year change | | | (4.8) | % | | | 1.6 | % | | | (4.0) | % | | | 2.5 | % |
Revenue growth in constant currency | | | (6.7) | % | | | (0.4) | % | | | (6.8) | % | | | 0.6 | % |
Adjusted EBITDA | | $ | 142 | | | $ | 152 | | | $ | 210 | | | $ | 322 | |
Adjusted EBITDA year-over-year change | | | (7) | % | | | | | | | (35) | % | | | | |
For the three months ended September 30, 2026, Strategic Markets revenue of $939 million decreased 4.8 percent and included a 1.9-point impact from currency. Revenue decreased 6.7 percent in constant currency, compared
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to the prior-year quarter, primarily driven by the completion of customer projects and contracts. Adjusted EBITDA decreased $10 million from the prior-year quarter, primarily driven by progress on our key initiatives to drive operating efficiencies.
For the six months ended September 30, 2026, Strategic Markets revenue of $1.9 billion decreased 4.0 percent and included a 2.8-point impact from currency. Revenue decreased 6.8 percent in constant currency, compared to the prior-year period, primarily driven by the completion of customer projects and contracts. Adjusted EBITDA decreased $112 million from the prior-year period, driven by an $86 million increase in workforce rebalancing charges and lower revenue.
Corporate and Other
Corporate and other was a net expense of $26 million in the three months ended September 30, 2026, compared to $28 million in the three months ended September 30, 2025. Corporate and other was a net expense of $56 million in the six months ended September 30, 2026, compared to $53 million in the six months ended September 30, 2025.
Costs and Expenses
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Percent of Revenue | | Change | |||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | | 2026 vs. 2025 | |||||
Revenue | | $ | 3,651 | | $ | 3,721 | | 100.0 | % | | 100.0 | % | | (1.9) | % |
Cost of services | | | 2,794 | | | 2,920 | | 76.5 | % | | 78.5 | % |
| (4) | % |
Selling, general and administrative expenses | | | 669 | | | 659 | | 18.3 | % | | 17.7 | % |
| 2 | % |
Workforce rebalancing charges | |
| 38 | |
| 19 |
| 1.0 | % | | 0.5 | % |
| 100 | % |
Transaction-related costs (benefits) | | | 3 | | | — | | 0.1 | % | | 0.0 | % | | NM | |
Interest expense | |
| 37 | |
| 20 |
| 1.0 | % | | 0.5 | % |
| 87 | % |
Other expense (income) | |
| (1) | |
| 5 |
| 0.0 | % | | 0.1 | % |
| NM | |
Income before income taxes | | $ | 112 | | $ | 98 |
|
| | |
| |
| | |
NM – not meaningful
Cost of services was 76.5% of revenue in the three months ended September 30, 2026, compared to 78.5% in the three months ended September 30, 2025, driven by progress on our key initiatives to drive operating efficiencies. Selling, general and administrative expenses were 18.3% of revenue in the three months ended September 30, 2026 compared to 17.7% in the prior-year quarter, driven by lower revenue. Workforce rebalancing charges were 1.0% of revenue in the three months ended September 30, 2026 compared to 0.5% of revenue in the prior-year quarter. Interest expense was 1.0% of revenue in the three months ended September 30, 2026 compared to 0.5% in the prior-year quarter, driven by interest on borrowings drawn under our Revolving Credit Agreement in February 2026.
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| | | | | | | | | | | | | | | |
| | Six Months Ended September 30, | | Percent of Revenue | | Change | |||||||||
(Dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | | 2026 vs. 2025 | |||||
Revenue | | $ | 7,269 | | $ | 7,464 | | 100.0 | % | | 100.0 | % | | (2.6) | % |
Cost of services | | | 5,636 | | | 5,867 | | 77.5 | % | | 78.6 | % |
| (4) | % |
Selling, general and administrative expenses | | | 1,337 | | | 1,305 | | 18.4 | % | | 17.5 | % |
| 3 | % |
Workforce rebalancing charges | |
| 190 | |
| 44 |
| 2.6 | % | | 0.6 | % |
| 328 | % |
Transaction-related costs (benefits) | | | (36) | | | — | | (0.5) | % | | 0.0 | % | | NM | |
Impairment expense | | | 38 | | | — | | 0.5 | % | | 0.0 | % | | NM | |
Interest expense | |
| 71 | |
| 39 |
| 1.0 | % | | 0.5 | % |
| 81 | % |
Other expense (income) | |
| (11) | |
| 18 |
| (0.1) | % | | 0.2 | % |
| NM | |
Income before income taxes | | $ | 43 | | $ | 190 |
|
| | | | |
| | |
NM – not meaningful
Cost of services was 77.5% of revenue in the six months ended September 30, 2026, compared to 78.6% in the six months ended September 30, 2025, driven by progress on our key initiatives to drive operating efficiencies. Selling, general and administrative expenses were 18.4% of revenue in the six months ended September 30, 2026 compared to 17.5% in the prior-year period, driven by lower revenue and increased expenses to support future growth. Workforce rebalancing charges were 2.6% of revenue in the six months ended September 30, 2026 compared to 0.6% of revenue in the prior-year period. Transaction-related costs (benefits) were (0.5)% of revenue in the six months ended September 30, 2026 due to a $40 million gain from the sale of a wholly-owned digital solutions subsidiary in the Principal Markets segment. Impairment expense was 0.5.% of revenue in the six months ended September 30, 2026 driven by the sale of a facility in the United States. Interest expense was 1.0% of revenue in the six months ended September 30, 2026 compared to 0.5% in the prior-year period, driven by interest on borrowings drawn under our Revolving Credit Agreement in February 2026. Other expense (income) was (0.1)% of revenue in the six months ended September 30, 2026, which was driven by net exchange gains, compared to 0.2% of revenue in the six months ended September 30, 2025, which was driven by net exchange losses.
Transaction-Related Costs
The Company classifies certain expenses and benefits related to the Separation, acquisitions and divestitures as Transaction-related costs (benefits) in the Consolidated Income Statement. Transaction-related costs include gains or losses, employee retention expenses, information technology costs, marketing expenses to establish the Kyndryl brand, legal, accounting, consulting and other professional service costs, costs and benefits resulting from settlements with our former Parent associated with pre-Separation and Separation-related matters, and other costs related to contract and supplier novation and integration, associated with acquisitions, divestitures or the Separation.
Workforce Rebalancing Charges
Fiscal 2027 Actions
During the six months ended September 30, 2026, management initiated actions to reduce the Company’s overall cost structure and enhance operating efficiency. As a result of these actions, the Company recorded workforce rebalancing charges of $38 million and $190 million for the three and six months ended September 30, 2026, respectively.
Total cash outlays for this program are expected to be approximately $200 million, of which approximately $92 million has been paid through September 30, 2026, and the remainder is expected to be paid thereafter. Management expects that these workforce rebalancing activities will reduce annual payroll and related expenses included in Cost of services and Selling, general and administrative expenses, by approximately $400 to $500 million. There can be no guarantee that we will achieve our expected savings.
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The Company will continue to seek opportunities to improve operational efficiency and reduce costs, which may result in additional charges in future periods. For additional information, see Note 14 – Workforce Rebalancing Charges in the accompanying Consolidated Financial Statements.
Fiscal 2026 Program
During the year ended March 31, 2026, management initiated actions to reduce the Company’s overall cost structure and enhance operating efficiency. As a result of these actions, the Company recorded workforce rebalancing charges of $60 million for the year ended March 31, 2026.
Total cash outlays for this program are expected to be approximately $60 million, of which approximately $58 million has been paid through September 30, 2026, and the remainder is expected to be paid thereafter. Management expects that these workforce rebalancing activities will reduce annual payroll costs and related expenses by more than $100 million in fiscal year 2027. There can be no guarantee that we will achieve our expected cost savings.
Income Taxes
The provision for income taxes for the three months ended September 30, 2026 was $53 million, compared to $30 million for the three months ended September 30, 2025. The provision for income taxes for the six months ended September 30, 2026 was $39 million, compared to $66 million for the six months ended September 30, 2025. The income tax expense was primarily attributable to taxes on foreign operations, uncertain tax positions, and valuation allowances recorded in certain jurisdictions. For the six months ended September 30, 2026, income tax expense was additionally impacted by the finalization of the prior-year income tax returns.
In assessing the need for a valuation allowance, management considers all available evidence for each jurisdiction, including past operating results, estimates of future taxable income, the reversal of existing temporary differences, and the feasibility of ongoing tax planning strategies and actions. Estimates of future taxable income and loss could change, perhaps materially, which may require us to revise our assessment of the recoverability of the deferred tax asset at that time. Recent improvements in profitability and forecasts of future taxable income have increased the positive evidence considered in certain jurisdictions as part of this assessment. Based on our evaluation of current results and anticipated future earnings, there is a reasonable possibility that we will conclude within the next twelve months that a portion of the valuation allowances recorded in certain jurisdictions is no longer necessary. However, our judgment regarding future taxable income and the timing and amount of any valuation allowance release is subject to change based on future business performance, market conditions and other factors.
The release of any valuation allowance would result in the recognition of deferred tax assets and could result in a material income tax benefit in the period the release is recorded.
The Company is engaged in various tax matters in multiple jurisdictions that remain subject to examination, negotiation, or other administrative proceedings. It is reasonably possible that the amount of unrecognized tax benefits associated with these matters could significantly increase or decrease within the next twelve months as these matters progress. However, due to the uncertainty surrounding the timing and ultimate resolution of these matters, the Company cannot reasonably estimate the range of any potential change at this time.
Financial Position Dynamics
Total assets of $11.9 billion decreased by $686 million (and decreased by $668 million adjusted for currency) from March 31, 2026, primarily driven by a decrease in cash and cash equivalents of $964 million mainly due to cash used in operating activities of $137 million, cash used in investing activities of $568 million, and cash used in financing activities of $242 million. This was partially offset by an increase in goodwill of $133 million and an increase in intangible assets of $162 million due to the acquisition of Healthcare IT Leaders.
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Total liabilities of $10.7 billion decreased by $569 million (and decreased by $570 million adjusted for currency) from March 31, 2026, primarily driven by a decrease in accounts payable of $352 million primarily due to annual and multi-year software subscription and renewal payments.
Total equity of $1.2 billion decreased by $116 million from March 31, 2026, principally due to $96 million of share repurchases under our Share Repurchase Program.
Liquidity and Capital Resources
We believe that our existing cash and cash equivalents, together with access to the capital markets, our revolving credit facility and other available methods of debt financing, such as commercial paper borrowings, will be sufficient to meet our anticipated operating cash needs, and to fund our planned capital investments and debt maturities for at least the next twelve months. As of September 30, 2026, we had cash and cash equivalents of approximately $1.7 billion and $3.15 billion in available borrowing capacity under our revolving credit facility.
Our principal ongoing cash requirements include operating expenses, income taxes, debt service payments and capital expenditures, and may include discretionary debt repayments, business acquisitions and stock repurchases. Our primary sources of liquidity include available cash and cash equivalents, cash from operations and proceeds obtained from long-term debt. Additionally, we have access to incremental liquidity, if needed, through borrowings under our revolving credit facility to manage our working capital and investment needs, as well as access to the capital markets. In November 2026, we established a commercial paper program, backstopped by our revolving credit facility, under which we may issue short-term commercial paper notes from time to time, supplementing and further diversifying our sources of liquidity and providing additional flexibility to manage our short-term funding needs.
Our capital allocation priorities are focused on financial flexibility with strong liquidity, including to invest in strategic growth initiatives and maintaining our investment-grade ratings. Consistent with these priorities, in September 2026, we completed the acquisition of Healthcare IT Leaders with cash on hand and temporarily paused our stock repurchase program to preserve financial flexibility. We also completed a $1 billion registered offering of 3- and 5-year notes in September 2026, using the net proceeds to repay debt and extending our debt maturity profile.
Together, these decisions reflect our disciplined approach to managing our capital structure and support our liquidity. Our cash provided from operating activities is somewhat impacted by seasonality. Working capital needs are generally highest in our first quarter due to multi-year renewals and annual and biannual payments, such as prepaid software subscriptions and incentive payments. On a continuing basis, we also consider various transactions to increase stockholder value and enhance our business results, including acquisitions and divestitures, as well as productivity and other efficiency initiatives, that may result in future cash proceeds or payments.
As part of our ongoing cash and commercial management strategy with customers and suppliers and as previously disclosed, our standard practice since the time of our Spin-off from IBM is to actively manage our working capital, including accounts receivables and accounts payables. This includes optimizing payment terms and conditions, accelerating certain cash receipts (including through the sale of accounts receivables to third-party financial institutions as described under “Transfers of Financial Assets” below and in Note 7 to the consolidated financial statements) and delaying certain cash payments (including deferring vendor payments quarter to quarter, in certain cases beyond vendor payment terms), and undertaking other discretionary cash and working capital management initiatives. The magnitude of these practices (including deferrals) varies from period to period. The effects of these practices, including any impacts on our cash flows, have been and are reflected in our accounts payable, accounts receivable and operating cash flows, which are accounted for in accordance with U.S. GAAP, the material drivers of which are quantified below under “Cash Flow.” Our working capital and cash flows have also reflected the impact of accrued contract costs in certain periods due to the timing of vendor billings. We may, from time to time, revise or adapt our cash and working capital management practices as we deem appropriate.
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Cash Flow
Our cash flows from operating, investing and financing activities are summarized in the table below.
| | | | | | |
| | Six Months Ended September 30, | ||||
(Dollars in millions) | | 2026 | | 2025 | ||
Net cash provided by (used in): |
| | |
| | |
Operating activities | | $ | (137) | | $ | 22 |
Investing activities | |
| (568) | |
| (196) |
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) |
Net cash used by operating activities was $137 million in the six months ended September 30, 2026, which primarily reflects payments for multi-year renewals and annual prepaid software subscriptions and incentive compensation payments. This compares to cash provided by operating activities of $22 million in the prior-year period. The year-over-year decrease in cash provided by in operating activities is mainly due to the timing of working capital, including higher software payments of $187 million, primarily for multi-year renewals and annual prepaid software subscriptions, and the timing of advance customer billings of $92 million and higher workforce rebalancing payments of $51 million, partially offset by lower annual incentive compensation payments in the current year of $187 million.
Net cash used in investing activities was $568 million in the six months ended September 30, 2026, compared to $196 million in the prior-year period, primarily due to a $307 million use of cash for the acquisition of Healthcare IT Leaders, partially offset by $31 million net cash proceeds from the sale of a wholly-owned digital solutions subsidiary in the Principal Markets segment.
Net cash used in financing activities was $242 million in the six months ended September 30, 2026, compared to $310 million in the prior-year period, mainly due to proceeds from issuance of debt, net of debt issuance costs of $986 million, lower shares repurchased to settle tax withholdings related to the vesting of stock-based awards of $69 million, and lower common stock repurchases of $54 million, partially offset by repayment of the revolving credit facility of $1.0 billion and higher debt repayments of $18 million.
Senior Unsecured Notes
In October 2021, in preparation for our Spin-off, we completed the offering of $2.4 billion in aggregate principal amount of senior unsecured fixed-rate notes as follows: $700 million aggregate principal amount of 2.05% Senior Notes due 2026, $500 million aggregate principal amount of 2.70% Senior Notes due 2028, $650 million aggregate principal amount of 3.15% Senior Notes due 2031 and $550 million aggregate principal amount of 4.10% Senior Notes due 2041 (the “Initial Notes”). The Initial Notes were offered and sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-U.S. persons in reliance on Regulation S of the Securities Act. In connection with the issuance of the Initial Notes, we entered into a registration rights agreement with the purchasers of the Initial Notes, pursuant to which we completed a registered offering to exchange each series of Initial Notes for new notes with substantially identical terms during the quarter ended September 30, 2022.
In February 2024, we completed a registered offering of $500 million in aggregate principal amount of 6.35% senior unsecured notes due 2034 (the “2034 Notes”). We received proceeds of $494 million, net of debt issuance costs and discounts. The 2034 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness.
In September 2026, we completed a registered offering of $600 million aggregate principal amount of 7.80% senior unsecured notes due 2029 (the “2029 Notes”) and $400 million aggregate principal amount of 7.875% senior unsecured notes due 2032 (the “2032 Notes”). We received net proceeds of approximately $595 million from the issuance of the 2029 Notes and approximately $391 million from the issuance of the 2032 Notes, after deducting
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discounts and debt issuance costs. The interest rate payable on these notes will be subject to adjustment from time to time if any of Moody’s, S&P or Fitch downgrades (or subsequently upgrades) the debt rating applicable to these notes. The 2029 Notes and 2032 Notes are the Company’s senior unsecured obligations and rank equally in right of payment among themselves and with all of the Company’s other existing and future senior unsecured indebtedness.
The Initial Notes, the 2029 Notes, the 2032 Notes and the 2034 Notes are subject to customary affirmative covenants, negative covenants and events of default for financings of this type and are redeemable at our option in a customary manner.
In October 2026, we repaid at maturity the $700 million aggregate principal amount of our 2.05% senior notes due 2026, which were outstanding as of September 30, 2026, using the net proceeds from the offerings of the 2029 and 2032 Notes.
Commercial Paper Program
In November 2026, the Company established a commercial paper program, under which we may issue short-term paper notes from time to time of up to a maximum aggregate principal amount of $3.15 billion, with maturities of up to 397 days from the date of issue. The notes will be sold under customary terms in the commercial paper market. The proceeds from the issuance of any notes under the program will be used for general corporate purposes. The commercial paper program is backed by the revolving credit facility, and any commercial paper borrowings will reduce the available capacity under the Revolving Credit Agreement. The Company has not initiated any borrowings under this program.
Revolving Credit Agreement
In October 2021, we entered into a $3.15 billion multi-currency revolving credit agreement (the “Revolving Credit Agreement”), which was originally set to expire in October 2026. The Revolving Credit Agreement was amended in June 2023, replacing the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”). In March 2025, we further amended the agreement, extending the maturity to March 2030.
Interest rates on borrowings under the Revolving Credit Agreement will be based on prevailing market interest rates, plus a margin, as further described in the Revolving Credit Agreement.
In February 2026, the Company borrowed $1 billion under the Revolving Credit Agreement, which was repaid in full in September, and there was no outstanding borrowing under the Revolving Credit Agreement as of September 30, 2026.
The Revolving Credit Agreement includes certain customary mandatory prepayment provisions. In addition, it includes customary events of default and affirmative and negative covenants as well as a maintenance covenant that will require that the ratio of our indebtedness for borrowed money to consolidated EBITDA (as defined in the Revolving Credit Agreement) for any period of four consecutive fiscal quarters be no greater than 3.50 to 1.00. The Company is in compliance with its debt covenants.
Transfers of Financial Assets
The Company has entered into arrangements with third-party financial institutions to sell certain financial assets (primarily accounts receivables) without recourse. The Company has determined these are true sales. The carrying value of the financial asset sold is derecognized, and a net gain or loss on the sale is recognized, at the time of the transfer. The first agreement, which was executed in November 2021 and subsequently amended, enabled us to sell certain of our accounts receivables to the counterparty. This agreement includes a $600 million committed facility and an incremental $200 million uncommitted facility that is subject to the counterparty’s sole discretion to purchase incremental amounts. This agreement was amended in August 2026 to extend the expiration date from April 2027 to October 2027, after which the agreement automatically resets to a term of 18 months after every six months, unless either party elects not to extend. We have also entered into additional agreements with a separate third-party financial institution that enable us to sell
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Management Discussion (continued)
receivables. These agreements were first executed in June 2022 and subsequently amended to renew automatically every 18 months, unless either party elects not to extend. These facilities are committed for up to approximately $160 million as of September 30, 2026. In aggregate, we have committed facilities of up to approximately $760 million as of September 30, 2026.
The net proceeds from these arrangements are reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows. Gross proceeds from receivables sold to third parties under the aforementioned programs were $539 million and $1.1 billion for the three and six months ended September 30, 2026, respectively, and $563 million and $1.2 billion for the three and six months ended September 30, 2025, respectively. The fees associated with the transfers of receivables were $5 million and $9 million for the three and six months ended September 30, 2026, and were $5 million and $10 million for the three and six months ended September 30, 2025, respectively.
Of the receivables sold and derecognized from the Consolidated Balance Sheet, $0.8 billion and $0.9 billion remained uncollected from customers at September 30, 2026 and March 31, 2026, respectively. Overall, the declining balances of sold receivables have been primarily driven by factoring of receivables from pre-spin customer contracts that gave certain customers extended payment terms. As we have transitioned to new signings, including with existing customers, fewer customers have used extended payment terms, which has caused these balances in the aggregate to continue to decline.
Supplier Financing Program
In the year ended March 31, 2024, the Company initiated a supplier financing program with a third-party financial institution under which the Company agrees to pay the financial institution the stated amounts of invoices from participating suppliers on the originally invoiced due date, which have an average term of 90 to 120 days. The financial institution offers earlier payment of the invoices at the sole discretion of the supplier for a discounted amount. The Company does not provide secured legal assets or other forms of guarantees under the arrangements. The Company or the financial institution may terminate the agreement upon at least 180 days’ notice. The Company’s obligations under this program continue to be recognized as accounts payable in the Consolidated Balance Sheet. The obligations outstanding under this program at September 30, 2026 and March 31, 2026 were immaterial.
Share Repurchase Program
In November 2024, the Company’s Board of Directors authorized a share repurchase program of up to $300 million of the Company’s common stock, and in November 2025, the Company announced that the Board of Directors authorized an additional $400 million of repurchase capacity under this program. Under the Share Repurchase Program, the Company may repurchase shares of its common stock from time to time in open market transactions and may also repurchase shares in accelerated share buyback programs, tender offers, privately negotiated transactions or by other means. Repurchases may also be made under a Rule 10b5-1 trading plan. The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors. The program does not have a set expiration date and may be suspended, modified or discontinued at any time without prior notice.
During the three and six months ended September 30, 2026, the Company repurchased 2.5 and 7.5 million shares of its common stock at an aggregate cost of $32 and $96 million, respectively, and during the three and six months ended September 30, 2025, the Company repurchased 2.9 and 4.6 million shares of its common stock at an aggregate cost of $89 and $154 million, respectively, under the Share Repurchase Program. As announced in September 2026, to preserve financial flexibility, the Company has temporarily paused its Share Repurchase Program. As of September 30, 2026, approximately $205 million of capacity remained available under the Share Repurchase Program.
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Management Discussion (continued)
Other Information
Signings
The following table presents the Company’s signings for the three and six months ended September 30, 2026 and 2025.
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, | ||||||||
(Dollars in billions) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Total signings | | $ | 4.1 | | $ | 2.8 | | $ | 8.0 | | $ | 6.0 |
Signings increased by $1.3 billion in the three months ended September 30, 2026, or 46%, compared to the prior-year quarter, with year-over-year increases in Japan, Principal Markets and Strategic Markets segments. Signings increased by $2.0 billion in the six months ended September 30, 2026, or 33%, compared to the prior-year period, with year-over-year increases in each segment. Management uses signings to monitor the performance of the business, as a measure of customer engagement and our ability to drive growth. There are no third-party standards or requirements governing the calculation of signings. We define signings 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, including the type and duration of the agreement and 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, the macroeconomic environment or external events.
Critical Accounting Estimates
The application of U.S. GAAP requires us to make estimates and assumptions about certain items and future events that directly affect our reported financial condition. There have been no changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 (“Form 10-K”).
Cautionary Note Regarding Forward-Looking Statements
This report 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 report, including statements concerning the Company’s plans, objectives, goals, beliefs, business strategies, future events, business condition, results of operations, financial position, business outlook, business trends, the outcome of legal and regulatory claims, suits, investigations and other matters, the remediation of material weaknesses and other non-historical statements in this report 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. The Company’s actual business, financial condition, results of operations, liquidity, cash flows, internal controls, reputation, stock price and key relationships 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; |
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Management Discussion (continued)
| ● | 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 the Company’s 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 complete and 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; |
| ● | the impact of business with foreign, state and local government customers; |
| ● | 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 the Company’s 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 and environmental matters; |
| ● | risks related to legal and regulatory claims, suits, investigations, proceedings and other matters, and consequences related 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; |
| ● | potential indemnification obligations; |
| ● | impact of changes or developments in credit ratings, 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 our 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 SEC. In addition, other risks and uncertainties that are not currently known to the Company or that the Company currently deems immaterial may also impact actual results and outcomes. Any forward-looking statement in this report 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.
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Management Discussion (continued)
Available Information
We routinely post on or make accessible through our corporate website at www.kyndryl.com and Investor Relations website at https://investors.kyndryl.com information that may be material or of interest to our investors, including news and materials regarding our financial performance, business developments, investor events and other important information regarding the Company. You may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Investor Email Alerts” section under the “Resources” section at https://investors.kyndryl.com. We encourage investors, media, our customers, consumers, business partners and others interested in our Company to review the information we provide through these channels. The information contained on the websites referenced above is not, and shall not be deemed to be, incorporated into this filing or any of our other filings with the SEC.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
For our disclosures about market risk, see the information under the heading “Quantitative and Qualitative Disclosures About Market Risk” in the Form 10-K. There have been no material changes to the Company’s disclosure about market risk in the Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company’s management evaluated, with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2026, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2026 due to the material weaknesses in internal control over financial reporting described below.
These deficiencies did not result in a misstatement to the interim or annual consolidated financial statements previously filed or included in this Form 10-Q. The Company’s management has concluded that the consolidated financial statements for the periods covered by and included in this Form 10-Q fairly present, in all material respects, the Company’s financial position, results of operations and cash flows in conformity with GAAP.
Material Weaknesses in Internal Control over Financial Reporting
As defined in Rule 12b-2 of the Exchange Act, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. As previously disclosed in the amended annual report on Form 10-K/A for the period ended March 31, 2025 (filed on February 17, 2026), management identified the following material weaknesses in the Company’s internal control over financial reporting:
| ● | The Company’s senior finance executives failed to set an appropriate tone at the top based on the principles associated with the control environment component of the Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control – Integrated Framework (2013) (the “COSO framework”). Specifically, there was a lack of transparency with the Company’s Chief Executive Officer, the Audit Committee of the Board and the Board, such that disclosure processes, including with respect to cash management practices regarding deferring vendor payments quarter to quarter, were impacted. Additionally, the Company lacked an appropriate complement of finance personnel with sufficient understanding of their responsibilities as Disclosure Committee members and with adequate competency in their responsibilities regarding disclosure controls. |
| ● | The Company did not design and maintain effective controls related to the information and communication component of the COSO framework to ensure appropriate communication pertaining to the disclosure process between certain functions within the Company, including the Company’s Disclosure Committee and the Chief Executive Officer, as well as with the Audit Committee and the Board. |
| ● | The aforementioned material weaknesses contributed to an additional material weakness. The Company did not design and maintain effective controls regarding the internal investigation, escalation and documentation of complaints made through the Company’s reporting hotline and certain other available reporting channels, including with respect to appropriate escalation of certain complaints to the Audit Committee. |
These material weaknesses did not result in a misstatement of the Company’s previously issued historical consolidated financial statements. However, these material weaknesses could result in a misstatement that would result in a material misstatement to the Company’s annual or interim consolidated financial statements that would not be prevented or detected.
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Remediation Plan
On February 5, 2026, the Company appointed an Interim Chief Financial Officer, Interim General Counsel and Interim Corporate Controller. In addition, the Company has appointed Andrew Bonzani as General Counsel and Secretary effective as of July 6, 2026, and Ellen Johnson as Chief Financial Officer effective as of August 6, 2026. As previously described in Part II, Item 9A of the Company’s 2026 Form 10-K, with oversight from the Audit Committee of our Board, management developed a comprehensive remediation plan, including continued focus on strengthening the Company’s control environment and disclosure processes. In the second quarter of fiscal 2027, management completed the design and implementation of enhanced controls to address the material weaknesses, and is now testing the operating effectiveness of such controls. The Company’s enhancements to its internal control over financial reporting notably include:
| ● | enhanced disclosure controls and procedures related to communication and information sharing ‒ by developing a more detailed reporting and internal review processes, evaluating and integrating opportunities for enhancement in our periodic disclosure processes, and formalizing forums, including additional meetings as appropriate, to facilitate enhanced information sharing across several functions and with senior leadership, as well as with the Chief Executive Officer, the Audit Committee and the Board, including enhancing controls concerning information communicated regarding the application of the Company’s cash management practices; |
| ● | enhanced existing Disclosure Committee responsibilities and processes ‒ by updating the Disclosure Committee Charter to reflect enhancements to the committee composition and roles, facilitating additional discussions, conducting incremental training on the purpose and responsibilities of the Disclosure Committee and related subcertifications, and enhancing the subcertification process; |
| ● | enhanced training program ‒ by providing updated training on, and instituting future periodic training sessions regarding, disclosure controls and procedures and internal control over financial reporting and requirements under the Sarbanes-Oxley Act of 2002, including training courses on applicable federal securities laws for members of management and other personnel; and |
| ● | implemented enhancements to the controls, policies, procedures and trainings related to the Company’s reporting hotline process ‒ including related to the evaluation and escalation to the Company’s Audit Committee of certain reports made through the hotline and certain other available reporting channels. |
The Company has devoted substantial resources to, and continues to work diligently on, executing its remediation plan, and expects to remediate the material weaknesses as of March 31, 2027, on which it will report in its fiscal year 2027 annual report on Form 10-K. Management is actively engaged and believes that the remediation plan will address the deficiencies described above; however, deficiencies will not be considered fully remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Management will continue to monitor the design and effectiveness of these and other processes, procedures and controls and make further changes as appropriate. The remediation is subject to ongoing management review, as well as oversight by the Audit Committee of our Board.
Changes in Internal Control over Financial Reporting
Other than the ongoing remediation of the deficiencies described above, there has been no change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that occurred during the Company’s last fiscal quarter ended September 30, 2026 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II — Other Information
Item 1. Legal Proceedings
Refer to Note 11 – Commitments and Contingencies, in the notes to consolidated financial statements in this report.
Item 1A. Risk Factors
For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Form 10-K for the year ended March 31, 2026. There have been no material changes with respect to the risk factors disclosed in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
A summary of our common stock repurchases during the three months ended September 30, 2026 is set forth in the table below.
| | | | | | | | | | |
Period | | Total Number of Shares Repurchased(a) | | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions) |
July 1 - 31 | | 1,786,936 | | $ | 12.38 | | 1,786,936 | | $ | 216 |
August 1 - 31 | | 729,474 | | | 13.87 | | 729,474 | | | 205 |
September 1 - 30 | | — | | | | | — | | | 205 |
Total | | 2,516,410 | | | | | 2,516,410 | | | |
| (a) | All shares were repurchased in open market transactions pursuant to the Share Repurchase Program authorized by our Board of Directors, of which $300 million was publicly announced on November 21, 2024, and an additional $400 million was publicly announced on November 4, 2025. As announced in September 2026, to preserve financial flexibility, the Company has temporarily paused its Share Repurchase Program. The Share Repurchase Program does not have a set expiration date and may be suspended, modified or discontinued at any time without prior notice. Amounts shown herein exclude common stock repurchases to settle tax withholdings related to the vesting of stock-based awards. See further description of the Share Repurchase Program in “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources— Share Repurchase Program.” |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended September 30, 2026,
In November 2026, the Company established a commercial paper program, under which we may issue short-term paper notes from time to time of up to a maximum aggregate principal amount of $3.15 billion, with maturities of up to 397 days from the date of issue. The notes will be sold under customary terms in the commercial paper market. The proceeds from the issuance of any notes under the program will be used for general corporate purposes. The commercial paper program will be backed by the revolving credit facility, and any commercial paper borrowings will
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reduce the available capacity under the Revolving Credit Agreement. The Company has not initiated any borrowings under this program.
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Item 6. Exhibits
Exhibit Number | Description of Exhibit |
2.1 | Separation and Distribution Agreement, dated as of November 2, 2021, by and between International Business Machines Corporation and the registrant, was filed as Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed on November 4, 2021, and is hereby incorporated by reference. |
3.1 | Amended and Restated Certificate of Incorporation of the registrant was filed as Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on November 4, 2021, and is hereby incorporated by reference. |
3.2 | Amended and Restated Bylaws of the registrant, effective January 25, 2023, was filed as Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on January 27, 2023, and is hereby incorporated by reference. |
4.1 | Third Supplemental Indenture, dated as of September 28, 2026, between Kyndryl Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, including form of note, was filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on September 28, 2026, and is hereby incorporated by reference. |
4.2 | Fourth Supplemental Indenture, dated as of September 28, 2026, between Kyndryl Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, including form of note, was filed as Exhibit 4.3 to the registrant’s Current Report on Form 8-K filed on September 28, 2026, and is hereby incorporated by reference. |
10.1 | Amended and Restated Kyndryl 2021 Long-Term Performance Plan was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 31, 2026, and is hereby incorporated by reference. |
10.2 | Seventh Amendment to Amended and Restated Receivable Purchase Agreement, dated August 7, 2026, by and among Banco Santander S.A., Kyndryl, Inc. and the registrant (filed herewith) |
10.3 | Kyndryl 2026 Employment Inducement Equity Incentive Plan (“Inducement Equity Plan”) (incorporated by reference to Exhibit 4.4 to the Company’s registration statement on Form S-8 filed on August 5, 2026). |
10.4 | Form of Inducement Equity Plan equity award agreement for performance share units (filed herewith) |
10.5 | Form of Inducement Equity Plan award agreement for restricted stock units (filed herewith) |
10.6 | Form of Inducement Equity Plan award agreement for retention restricted stock units (filed herewith) |
31.1 | Certification of principal executive officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
31.2 | Certification of principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
32.1 | Certification of principal executive officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) |
32.2 | Certification of principal financial officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) |
101.INS | XBRL Instance Document – the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and do not apply in any other context or at any time other than the date they were made.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |||
| Kyndryl Holdings, Inc. | |||
| (Registrant) | |||
| | |||
Date: | November 4, 2026 | | | |
| By: | /s/ Ellen Johnson | ||
| | |||
| | Ellen Johnson Chief Financial Officer (Principal Financial Officer and Authorized Signatory) | ||
| | |||
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