Agentic artificial intelligence (AI) company Kyndryl (KD) is on pace for its worst daily share price loss on record after its first-quarter fiscal 2026 earnings release. KD stock is down 19.9% this afternoon, easily surpassing its previous record one-day drop of -15.35%, set in May 2022.
The tech stock’s 20-day and 50-day moving averages recently completed a bearish cross, and today’s bearish gap has pushed KD below its 200-day moving average, as well. The stock’s 14-day Relative Strength Index (RSI) has dropped all the way to 17.39, deep into oversold territory.
Why is Kyndryl Stock Down Today?
The company reported disappointing revenue of $3.74 billion, missing Wall Street's consensus estimate of $3.83 billion, while posting a concerning 2.6% decline on a constant currency basis year-over-year (the consensus called for a modest increase).
Despite the revenue challenges, Kyndryl demonstrated notable improvements in profitability metrics, with adjusted EBITDA rising to $647 million and achieving a 17.3% margin, up from $556 million and 14.9% margin in the previous year. The company's strategic initiatives showed promising results, particularly in high-growth segments, with Kyndryl Consult revenue growing 32% to $3.2 billion and hyperscaler-related revenue surging 119% to $1.4 billion.
What’s Next for Kyndryl?
Management maintained its fiscal 2026 guidance, projecting adjusted pretax income of at least $725 million and an adjusted EBITDA margin of approximately 18%. The company's ambitious "triple, double, single" strategy aims to increase adjusted free cash flow to over $1 billion by FY28, with signings following the IBM (IBM) spinoff expected to represent 67% of revenue in FY26 and grow to more than 90% by FY28.
However, Kyndryl faces significant industry headwinds in the IT services sector. The company's balance sheet shows $1.5 billion in cash and $3.1 billion in debt, while free cash flow was negative at $222 million for the quarter.
Nevertheless, analysts rate the stock a “Strong Buy” overall, with Oppenheimer calling today’s plunge a buying opportunity. Likewise, JPMorgan and Scotiabank have backed their top ratings on KD today.
Is KD a Good Buy on the Historic Stock Plunge?
Clearly, investors are keying in on top-line weakness over margin improvements. And with mega-cap players still pouring cash into AI growth initiatives, the company's limited investment in new technology capabilities - with only 1-4% of revenue allocated to capex over the last decade - raises concerns about long-term competitiveness. This conservative approach to investment, combined with intense competition, suggests continued pressure on Kyndryl's growth prospects despite its ongoing transformation efforts.
While the stock is still up more than 10% from its April lows - which is the last time we saw KD stock this deeply oversold below its 200-day moving average - the relatively high beta suggests that Kyndryl is best reserved for investors with a healthy appetite for risk.
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