On Tuesday, Kyndryl Holdings, Inc. (NYSE:KD) reported a second-quarter earnings beat, highlighting its expansion of AI services in the U.K., France, Singapore, and India, alongside increased share buybacks.
The provider of IT infrastructure services reported second-quarter adjusted earnings per share of 38 cents, beating the analyst consensus estimate of 36 cents.
Quarterly revenues of $3.721 billion (down 1% year over year) marginally missed the Street view of $3.840 billion. Sales fell 3.7% in constant currency.
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On a constant-currency basis, the decline mirrors efforts to exit inherited no-margin and low-margin third-party content. Longer sales cycles also weighed on year-over-year comparisons.
Segments
Kyndryl’s hyperscaler cloud revenue soared 65% to $440 million this quarter. At this pace, the $1.8 billion 2026 target looks squarely in sight, the company said.
In the second quarter, Kyndryl Consult revenues grew 28% year-over-year. Kyndryl Consult signings have grown 11% over the last twelve months.
Kyndryl’s book-to-bill stayed above 1 for a fifth straight quarter. About 25% of last quarter’s signings were AI-related. Signings over the past 12 months totaled $15.6 billion.
AI Expansion
Kyndryl said it is continuing to expand its AI-related capabilities by establishing technology hubs in England, France and Singapore and, most recently, launching an AI Innovation Lab in India.
At constant currency, revenues in the United States slumped 6% year over year to $899 million, while those in Japan fell 5% to $581 million.
Adjusted EBITDA was $641 million, a 15% year-over-year increase.
Buyback
Kyndryl repurchased 2.9 million shares for $89 million in the second quarter.
The company has approved an additional $400 million share buyback.
The company exited the quarter with cash and equivalents worth $1.33 billion, lower than $1.786 billion as of March 31, 2025.
In fiscal year 2026, the firm is expected to generate approximately $550 million in free cash flow, reflecting cash taxes of approximately $175 million.
Kyndryl Chief Financial Officer David Wyshner stated that the company remains on track to meet its fiscal 2028 targets, including generating over $1 billion in free cash flow.
Outlook
In fiscal year 2026, Kyndryl expects constant-currency revenue growth of 1%, translating to revenue of approximately $15.20 billion, compared to the analyst consensus $15.60 billion.
The firm projects an adjusted EBITDA margin of approximately 18%, representing a year-over-year increase of approximately 130 basis points.
“We expect activity to strengthen in the second half of fiscal 2026, supported by our pipeline and the constructive discussions we’re having with new and existing customers,” said Kyndryl Chairman and Chief Executive Officer Martin Schroeter.
The company reaffirmed the multi-year targets announced last November.
It aims to more than double adjusted pretax income over the same period. Management states that these goals depend on achieving sustainable mid-single-digit revenue growth by fiscal year 2028 and beyond.
KD Price Action: Kyndryl shares are trading lower by 3.27% to $27.88 at last checked on Tuesday.
According to Benzinga Pro, KD stock has gained over 21% in the past year. Investors can gain exposure to the stock via the Invesco S&P Spin-Off ETF (NYSE:CSD).
KD Price Action: Kyndryl Hldgs shares closed lower by 4.59% at $27.43 on Tuesday, according to Benzinga Pro data.
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