Kyndryl Holdings Inc
Q2 2026 Earnings
Market Reaction
S&P 500 over the same 30 days: +0.89%.
Did KD Beat Earnings? Q2 2026 Results
Kyndryl delivered a mixed but fundamentally encouraging fiscal second quarter, posting adjusted earnings per share of $0.38 against a consensus estimate of $0.36, a 6.15% beat, even as revenue of $3.72 billion fell 3.10% short of the $3.84 billion Wall Street expected and declined 1.4% from the year-ago period. The profitability story, however, was the quarter's defining theme: the IT infrastructure services company swung to GAAP net income of $68 million from a net loss of $43 million a year earlier, while adjusted EBITDA surged 15% to $641 million, pushing margins to 17.2% from 14.8%. The revenue softness reflects Kyndryl's deliberate pruning of low-margin legacy contracts, a strategic trade-off that management argues is already paying off in margin expansion and a hyperscaler-related revenue line that jumped 65% year-over-year to $440 million. Looking ahead, Kyndryl reaffirmed its fiscal 2026 guidance, targeting adjusted pretax income of at least $725 million, approximately 18% adjusted EBITDA margins, and free cash flow of roughly $550 million, with stronger second-half revenue expected as backlog conversion accelerates.
- Three-A initiatives (Alliances, Advanced Delivery, Accounts) driving earnings growth and margin expansion
- Hyperscaler-related revenue of $440 million in Q2, up 65% year-over-year
- Kyndryl Consult revenues grew 28% year-over-year
- Deliberate reduction of inherited no-margin and low-margin third-party content in customer contracts
- Strong projected pretax margin on new signings in high-single-digit range
“Our second quarter performance reflects the momentum we're building across key growth priorities – Kyndryl Consult, alliances with hyperscalers and other leading technology providers, and our innovative services in AI, cloud and security. 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.”
Kyndryl CEO, on the earnings call
Forward Guidance & Outlook
Kyndryl reaffirmed its fiscal 2026 outlook (April 2025 – March 2026): adjusted pretax income of at least $725 million (year-over-year increase of at least $243 million), adjusted EBITDA margin of approximately 18% (up approximately 130 basis points year-over-year), free cash flow of approximately $550 million (with cash taxes of approximately $175 million), and constant-currency revenue growth of 1%. Second-half revenue is expected to be stronger than first-half, driven by larger revenue contribution from opening backlog, accelerated growth in Kyndryl Consult and hyperscaler-related revenue, and a record pipeline of in-process deals. The company also targets generating more than $1 billion in free cash flow by fiscal 2028.
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Figures from SEC filings and company reports. Not investment advice.