New York, November 4th / PRNewswire / -- Kyndryl (New York Stock Exchange ticker: KD) today announced its quarterly financial results for the period ending September 30, 2026, which corresponds to the second quarter of the company's 2027 fiscal year.

Chairman and CEO Martin Schroeter stated: "Strong contract signings, as well as the continued growth of Kyndryl Consult and large-scale cloud-related revenues, have enhanced our confidence in our outlook for the fiscal year 2027. Our performance reflects the market's demand for Kyndryl's modernization capabilities driven by AI, as well as our deep expertise in critical tasks that help customers evolve complex technical environments, strengthen network security, and achieve measurable business results."

Second Quarter Results for Fiscal Year 2027

In the second quarter as of September 30, 2026, Kyndryl reported revenue of $3.7 billion, a year-over-year decrease of 1.9% on a reported basis and 0.8% on a constant exchange rate basis. The company's pre-tax profit was $112 million, compared to $98 million in the same period last year. The quarterly net profit was $59 million, or $0.27 per diluted share; last year in the same period, the net profit was $68 million, or $0.29 per diluted share. The financial results for the second quarter of fiscal year 2027 include $38 million in employee restructuring costs, compared to $19 million in the same period last year. Cash flow from operating activities was $172 million, compared to $147 million last year.

After adjustment, the pre-tax profit was $150 million, compared to $123 million in the same period last year. The adjusted net profit was $92 million, which is $0.42 per diluted share; in the same period last year, it was $89 million, or $0.38 per diluted share. After adjustment, EBITDA was $699 million, compared to $641 million in the same period last year. The above second-quarter results also include the aforementioned employee restructuring costs. Free cash flow was a net outflow of $34 million, whereas in the same period last year, it was a net inflow of $22 million. For more information, please refer to "Definitions and Non-GAAP Reconciliation."

Chief Financial Officer Ellen Johnson stated: "Our performance reflects continuous progress in strategic and financial priorities. We will continue to focus on disciplined execution to strengthen our fundamentals, support profit margin expansion, and drive growth in free cash flow."

Key Points

• Signing Amount: The signing amount over the past 12 months was 15.5 billion US dollars, with 4.1 billion US dollars in the second quarter. Over the past 12 months, Kyndryl has signed 43 customer contracts with a single amount exceeding 50 million US dollars, 11 of which came from the second quarter.
• Kyndryl Consult Revenue: In the second quarter, Kyndryl Consult revenue increased by 4.2% year-on-year. Over the past 12 months, Kyndryl Consult revenue amounted to 3.6 billion US dollars, with a year-on-year increase of 8.1%. Over the same period, Kyndryl Consult contract value reached 4.6 billion US dollars, representing a year-on-year growth of 19.1%.
• Ultra-large scale cloud-related revenue: In the second quarter, ultra-large scale cloud-related revenue exceeded $550 million, a year-on-year increase of 27.2%. Over the past 12 months, ultra-large scale cloud-related revenue amounted to $2.1 billion, a year-on-year increase of 38.5%.
• AI-Driven Modernization: Kyndryl's "2026 Modernization Status Report" finds that AI is driving new modernization needs, but 51% of organizations regard legacy system integration as the primary obstacle to advancing this process. To support its customers, Kyndryl has enhanced its AI-driven modernization capabilities through a new "Software as a Service" solution, as well as by continuing to expand its global AI innovation laboratory network located in Dallas, Texas, USA, and Luxembourg.
• Simplified Operational Measures: In the second quarter, the company recognized expenses of $38 million related to employee restructuring actions. The company still estimates that the related expenses for the fiscal year 2027 will be around $200 million, of which $190 million has already been recognized in the first half of the year. Savings are expected to begin in the second half of fiscal year 2027 and will largely offset these expenses. Once these employee restructuring measures are completed, it is anticipated that there will be annual operational cost savings of approximately $400 million to $500 million in fiscal year 2028.
• Completed the acquisitions of Healthcare IT Leaders and LLC; in mid-September, Kyndryl announced the completion of its acquisition of Healthcare IT Leaders. The latter is a company that provides IT services to hospitals and medical systems in the United States. This acquisition has enhanced Kyndryl's capabilities in medical application implementation and hosting services, and has also expanded its ability to help medical clients modernize key systems and accelerate their digital transformation.
• Debt refinancing enhances financial flexibility and liquidity: On September 28, 2026, Kyndryl completed the issuance of senior notes amounting to $600 million with a coupon rate of 7.80% maturing in 2029, as well as senior notes amounting to $400 million with a coupon rate of 7.875% maturing in 2032. The company used the net proceeds from this issuance to repay senior notes totaling $700 million with a coupon rate of 2.05% that were due in October 2026. Kyndryl also utilized the remaining net proceeds, along with cash on hand, to repay the $1 billion balance owed under the company's revolving credit agreement as of the end of September.

Reiterate the outlook for the fiscal year 2027

Kyndryl reiterates its outlook for the fiscal year 2027, which spans from April 2026 to March 2027:

• The adjusted pre-tax profit is between $600 million and $700 million.
• According to the company's definition since the fiscal year 2025, this indicator includes employee restructuring costs.
• Free cash flow ranges from $400 million to $500 million.
• Calculated at a fixed exchange rate, revenue remained flat to decreased by 2%.

For more information, see "Definition and Non-GAAP Reconciliation".

Performance Conference Call

Kyndryl The second-quarter earnings conference is scheduled to begin at 8:30 a.m. Eastern Time on November 4, 2026. Live webcast can be watched through the Kyndryl investor relations website investors.kyndryl.com. Presentation slides will be released on the company's investor relations website before the conference on November 4. After the event, a replay will be available for 12 months at investors.kyndryl.com.

About Kyndryl

Kyndryl (New York Stock Exchange ticker: KD) is a leading provider of mission-critical enterprise technology services, offering consulting, implementation, and managed services to thousands of clients in over 60 countries. As the world's largest provider of IT infrastructure services, the company designs, builds, manages, and modernizes the complex information systems that the world relies on every day. For more information, please visit www.kyndryl.com.

Forward-looking and Cautionary Statements

This press release contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Except for statements regarding historical facts in this press release, all non-historical statements regarding the company’s plans, objectives, purposes, beliefs, business strategies, future events, operating conditions, operating results, financial conditions, business prospects, and business trends, including but not limited to the prospects and financial targets mentioned in this press release (without assuming any future acquisitions or divestitures), are forward-looking statements. Such forward-looking statements typically contain words such as “intended to,” “expected,” “believed,” “may,” “estimated,” “anticipated,” “predicted,” “planned,” “perhaps,” “target,” “opportunity,” “plan,” “positioned,” “forecast,” “seek,” “should,” “goal,” “will,” “shall,” etc., or their negative forms, as well as other similar expressions. Forward-looking statements are based on the company’s current assumptions and judgments regarding future business and financial performance.

Due to various risks and uncertainties, the company's actual business, financial condition, or operating results may differ significantly from those implied in the forward-looking statements. These include, but are not limited to: the inability to attract new customers, retain existing customers, or sell services to customers; failure to achieve growth and productivity targets and maintain capital allocation strategies; competition; impacts related to key supplier and partnership relationships; inability to keep up with and adapt to technological developments and trends; inability to attract and retain key personnel and other technical staff; effects of economic, geopolitical, public health, and other conditions; damage to the company's reputation and stock price caused by negative public opinion; inability to accurately estimate service costs and contract completion timelines; service delivery issues; the company's ability to successfully manage acquisitions and divestitures, including integration challenges, failure to meet targets, assumption of liabilities, and higher debt levels; whether the company can refinance maturing debts in a timely manner and on favorable terms, or the possibility of being unable to refinance at all, as well as risks associated with accessing capital and credit markets; the company's intellectual property not being able to prevent competitive products, and the company's inability to obtain, retain, and extend necessary licenses; impairment of goodwill or long-term assets; risks related to network security, data governance, and privacy; risks associated with non-compliance with legal and regulatory requirements, as well as changes in laws, regulations, and policies in the United States and countries where the company and its customers do business, including tariffs, taxes, and other import and export controls; adverse effects of tax matters; risks and consequences related to legal and regulatory claims, lawsuits, investigations, proceedings, and other matters; the company's ability to correct significant deficiencies in internal financial reporting controls, as well as the time and cost associated with such corrections, and the company's ability to maintain effective controls in the future; changes in market liquidity and customer credit risk affecting accounts receivable; the company's pension plans; the impact of exchange rate fluctuations; and risks related to the company's common stock and securities markets.

Other risks and uncertainties also include those mentioned in the "Risk Factors" section of the company's Form 10-K annual report for the fiscal year ending March 31, 2026, as well as related factors that may be updated from time to time in documents subsequently submitted by the company to the U.S. Securities and Exchange Commission. Any forward-looking statements in this press release are only valid as of the date they are made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements due to new information, future events, or other reasons. Due to rounding, the sum of some amounts may not be exactly consistent; the percentages listed are based on the underlying amounts. The projected amounts are based on exchange rates as of October 2026.

Non-GAAP financial indicators

To provide investors with more information regarding performance, the company has provided several indicators that are not calculated in accordance with generally accepted accounting principles (GAAP), such as fixed exchange rate results, adjusted EBITDA, adjusted pre-tax profit, adjusted net profit, adjusted earnings per share, adjusted EBITDA margin, adjusted pre-tax margin, net debt, and free cash flow. These non-GAAP indicators are intended to complement rather than replace the GAAP indicators. The company's non-GAAP indicators may not be directly comparable to indicators of the same name used by other companies. For information on the calculation methods of these non-GAAP indicators and the definitions and supplementary details for reconciling historical periods with the GAAP indicators, please refer to the tables in this press release.

This press release does not provide a reconciliation of forward-looking non-GAAP financial information, as the company is unable to make sufficiently certain forecasts regarding some of the individual components within such reconciliation within the scope of reasonable efforts. These items are subject to uncertainty and depend on various factors, and may have a significant impact on future results calculated in accordance with GAAP.

Investor contact: investors @ kyndryl.com

Media contact: press @ kyndryl.com

Table 4: Definitions and Reconciliation for Non-GAAP Items

(Apart from signing contracts, all amounts are in millions of US dollars.)

Non-GAAP indicators

The company reports its financial results in accordance with the GAAP standards, and also provides several non-GAAP financial indicators to offer investors useful supplementary information. The company provides these non-GAAP indicators because it believes they help investors understand management decisions and their impact on operational performance; they facilitate comparison with peer companies; and they enable the company to provide investors with a long-term strategic perspective on the future of the business. In addition, the company also uses some of these non-GAAP financial indicators in its executive compensation plan to measure performance.

Fixed exchange rate information assumes that the exchange rate remains constant between different periods for comparison purposes. The company defines fixed exchange rate revenue as the total revenue after excluding the impact of foreign exchange rate fluctuations, and calculates the year-over-year growth in fixed exchange rate revenue based on this. Fixed exchange rate revenue is determined by converting the current period's revenue using the exchange rate from the corresponding previous period.

The adjusted pre-tax profit is defined as the pre-tax profit after deducting transaction-related costs and revenues, costs associated with the cessation of use of leased/fixed assets, lease termination expenses, pension costs (excluding pension service costs and multi-employer plan costs), equity incentive expenses, amortization of intangible assets related to acquisitions, impairment expenses, impacts from significant legal and regulatory matters, as well as the effects of high-inflation countries' currencies. The adjusted pre-tax profit margin is calculated by dividing the adjusted pre-tax profit by revenue.

After adjustment, EBITDA is defined as the amount remaining after deducting net interest expenses, income tax, depreciation of property, equipment, and capitalized software, transition costs and prepaid software amortization, costs related to the discontinuation of use of leased/fixed assets, lease termination costs, transaction-related costs and revenues, pension costs (excluding pension service costs and multi-employer plan costs), equity incentive costs, impairment costs, the impact of significant legal and regulatory matters, as well as the impact of high-inflation country currencies. The adjusted EBITDA profit margin is calculated by dividing the adjusted EBITDA by revenue.

The adjusted net profit is defined as the adjusted pre-tax profit minus the reported income tax provision, plus or minus the tax impact of non-GAAP adjustment items used in calculating the adjusted pre-tax profit, and excluding special items that affect the reported income tax provision.

Adjusted earnings per share ( EPS ) is defined as the adjusted net profit divided by the diluted weighted average number of outstanding shares, in order to reflect the shares that have a dilutive or anti-dilutive effect on the amount of adjusted net profit. The number of weighted average common shares used to calculate adjusted earnings per share may differ from the number of shares used to calculate the diluted earnings per share ( GAAP ), as including dilutive shares in one calculation may result in an anti-dilutive effect, while in another calculation it may not.

Free cash flow is defined as cash flow from operating activities ( GAAP ) minus net capital expenditures (i.e., capital expenditures less proceeds from the disposal of properties and equipment). Management uses free cash flow as an indicator to evaluate operating results, plan strategic investments, and measure the company's ability to borrow and repay debt. The company believes this indicator helps investors assess the company's ability to seize business opportunities, invest, and repay debt. Free cash flow is not a financial indicator recognized by U.S. GAAP; therefore, it should not be considered a substitute for cash flow from operating activities or a measure of liquidity calculated in accordance with U.S. GAAP. For more information on the company's ongoing cash and business management strategies, please refer to the company's latest Form 10-K or Form 10-Q filing, including item 2 of Part I, "Management's Discussion and Analysis of Financial Conditions and Operating Results – Liquidity and Capital Resources," in the Form 10-Q for the second quarter of fiscal year 2027, which is expected to be submitted later today.

Other indicators

Kyndryl defines the contracted amount as a preliminary estimate of the value that the customer commits to under the contract. This calculation involves an estimation and judgment of the customer's level of commitment. The company will perform this calculation based on various factors, including the type and duration of the agreement, as well as whether there are termination fees or exit costs. Contract renewals and scope expansions are only included in the contracted amount for the newly added value. Due to various factors, the contracted amount may change over time, including but not limited to the timing of signing large-scale outsourcing contracts and the length of these contracts. The contracted amount should not be considered a comprehensive measure of future revenue. The conversion of the contracted amount into revenue may vary depending on the type of service and solution, customer decisions, and other factors, which may include but are not limited to the macroeconomic environment or external events. Management uses the contracted amount to monitor business performance, measure customer engagement, and assess the ability to drive growth.