Kyndryl Holdings, Inc.

Kyndryl reported Q1 revenue of $3.6 billion, down 3% year over year on both a reported and constant-currency basis. Adjusted EBITDA was $512 million and adjusted pretax loss was $37 million, with $152 million of workforce rebalancing charges driving the year-over-year decline in earnings and margin and causing more than a 4-point impact on adjusted pretax income margin. Free cash flow was a $401 million outflow in the quarter, and cash balance at June 30 was $2.1 billion. For the full year fiscal 2027, Kyndryl continues to expect adjusted pretax income of $600 million to $700 million, free cash flow of $400 million to $500 million, and revenue flat to down 2% in constant currency; second-quarter adjusted pretax income is expected to be relatively in line with the $123 million reported last year. Management also said fiscal 2028 savings from workforce actions are expected to be $400 million to $500 million annually, and reiterated confidence in achieving more than $1.2 billion in adjusted pretax income and $1 billion in free cash flow in fiscal 2028 on low single-digit constant-currency revenue growth.

Martin Schroeter emphasized that Kyndryl is seeing demand where it wants to compete: Consult, hyperscaler alliances, modernization and Agentic AI. He said signings over the last six months have exceeded revenue, large-deal mix is improving, and new scope and new-logo deals are increasing as a share of large signings. His tone was confident and strategic, stressing that AI and modernization are structural themes and that Kyndryl’s Bridge platform, Agentic AI capabilities and consulting expertise are differentiators.

Harsh Chugh walked through the quarter’s financial drag from workforce actions, noting $152 million of workforce rebalancing charges, adjusted EBITDA of $512 million, adjusted pretax loss of $37 million and a $401 million free cash flow outflow tied to seasonal working-capital timing, higher payments for renewals and prepaid software, and lower billings and collections. He said cash was $2.1 billion, net leverage was 0.8x, the company plans to refinance or use cash for the near-term $700 million debt maturity, and 5 million shares were repurchased for $64 million in Q1. He reiterated full-year fiscal 2027 guidance for $600 million to $700 million of adjusted pretax income, $400 million to $500 million of free cash flow, and revenue flat to down 2% in constant currency, with about $200 million of workforce rebalancing charges and a similar amount of offsetting savings embedded in the outlook.

Analysts focused on what is embedded in the fiscal 2027 outlook, regional weakness in Europe, workforce planning, new-logo pricing, and the mainframe modernization opportunity. Management said Consult is tracking within the earlier high-single-digit to low-double-digit growth assumption, signings momentum looks good, and sales cycles are not materially changing despite some sovereignty-related complexity in Europe. They also said the workforce is being reskilled and redeployed, AI and agentic automation are already enabling higher-value work, and mainframe modernization remains a real opportunity where Kyndryl has unique scale and deep expertise; the relationship with IBM was described as good and still evolving.