Kyndryl Holdings Incorporation ((KD)) has held its Q4 earnings call. Read on for the main highlights of the call.
Kyndryl Holdings Inc. recently held its earnings call, revealing a robust financial performance that has impressed investors and analysts alike. The company reported significant increases in signings, revenue, and adjusted pretax income, marking a return to positive revenue growth. Kyndryl’s strategic initiatives have shown substantial progress, although challenges such as increased IBM software costs and geopolitical risks remain. Overall, the positive highlights from the earnings call significantly outweigh the lowlights, painting an optimistic picture for the company’s future.
Significant Increase in Signings
Kyndryl reported a remarkable 48% increase in signings, reaching over $18 billion in constant currency. This surge indicates a strong demand for Kyndryl’s services and reflects the company’s growing influence in the market. The impressive growth in signings is a testament to Kyndryl’s successful strategies and its ability to attract new business.
Record Adjusted Pretax Income
The company achieved a record adjusted pretax income of $482 million, marking a 192% increase from the previous year. This substantial growth highlights Kyndryl’s effective cost management and operational efficiency, contributing to its overall financial success.
Strong Cash Flow Generation
Kyndryl generated $446 million in adjusted free cash flow, representing a 53% increase from last year. This strong cash flow generation underscores the company’s financial health and its ability to reinvest in growth opportunities.
Kyndryl Consult Revenue Growth
Kyndryl Consult delivered above-market growth, with revenue increasing by more than 25% year over year. This performance demonstrates the strength of Kyndryl’s consulting services and its ability to meet the evolving needs of its clients.
Hyperscaler Related Revenue Surge
The company reported that hyperscaler-related revenue more than doubled to $1.2 billion. This surge reflects Kyndryl’s successful partnerships with major cloud providers and its expanding presence in the cloud services market.
Positive Revenue Growth
Kyndryl returned to positive constant currency revenue growth in the fourth quarter, signaling a turnaround in its financial trajectory. This positive growth is a key indicator of the company’s recovery and future potential.
Large Contract Wins
Kyndryl secured 55 contracts valued at over $50 million each, with nearly half exceeding $100 million. These large contract wins highlight the company’s ability to secure significant business deals and strengthen its market position.
IBM Software Cost Increase
The fiscal 2026 outlook includes a $150 million increase in IBM software costs, which could impact Kyndryl’s financial results. The company is actively managing these costs to mitigate their effect on profitability.
Exposure to Geopolitical Risks
Kyndryl acknowledged some exposure to geopolitical risks and tariffs, although it remains limited. The company is monitoring these risks closely to ensure they do not adversely affect its operations.
Forward-Looking Guidance
In its forward-looking guidance, Kyndryl projected another year of significant earnings and cash flow growth for fiscal 2026, along with positive constant currency revenue growth. The company expects adjusted pretax income to grow by more than $240 million to at least $725 million, and adjusted free cash flow to reach approximately $550 million. Looking further ahead, Kyndryl aims to achieve more than $1 billion in adjusted free cash flow and $1.2 billion in adjusted pretax income by fiscal 2028, with a target of mid-single digit revenue growth.
In summary, Kyndryl Holdings Inc.’s recent earnings call showcased a strong financial performance with significant growth in key areas such as signings, revenue, and cash flow. Despite challenges like increased IBM software costs and geopolitical risks, the company’s strategic initiatives are yielding positive results. With optimistic forward-looking guidance, Kyndryl is well-positioned for continued success in the coming years.