Q2 FY2027
Filed Nov 4, 2026Kyndryl reports second quarter fiscal 2027 revenue of $3.7 billion, pretax income of $112 million, net income of $59 million, and reaffirms fiscal 2027 outlook.
Second-quarter profitability and adjusted EBITDA improved year over year, supported by United States performance and higher hyperscaler-related and Kyndryl Consult revenue, while reported revenue declined, net income and GAAP EPS declined, and free cash flow was a use of cash.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Revenue, three months ended September 30, 2026GAAP | $3.65B | – | (1.9%) |
| Revenue, six months ended September 30, 2026GAAP | $7.27B | – | (2.6%) |
| Cost of services, three months ended September 30, 2026GAAP | $2.79B | – | – |
| Selling, general and administrative expenses, three months ended September 30, 2026GAAP | 669 | – | – |
| Workforce rebalancing charges, three months ended September 30, 2026GAAP | 38 | – | – |
| Transaction-related costs (benefits), three months ended September 30, 2026GAAP | 3 | – | – |
| Impairment expense, three months ended September 30, 2026GAAP | — | – | – |
| Interest expense, three months ended September 30, 2026GAAP | 37 | – | – |
| Other expense (income), three months ended September 30, 2026GAAP | (1) | – | – |
| Total costs and expenses, three months ended September 30, 2026GAAP | $3.54B | – | – |
| Pretax income, three months ended September 30, 2026GAAP | $112M | – | – |
| Provision for income taxes, three months ended September 30, 2026GAAP | 53 | – | – |
| Net income, three months ended September 30, 2026GAAP | $59M | – | – |
| Basic earnings per share, three months ended September 30, 2026GAAP | $ 0.27 | – | – |
| Diluted earnings per share, three months ended September 30, 2026GAAP | 0.27 | – | – |
| Adjusted pretax income, three months ended September 30, 2026non-GAAP | $150M | – | – |
| Adjusted EBITDA, three months ended September 30, 2026non-GAAP | $699M | – | – |
| Net income margin, three months ended September 30, 2026GAAP | 1.6% | – | – |
| Adjusted EBITDA margin, three months ended September 30, 2026non-GAAP | 19.1% | – | – |
| Adjusted net income, three months ended September 30, 2026non-GAAP | $ 92 | – | – |
| Adjusted earnings per share, three months ended September 30, 2026non-GAAP | $ 0.42 | – | – |
| Cash flows from operating activities, three months ended September 30, 2026GAAP | $172M | – | – |
| Free cash flow, three months ended September 30, 2026non-GAAP | $ (34) | – | – |
| Revenue, six months ended September 30, 2026GAAP | $7.27B | – | (2.6%) |
| Pretax income, six months ended September 30, 2026GAAP | $ 43 | – | – |
| Net income, six months ended September 30, 2026GAAP | $4M | – | – |
| Diluted earnings per share, six months ended September 30, 2026GAAP | 0.02 | – | – |
| Adjusted pretax income, six months ended September 30, 2026non-GAAP | $113M | – | – |
| Adjusted EBITDA, six months ended September 30, 2026non-GAAP | $1.21B | – | – |
| Adjusted EBITDA margin, six months ended September 30, 2026non-GAAP | 16.7% | – | – |
| Adjusted net income, six months ended September 30, 2026non-GAAP | $ 66 | – | – |
| Adjusted earnings per share, six months ended September 30, 2026non-GAAP | $ 0.30 | – | – |
| Cash flows from operating activities, six months ended September 30, 2026GAAP | −$137M | – | – |
| Free cash flow, six months ended September 30, 2026non-GAAP | −$434M | – | – |
| Signings, three months ended September 30, 2026other | $ 4.1 | – | – |
| Signings, six months ended September 30, 2026other | $ 8.0 | – | – |
| Signings, last twelve months ended September 30, 2026other | $ 15.5 | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| United States, three months ended September 30, 2026Includes a 3 point favorable impact on revenue growth from the resolution of a commercial matter. | $980M | – | 9.0% |
| Japan, three months ended September 30, 2026No segment-specific driver reported. | 555M | – | (4.6%) |
| Principal Markets, three months ended September 30, 2026No segment-specific driver reported. | 1.18B | – | (6.1%) |
| Strategic Markets, three months ended September 30, 2026India transitioned from Principal Markets to Strategic Markets in the quarter ended September 30, 2026; historical segment information was updated. | 939M | – | (4.8%) |
| United States, six months ended September 30, 2026No segment-specific driver reported. | $1.93B | – | 6.8% |
| Japan, six months ended September 30, 2026No segment-specific driver reported. | 1.09B | – | (6.1%) |
| Principal Markets, six months ended September 30, 2026No segment-specific driver reported. | 2.38B | – | (6.6%) |
| Strategic Markets, six months ended September 30, 2026India transitioned from Principal Markets to Strategic Markets in the quarter ended September 30, 2026; historical segment information was updated. | 1.87B | – | (4.0%) |
Amounts quoted below without a unit are in millions, as in the filing’s tables. Per-share figures are as printed.
fiscal 2027, which runs from April 2026 to March 2027 outlook
- RevenueConstant-currency revenue flat to down 2%
- NoteAdjusted pretax income of $600 to $700 million
- NoteFree cash flow of $400 to $500 million
- NoteAdjusted pretax income outlook includes workforce rebalancing charges, consistent with the definition of adjusted pretax income since fiscal 2025.
Capital returns
- Common stock repurchases were $ (97) in the six months ended September 30, 2026, compared to $ (151) in the prior-year period.
- Common stock repurchases for tax withholdings were $ (20) in the six months ended September 30, 2026, compared to $ (89) in the prior-year period.
What drove it
- Kyndryl Consult revenues grew 4.2% year-over-year in the second quarter.
- Hyperscaler-related revenues of more than $550 million grew 27.2% year-over-year in the second quarter.
- Trailing-twelve-month signings were $15.5 billion, including $4.1 billion in the second quarter.
- Kyndryl signed 43 customer contracts exceeding $50 million each in the last twelve months, of which 11 were in the second quarter.
- United States revenue growth included a 3 point favorable impact from resolution of a commercial matter.
- Kyndryl completed its acquisition of Healthcare IT Leaders in mid-September.
Concerns
- Revenue declined 1.9% year-over-year on a reported basis and 0.8% year-over-year in constant currency.
- Net income was $59 million, compared to $68 million in the prior-year period, while diluted earnings per share was $0.27, compared to $0.29.
- Free cash flow was $ (34) in the quarter, compared to $22 in the prior-year period.
- Workforce rebalancing charges were $38 million in the quarter and $190 million in the first half; the Company expects approximately $200 million of charges in fiscal 2027.
- Principal Markets revenue declined 6.1% and Strategic Markets revenue declined 4.8% year-over-year on a reported basis in the quarter.
What to watch
- Savings from workforce-rebalancing actions are expected to begin in the second half of fiscal 2027 and largely offset the charges.
- Once completed, workforce-rebalancing efforts are expected to result in annualized run-rate operating expense savings of approximately $400 to $500 million in fiscal year 2028.
- Fiscal 2027 outlook calls for adjusted pretax income of $600 to $700 million, free cash flow of $400 to $500 million, and constant-currency revenue flat to down 2%.
- Kyndryl Consult, hyperscaler-related revenue and signings trends.
- Execution and integration of the Healthcare IT Leaders acquisition.
Balance sheet and cash flow
- Cash and equivalents were $ 1,659 at September 30, 2026, compared to $ 2,623 at March 31, 2026.
- Debt (short-term and long-term) was 4,059 at September 30, 2026, compared to 4,089 at March 31, 2026.
- Net cash used in operating activities was $ (137) in the six months ended September 30, 2026, compared to $ 22 in the prior-year period.
- Capital expenditures were $ (363) in the six months ended September 30, 2026, compared to $ (272) in the prior-year period.
- Net cash used in investing activities was $ (568) in the six months ended September 30, 2026, compared to $ (196) in the prior-year period.
- Net cash used in financing activities was $ (242) in the six months ended September 30, 2026, compared to $ (310) in the prior-year period.
- Kyndryl completed an offering of $600 million of 7.80% Senior Notes due 2029 and $400 million of 7.875% Senior Notes due 2032 on September 28, 2026.
- The Company used net proceeds to repay at maturity the $700 million of 2.05% Senior Notes in October 2026 and used remaining proceeds together with cash on hand to repay the $1 billion outstanding revolving credit facility balance at the end of September.
Analysis
Kyndryl reported second-quarter fiscal 2027 revenue of $3.7 billion, down 1.9% year-over-year on a reported basis and down 0.8% in constant currency. The United States grew 9.0%, including a 3 point favorable impact from resolution of a commercial matter. Japan, Principal Markets and Strategic Markets each declined on a reported basis. Management highlighted 4.2% growth in Kyndryl Consult revenue and 27.2% growth in hyperscaler-related revenue of more than $550 million.
Profitability improved on adjusted measures. Pretax income increased to $112 million from $98 million, adjusted pretax income increased to $150 million from $123 million, and adjusted EBITDA increased to $699 million from $641 million. Adjusted EBITDA margin was 19.1%, compared with 17.2%. GAAP net income declined to $59 million from $68 million, and diluted EPS declined to $0.27 from $0.29. The quarter included $38 million of workforce rebalancing charges, compared with $19 million in the prior-year period.
Cash generation was weaker than the prior year despite positive quarterly operating cash flow. Cash flows from operating activities were $172 million, compared with $147 million, but free cash flow was $ (34) versus $22. For the first half, cash flows from operating activities were $ (137) and free cash flow was $ (434). Capital expenditures for the first half were $ (363), compared with $ (272) in the prior-year period.
Capital allocation included $ (97) of common stock repurchases during the first half. Kyndryl refinanced debt through $600 million of 7.80% Senior Notes due 2029 and $400 million of 7.875% Senior Notes due 2032. It used proceeds to repay $700 million of 2.05% Senior Notes at maturity in October 2026 and, together with cash on hand, to repay the $1 billion revolving credit facility balance at the end of September. Cash and equivalents were $1,659 and debt was 4,059 at September 30, 2026.
The Company reaffirmed fiscal 2027 targets for adjusted pretax income of $600 to $700 million, free cash flow of $400 to $500 million and constant-currency revenue flat to down 2%. Kyndryl expects approximately $200 million of workforce-rebalancing charges in fiscal 2027, of which $190 million were incurred in the first half. Savings are expected to begin in the second half and largely offset the charges, with expected annualized run-rate operating expense savings of approximately $400 to $500 million in fiscal 2028.
Management, verbatim
Strong signings and continued growth in Kyndryl Consult and hyperscaler-related revenue reinforce our confidence in our fiscal 2027 outlook.
Martin Schroeter, Chairman and Chief Executive Officer
Our performance reflects demand for Kyndryl’s AI-led modernization capabilities and deep mission-critical expertise that help customers evolve their complex technology environments, strengthen cybersecurity and achieve measurable business outcomes.
Martin Schroeter, Chairman and Chief Executive Officer
Our results reflect continued progress against our strategic and financial priorities. We remain focused on disciplined execution to strengthen our fundamentals, support margin expansion and drive free cash flow growth.
Ellen Johnson, Chief Financial Officer
Not in the filing
stated, not guessed- Gross margin was not reported.
- Operating income was not reported.
- A reported tax rate was not provided.
- No quarterly sequential revenue, earnings, margin, or segment comparisons were reported.
- No dividend amount or dividend policy was reported.
- No prior outlook section was provided; therefore, comparison of results with prior guidance is unavailable.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was checked against the filing text, and a metric whose value, prior period and change do not add up is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.