Kyndryl Swings to Loss as Revenue Declines
Adjusted EBITDA margin narrowed 3.1 percentage points to 14.2% in the quarter.
The IT infrastructure-services provider Kyndryl Holdings (KD) swung to a first-quarter loss as revenue declined and workforce-rebalancing costs increased. Net loss was $55 million, or $0.25 a share, compared with income of $56 million, or $0.23 a share, a year earlier.
The quarter marked a reversal from the improving trajectory late in the prior fiscal year. Revenue fell 3% to $3.618 billion from $3.743 billion, after declining 1% in the fiscal fourth quarter and growing 3% in the third quarter. On a constant-currency basis, revenue also fell 3%, compared with a 5% decline in the preceding quarter.
Adjusted results weakened more sharply. Adjusted EBITDA dropped to $512 million from $647 million a year earlier and $688 million in the fiscal fourth quarter. Adjusted net results swung to a loss of $26 million, or $0.12 a share, from income of $90 million, or $0.37 a share, a year earlier.
Regional performance accounted for much of the pressure. U.S. revenue rose 5% to $954 million and adjusted EBITDA increased to $220 million, making the country the only geographic segment with year-over-year revenue growth. Strategic Markets revenue fell 3%, while adjusted EBITDA declined to $62 million from $163 million, the largest regional earnings decrease.
Growth businesses continued to expand at slower rates. Kyndryl Consult revenue rose 10%, down from 24% growth in the fiscal third quarter, while hyperscaler-related revenue exceeded $530 million and grew 34%, compared with 58% growth in that earlier period. Quarterly signings increased to $3.9 billion from $3.2 billion, though trailing-12-month signings fell to $14.2 billion from $18.3 billion.
Cash flow also deteriorated as working-capital timing, higher software payments and lower billings and collections weighed on the quarter. Free cash outflow widened to $401 million from $222 million a year earlier, while operating cash outflow increased to $310 million from $124 million.
Kyndryl reaffirmed its fiscal 2027 revenue, earnings and free-cash-flow outlook. The company recorded $152 million of workforce-rebalancing charges and continues to expect about $200 million for the year, with the actions now projected to yield $400 million to $500 million in annualized operating-expense savings in fiscal 2028.
The company repurchased 5.0 million shares for $64 million during the quarter, bringing buybacks since November 2024 to 19.3 million shares, or 8% of shares outstanding. It also introduced two AI offerings, broadening the agentic-AI services highlighted in earlier quarters as it worked to convert growth initiatives into a firmer earnings recovery.