Kyndryl Holdings Incorporation (KD) AI Stock Analysis

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Kyndryl Holdings Incorporation

(NYSE:KD)

Rating:52Neutral

Price Target:―

Kyndryl Holdings faces significant financial challenges, reflected in its low financial performance score, with declining revenue and high leverage posing financial risks. Technical analysis shows mixed signals, indicating potential for both upward and downward movements. The high P/E ratio suggests overvaluation, especially in light of financial struggles. However, the recent earnings call provided a positive outlook, highlighting strong growth in key areas, which slightly balances the overall score. Strategic improvements are necessary to enhance financial stability and growth prospects.

Positive Factors

Bookings and Contracts

Bookings trends continued to be a bright spot in the quarter.

Financial Performance

Free cash flow of $335M exceeded BofAe/implied guide of $245M/$240M.

Revenue and Margins

Kyndryl should have strong visibility to mid-term margins given mix shift and has delivered more than its targeted margin expansion to date.

Negative Factors

Audit Concerns

The report alleges aggressive accounting, coinciding with potential incremental IBM-related costs, suspect signings metrics, audit concerns, and internal stock sales.

Audit Optics

The optics of the audit matters aren’t ideal, but KD says auditor PwC OK’d the financial statements despite the systems issue.

Internal Controls

The report also alleges weakness in internal controls and key audit matters.

Kyndryl Holdings Incorporation (KD) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$9.04B

Dividend YieldN/A

Average Volume (3M)1.83M

Price to Earnings (P/E)37.6

Beta (1Y)1.51

Revenue Growth-8.20%

EPS GrowthN/A

CountryUS

Employees80,000

SectorTechnology

Sector Strength78

IndustryInformation Technology Services

Share Statistics

EPS (TTM)0.52

Shares Outstanding232,694,500

10 Day Avg. Volume1,739,378

30 Day Avg. Volume1,827,717

Financial Highlights & Ratios

PEG Ratio0.23

Price to Book (P/B)7.19

Price to Sales (P/S)0.00

P/FCF Ratio-129.24

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$44.80

Price Target Upside15.26% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering5

Kyndryl Holdings Incorporation Business Overview & Revenue Model

Company DescriptionKyndryl Holdings, Inc. operates as a technology services company and IT infrastructure services provider worldwide. The company offers cloud services; core enterprise and cloud services; application, data, and artificial intelligence services; digital workplace services; security and resiliency services; and network services and edge services. It serves financial, telecommunications, retail, automobile, and transportation industries. The company was incorporated in 2020 and is headquartered in New York, New York.

How the Company Makes MoneyKyndryl makes money primarily through its range of IT infrastructure services, which it provides to a diverse clientele across various industries. The company's revenue model is based on long-term service contracts with enterprises that require ongoing IT management, cloud services, and digital transformation support. Key revenue streams include fees for managed services, cloud infrastructure management, and digital workplace solutions. Kyndryl's earnings are significantly enhanced by strategic partnerships with major technology providers like Microsoft, Google, and Amazon, which enable it to offer integrated cloud and IT solutions. Additionally, the company benefits from its legacy customer base inherited from IBM, which includes numerous Fortune 500 companies, ensuring a stable and recurring revenue flow.

Kyndryl Holdings Incorporation Financial Statement Overview

Summary

Kyndryl Holdings is experiencing declining revenue and profitability issues across financial statements. The income statement shows decreasing revenue with some margin recovery. The balance sheet reflects high leverage and limited equity, posing financial risks. Cash flow statements indicate struggles in generating positive cash flow. Strategic improvements are needed for stability and growth.

Income Statement

Neutral

Kyndryl Holdings has been experiencing declining revenue over recent years. The TTM (Trailing-Twelve-Months) shows a slight recovery in margins, with a gross profit margin of approximately 39.8% and a net profit margin of 0.9%. However, the company has struggled with consistent profitability, evidenced by previous years' losses. The EBIT and EBITDA margins have shown some improvement, but overall revenue growth has been negative.

Balance Sheet

Negative

The balance sheet indicates a high debt-to-equity ratio in the TTM (Trailing-Twelve-Months) of approximately 3.61, reflecting significant leverage. The return on equity is modest at 12.6%, suggesting limited profitability on shareholders' equity. The equity ratio is low, highlighting potential financial instability. Overall, the balance sheet reflects a high-risk financial structure with limited equity support.

Cash Flow

Neutral

Cash flow analysis reveals challenges with free cash flow, which has been negative and inconsistent. The operating cash flow to net income ratio is approximately 3.67 in the TTM (Trailing-Twelve-Months), indicating reliance on operational cash rather than profitability. The free cash flow to net income ratio is negative, underscoring ongoing struggles to generate cash from operations.

TTM	Mar 2024	Mar 2023	Dec 2021	Dec 2020	Dec 2019
Breakdown
Income Statement		Total Revenue
15.11B	16.05B	17.03B	18.66B	19.35B	20.28B
	Gross Profit
3.03B	2.86B	2.53B	2.11B	2.21B	2.60B
	EBIT
318.00M	116.00M	-422.00M	-704.00M	-1.70B	-503.00M
	EBITDA
1.43B	1.14B	952.00M	960.00M	195.00M	1.42B
	Net Income Common Stockholders
138.00M	-340.00M	-1.37B	-2.31B	-2.01B	-943.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.50B	1.55B	1.85B	2.22B	24.00M	36.00M
	Total Assets
9.93B	10.59B	11.46B	13.21B	11.21B	11.74B
	Total Debt
3.95B	4.14B	4.24B	4.60B	1.39B	1.36B
	Net Debt
2.45B	2.59B	2.40B	2.38B	1.37B	1.32B
	Total Liabilities
8.72B	9.47B	10.00B	10.45B	6.28B	5.80B
	Stockholders Equity
1.09B	1.01B	1.36B	2.77B	4.87B	5.89B
Cash Flow		Free Cash Flow
-61.00M	-197.00M	-84.00M	-871.00M	-408.00M	-56.00M
	Operating Cash Flow
506.00M	454.00M	781.00M	-119.00M	628.00M	1.13B
	Investing Cash Flow
-402.00M	-553.00M	-835.00M	-572.00M	-953.00M	-1.13B
	Financing Cash Flow
-219.00M	-170.00M	-141.00M	2.92B	312.00M	-1.00M

Kyndryl Holdings Incorporation Technical Analysis

Technical Analysis Sentiment

Positive

Last Price38.87

Price Trends

50DMA

33.78

Positive

100DMA

35.98

Positive

200DMA

31.36

Positive

Market Momentum

MACD

2.01

Negative

RSI

63.08

Neutral

STOCH

37.41

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KD, the sentiment is Positive. The current price of 38.87 is above the 20-day moving average (MA) of 36.83, above the 50-day MA of 33.78, and above the 200-day MA of 31.36, indicating a bullish trend. The MACD of 2.01 indicates Negative momentum. The RSI at 63.08 is Neutral, neither overbought nor oversold. The STOCH value of 37.41 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for KD.

Kyndryl Holdings Incorporation Risk Analysis

Kyndryl Holdings Incorporation disclosed 30 risk factors in its most recent earnings report. Kyndryl Holdings Incorporation reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 3 New Risks

We continue to face a number of risks related to our separation from IBM, which could adversely affect our business, results of operations and financial condition. Q1, 2024

If we are not able to continue addressing and adapting to technological developments and trends that serve customer demands, our growth plans, market share and financial performance could be negatively affected. Q1, 2024

We may experience difficulties as we continue to integrate and update our new enterprise resource planning ("ERP") system, and we have identified deficiencies in our internal control related to the information technology general controls in our new ERP environment, which, if not remediated appropriately or timely, could result in adverse effects to the Company. Q1, 2024

Kyndryl Holdings Incorporation Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SAIC	78 Outperform	$5.53B	16.36	21.53%	1.26%	0.47%	-18.98%
G	76 Outperform	$7.61B	14.81	22.21%	1.44%	7.31%	-15.86%
CACI	76 Outperform	$10.15B	21.78	13.48%	―	14.16%	22.25%
WNS	75 Outperform	$2.68B	14.88	21.21%	―	-0.64%	30.96%
Sector *	61 Neutral	$11.28B	10.16	-6.88%	2.97%	7.41%	-8.93%
KD	52 Neutral	$9.04B	37.58	12.09%	―	-8.20%	―
DXC	46 Neutral	$2.67B	7.00	12.88%	―	-5.65%	78.20%

* Technology Sector Average

Performance Comparison

Kyndryl Holdings Incorporation

38.87

11.66

42.85%

CACI

Caci International

461.62

38.51

9.10%

Genpact

43.51

10.77

32.90%

SAIC

Science Applications

117.28

-16.14

-12.10%

WNS

57.79

6.33

12.30%

DXC

DXC Technology

14.75

-0.41

-2.70%

Kyndryl Holdings Incorporation Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q4-2025)

% Change Since: 17.29%|

Next Earnings Date:Jul 30, 2025

Earnings Call Sentiment Positive

Kyndryl showcased strong financial performance with significant increases in signings, revenue, and adjusted pretax income. The company returned to positive revenue growth and demonstrated substantial progress in its strategic initiatives. However, challenges such as increased IBM software costs and geopolitical risks remain. Overall, the highlights significantly outweigh the lowlights.

Q4-2025 Updates

Positive Updates

Significant Increase in Signings

Signings were up 48% in constant currency to more than $18 billion, indicating strong demand for Kyndryl's services.

Record Adjusted Pretax Income

Adjusted pretax income increased by $317 million to $482 million, marking a 192% increase from the prior year.

Strong Cash Flow Generation

Generated $446 million in adjusted free cash flow, a 53% increase from last year.

Kyndryl Consult Revenue Growth

Kyndryl Consult delivered above-market growth with revenue increasing more than 25% year over year.

Hyperscaler Related Revenue Surge

Hyperscaler related revenue more than doubled to $1.2 billion.

Positive Revenue Growth

Returned to positive constant currency revenue growth in the fourth quarter.

Large Contract Wins

Secured 55 contracts valued at over $50 million each, with nearly half over $100 million.

Negative Updates

IBM Software Cost Increase

Fiscal 2026 outlook includes a $150 million increase in IBM software costs, impacting financial results.

Exposure to Geopolitical Risks

Although limited, there is some exposure to geopolitical risks and tariffs, which the company is monitoring.

Company Guidance

In the Kyndryl Fourth Quarter 2025 Earnings Conference Call, the company provided guidance for fiscal 2026, projecting another year of significant earnings and cash flow growth, along with positive constant currency revenue growth. Key metrics highlighted included a 48% increase in signings to over $18 billion, $482 million in adjusted pretax income, a 53% increase in adjusted free cash flow to $446 million, and a 1.2 revenue book to bill ratio. The company reported that Kyndryl Consult revenue grew over 25%, with consult signings increasing by 50% in constant currency, and hyperscaler-related revenue more than doubled to $1.2 billion. For fiscal 2026, 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. Over the medium term, 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.

Kyndryl Holdings Incorporation Corporate Events

Stock BuybackBusiness Operations and Strategy

Kyndryl Holdings Announces $300 Million Share Buyback

Positive

Nov 21, 2024

Kyndryl Holdings, Inc. has announced a $300 million share repurchase program, signaling confidence in their business growth and financial stability. The company plans to buy back shares through various market transactions, with the flexibility to modify or discontinue the program as needed. This move aligns with Kyndryl’s strategy to return capital to shareholders while maintaining financial agility.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.