Kyndryl Shares Surge as Quarterly Signings Reach $4.1 Billion Despite Revenue Dip

Revenue for the three months to September 30 was $3.651 billion, down 1.9% from a year earlier and down 0.8% in constant currency, Kyndryl said in its earnings release. SiliconANGLE reported that the stock rose 30%.

The results suggest Kyndryl is starting to replace its old business of running other companies' data centres and networks with consulting and cloud work linked to AI projects. That shift was the main reason the company was spun out of IBM. Signings measure future revenue, and the company said they totalled $15.5 billion over the past 12 months.

The growth came from two parts of the business. Revenue at Kyndryl Consult, the higher-margin advisory unit launched in 2022, rose 4.2% in the quarter. Over 12 months the unit brought in $3.6 billion, up 8.1%, and its signings reached $4.6 billion, up 19.1%. Revenue tied to the large cloud providers topped $550 million in the quarter, up 27.2%, and reached $2.1 billion over 12 months, up 38.5%.

"Strong signings and continued growth in Kyndryl Consult and hyperscaler-related revenue reinforce our confidence in our fiscal 2027 outlook," chief executive Martin Schroeter said in the release. He said the results reflected "demand for Kyndryl's AI-led modernization capabilities and deep mission-critical expertise."

Kyndryl's consulting arm helps customers build systems of AI agents and set up training-data pipelines, and advises them on how to divide their AI budgets, according to SiliconANGLE. The company sells a software platform called Bridge that connects AI agents to a customer's internal data and monitors whether they follow safety rules.

Profit improved on an adjusted basis. Adjusted earnings were 42 cents a share, up from 38 cents a year earlier and slightly ahead of the 41 cents analysts expected, according to SiliconANGLE. Adjusted EBITDA rose to $699 million from $641 million. Under standard accounting, net income fell to $59 million, or 27 cents a share, from $68 million, or 29 cents.

Cash flow was weaker. Free cash flow was a use of $34 million, against an inflow of $22 million a year earlier, while operating cash flow was $172 million. The quarter included $38 million of workforce rebalancing charges, up from $19 million.

Those charges are part of a cost programme. Kyndryl expects about $200 million of workforce charges this fiscal year, $190 million of which it booked in the first half. It said savings should start in the second half and largely offset the charges, and it expects annualised operating expense savings of about $400 million to $500 million in fiscal 2028.

The company repurchased $97 million of shares in the six months to September 30, down from $151 million a year earlier.

Kyndryl kept its fiscal 2027 outlook: adjusted pretax income of $600 million to $700 million including the workforce charges, free cash flow of $400 million to $500 million, and constant-currency revenue flat to down 2%.