Kyndryl’s QQ2 2026 results reflect a measured-but-promising turnaround in profitability driven by portfolio shifts toward higher-margin post-spin contracts, greater contribution from advisory and AI-enabled services, and robust demand for infrastructure modernization. Reported revenue of $3.721B declined 1.4% YoY (3Q2 2026), primarily due to deliberate removal of low-margin hardware/software content, a strategic move that modestly pressured near-term top-line growth but materially enhanced gross profit quality and margin trajectory. Management highlighted meaningful progress in core growth vectors: Kyndryl Consult revenue up 32% YoY in constant currency (now ~$3.4B annualized), and Hyperscaler-related revenue up from year-ago levels (with the team tracking above an $1.8B fiscal 2026 target). The company reiterated confidence in a stronger second half, supported by a record pipeline and a book-to-bill ratio above 1 for the trailing 12 months. The AI narrative is central to the growth thesis, with approximately 25% of signings containing AI-related content, anchored by Kyndryl Bridge and the agentic AI framework. Near-term profitability is aided by margin expansion initiatives (3A program) and an acceleration in post-spin deals, offsetting ongoing investment in capabilities and partnerships. Long-term guidance points to significant free cash flow and pretax earnings growth through fiscal 2028, including achieving mid-single-digit revenue growth and over $1B of adjusted free cash flow by 2028. For investors, the key takeaways are the improving margin mix, a diversified growth engine (Consult, Hyperscalers, AI-enabled modernization), and a capital-allocation stance that balances buybacks, CapEx, and tuck-in acquisitions.