Executive Summary
Kyndryl Holdings Inc. reported its Q1 2026 results with a revenue of $3.743 billion, reflecting a year-over-year increase of 11% on a reported basis, driven primarily by strong growth in Kyndryl Consult, which saw a 30% increase year-over-year. Despite a decline in constant currency revenues due to strategic focus on essential accounts, management emphasized the substantial margin improvements and a 39% increase in adjusted pretax income, which illustrated the effectiveness of their operational strategies. The company reaffirmed its fiscal 2026 guidance of a 1% revenue growth, with expectations for accelerating growth in the latter part of the year as it shifts towards higher-margin post-spin contracts.
Key Performance Indicators
QoQ: -17.65% | YoY:409.09%
QoQ: -20.00% | YoY:380.00%
Key Insights
**Revenue Performance**: Kyndryl reported Q1 2026 revenues of $3.743 billion, a 2.6% decline in constant currency compared to Q4 2025, due to strategic focus on high-margin accounts, transitioning several low-margin accounts.
**Profitability Metrics**: The company's operating income stood at $150 million, with a margin of 4.0%, while net income surged significantly by 409% to $56 million amidst the focus on margin-expansion strategies.
**Cash Flow and Balance Sheet**: Despite a seasonal c...
Financial Highlights
Revenue Performance: Kyndryl reported Q1 2026 revenues of $3.743 billion, a 2.6% decline in constant currency compared to Q4 2025, due to strategic focus on high-margin accounts, transitioning several low-margin accounts.
Profitability Metrics: The company's operating income stood at $150 million, with a margin of 4.0%, while net income surged significantly by 409% to $56 million amidst the focus on margin-expansion strategies.
Cash Flow and Balance Sheet: Despite a seasonal cash outflow of $222 million, Kyndryl maintains a robust cash balance of $1.5 billion. The company forecasts a positive cash flow of approximately $550 million for the fiscal year, with manageable net leverage at 0.6x adjusted EBITDA.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
3.74B |
0.11% |
-1.50% |
| Gross Profit |
796.00M |
-1.12% |
N/A |
| Operating Income |
150.00M |
1.35% |
-7.41% |
| Net Income |
56.00M |
409.09% |
-17.65% |
| EPS |
0.24 |
380.00% |
-20.00% |
Management Commentary
Management highlighted several key themes in the earnings call:
- Growth Initiatives: Martin Schroeter emphasized, "In Q1, we made significant progress on our strategic initiatives, continued to drive margin expansion, and delivered a substantial increase in earnings."
- Margin Improvements: David Wyshner stated, "Our first-quarter adjusted EBITDA was $647 million, and our adjusted EBITDA margin was 17.3%, up 240 basis points year-over-year."
- Kyndryl Consult's Success: The ongoing growth in Kyndryl Consult was notable, with revenues rising 30% year-over-year. Management believes this segment will continue to be a key growth driver.
"We’re delivering innovation and best-of-breed solutions. Our expertise in both running and transforming is unmatched and differentiates us..." - Martin J. Schroeter
— Martin J. Schroeter
"We expect our revenue growth to accelerate from Q1 to Q2 and further in the second half..." - David B. Wyshner
— David B. Wyshner
Forward Guidance
Looking ahead to fiscal 2026, Kyndryl's management reaffirmed expectations of 1% revenue growth in constant currency, with the second half anticipated to be stronger due to an accelerated rollout of high-margin contracts. Kyndryl expects its adjusted pretax income to grow to at least $725 million, fueled by continued strength in Kyndryl Consult and improved operational efficiency. Management emphasized the potential to generate over $1 billion in adjusted free cash flow by fiscal 2028, supported by higher customer satisfaction and substantial investments in technology and innovation.