Shares of Kyndryl Holdings Inc. rose 30% today after the company reported better-than-expected earnings for the second quarter of its 2027 fiscal year.
Kyndryl had sales of $3.9 billion in the three months ended September 30. That represents a year-over-year decline of 1.9%, but the company still managed to beat the consensus estimate by about $50 million. The company attributed the sales surprise to its Kyndryl Consult business.
Kyndryl, a former unit of IBM Corp., once generated almost all of its revenue from managing other companies’ technology infrastructure. In 2022, Kyndryl Consult was founded to pursue more strategic, higher-margin professional services contracts.
The unit’s revenue rose 4.2% year-over-year in the second quarter. Kyndryl didn’t disclose specific quarterly revenue figures, but said the unit earned a total of $3.6 billion over the past 12 months.
Kyndryl Consult’s contract wins, a measure of future sales, rose 19% last year. This dynamic may have contributed to the company’s stock rally today.
Many of the projects Kyndryl Consult takes on use artificial intelligence. The unit can help customers build AI agent ensembles and establish training data generation pipelines. Additionally, it can advise customers on business decisions, such as allocating their AI budgets.
Kyndryl offers a software platform called Bridge to companies that buy its AI services. It allows AI agents to access business data from an organization’s internal systems. In addition, Bridge monitors these agents to ensure they comply with security requirements.
The public cloud is another key focus of Kyndryl’s growth efforts. The company’s hyperscale revenue topped $500 million in the second quarter, up 27% year-over-year.
“Strong contract wins and continued growth in Kyndryl Consult and hyperscaler-related revenues increase our confidence in our fiscal 2027 outlook,” said Martin Schroeter, Chief Executive Officer of Kyndryl. “Our performance reflects the demand for Kyndryl’s AI-powered modernization capabilities and deep business-critical expertise that help customers evolve their complex technology environments, strengthen cybersecurity and achieve measurable business results.”
The company had adjusted net income of $92 million, equal to 42 cents per share. Analysts expected 41 cents per share. The total does not include $38 million in workforce reduction costs that the company incurred in the second quarter. It’s part of a broader cost-cutting initiative that’s expected to save Kyndryl up to $500 million annually starting in fiscal 2028.
For the current fiscal year, the company forecasts adjusted pre-tax profit of $600 million to $700 million. Kyndryl expects sales to remain the same or increase by up to 2%.
Image: Kyndryl
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