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(Sharecast News) - Kyndryl shares were plummeting on Monday, after the company reported mixed third-quarter results and sharply lowered its full-year outlook, while disclosing leadership changes and an accounting review, developments that overshadowed growth in its consulting and cloud-alliance businesses.
The IT service provider posted third-quarter revenue of $3.9bn for the period ended 31 December, up 3% year on year on a reported basis but flat in constant currency.
Net income fell to $57m, or 25cents per share, from $215m a year earlier, reflecting the absence of a prior-year transaction-related benefit.
On an adjusted basis, earnings were 52cents per share, below market expectations, while adjusted EBITDA came in at $696m and free cash flow at $217m.
Operationally, the quarter showed continued momentum in growth areas.
Revenue tied to cloud hyperscaler alliances reached $500m, a 58% increase from a year earlier, putting the company on track to exceed its $1.8bn target for 2026.
Kyndryl Consult revenues rose 24% year on year, with trailing 12-month revenues of $3.6bn and signings of $4.1bn.
Total signings over the past 12 months reached $15.4bn, including 11 contracts above $50 million in the quarter.
However, the company cut its 2026 guidance, now forecasting a constant-currency revenue decline of 2% to 3%, compared with a prior expectation of growth.
Adjusted pretax income was expected to be $575m to $600m and free cash flow $325m to $375m, both well below previous targets.
Management cited extended sales cycles and continued transformation costs, even as it reiterated its focus on profitable growth and margin improvement over the medium term.
The update was accompanied by significant governance developments.
Kyndryl said it was reviewing its cash management practices, disclosures related to adjusted free cash flow and the effectiveness of its internal controls after receiving voluntary document requests from the US Securities and Exchange Commission.
The company said it would delay filing its quarterly Form 10-Q and expected to report material weaknesses in internal controls for multiple reporting periods, though it said it did not anticipate a restatement of its financial statements.
At the same time, the group announced leadership changes, naming Harsh Chugh as interim chief financial officer, Mark Ringes as interim general counsel and Bhavna Doegar as interim corporate controller, following the departures of the previous CFO and general counsel.
Chief executive Martin Schroeter said the company was addressing the review proactively while continuing to execute on its multi-year strategy.
At 1222 ET (1722 GMT), shares in Kyndryl Holdings were down 54.96% in New York at $10.58.
Reporting by Josh White for Sharecast.com.