Kyndryl Holdings Inc. reported a small revenue decline but a higher profit for its fiscal second quarter.

The information technology services company said revenue for the quarter ended Sept. 30 fell 1% year-over-year to $3.7 billion, below analyst expectations of $3.84 billion. Measured in constant currency, revenue declined 3.7%. The company said the decrease reflected its four-year efforts to phase out inherited low-margin contracts and longer sales cycles, partly offset by growth in cloud and consulting services.

Pretax income of $98 million reversed a $5 million loss a year earlier. Net income was $68 million, or 29 cents per diluted share, up from a $43 million loss, or 19 cents a share, a year ago. That beat analysts’ forecasts by two cents. Adjusted pretax income rose to $123 million, and adjusted net income was $89 million, or 38 cents per share, up from a penny in the prior-year quarter.

Chairman and Chief Executive Officer Martin Schroeter said the quarter “reflects the momentum we’re building across key growth priorities: Kyndryl Consult, alliances with hyperscalers and other leading technology providers and our innovative services in AI, cloud and security.” He added that activity is expected to strengthen in the second half of fiscal 2026, supported by a strong pipeline of customer engagements.

The company reaffirmed its full-year outlook for fiscal 2026, targeting adjusted pretax income of at least $725 million, an adjusted earnings before interest, taxes, depreciation, and amortization margin of approximately 18%, free cash flow of roughly $550 million and constant-currency revenue growth of 1%.

Strong hyperscaler growth

Chief Financial Officer David Wyshner said Kyndryl continued to advance its strategic and financial goals “while maintaining attractive margins across our operations.” He said the company remains focused on expanding its scope with customers and sustaining momentum toward its fiscal 2028 objective of generating more than $1 billion in free cash flow.

Kyndryl’s board approved a $400 million increase in its share repurchase authorization, adding to the $300 million program announced a year ago. As of Sept. 30, the company had repurchased 2.9 million shares for $89 million during the quarter and $249 million in total since the program’s launch.

“The expansion of our buyback capacity reflects the confidence we have in our earnings trajectory and cash flow growth, as well as our commitment to distributing cash to shareholders,” Wyshner said.

Among operational highlights, the company reported that hyperscaler-related revenue increased 65% year-over-year to $440 million, positioning Kyndryl to exceed its $1.8 billion full-year target. Kyndryl Consult revenue grew 28%, and overall signings for the trailing 12 months reached $15.6 billion, exceeding total revenue of $15 billion over the same period a year ago. One quarter of the company’s new contracts now include artificial intelligence-related services, and Kyndryl said it continues to expand its AI capabilities with new technology hubs in Europe and Asia.

Schroeter said the company’s AI-powered Kyndryl Bridge platform, a collection of curated cloud services aimed at improving customers’ insights into their business and complex problems, is enabling customers to extract greater value from modernization investments.

“We’ve been able to free up thousands of delivery professionals worth roughly a cumulative $875 million a year to us, representing a $50 million increase in our annual run rate this past quarter,” Wyshner said.

Kyndryl shares declined by more than 6% in early trading on Wednesday.

Photo: Kyndryl