Kyndryl Holdings, Inc. (KD) · Nov 4, 2026 · Earnings
Beat — Adjusted EPS $0.42 vs ~$0.38 consensus; revenue $3.651B vs ~$3.62B
Kyndryl’s second-quarter earnings beat consensus and its fiscal 2027 outlook stayed intact, but declining revenue and weak free cash flow remain the tension.
Kyndryl is in the middle of shifting from a shrinking legacy infrastructure base toward higher-value consulting, hyperscaler work and AI-led modernization; its prior-quarter story already centered on strong signings and that transition. The quarter was a modest execution beat, not a story reset. Adjusted EPS of $0.42 exceeded the published consensus of roughly $0.38, while revenue of $3.651 billion topped the roughly $3.62 billion estimate. The company also reaffirmed its existing fiscal 2027 outlook rather than raising it. Kyndryl reported adjusted EPS of $0.42, compared with $0.38 a year ago.
| Q2 FY27 | Q2 FY26 | Consensus | |
|---|---|---|---|
| Revenue (Table 1) | $3.651B (-1.9%) | $3.721B | $3.62B |
| Adjusted EPS (Reconciliation) | $0.42 | $0.38 | ~$0.38 |
| Adjusted EBITDA (Reconciliation) | $699M (+9.0%) | $641M | |
| Free cash flow (Reconciliation) | $(34)M | $22M | |
| FY27 adjusted pretax guide (Outlook) | $600M-$700M | $600M-$700M |
The mix is improving even though the top line is not. Kyndryl Consult revenue grew 4.2% and hyperscaler-related revenue rose 27.2%, supporting the strategic pivot. But total revenue declined 0.8% in constant currency, with every region outside the United States contracting on that basis. The U.S. growth also benefited from a commercial matter, including a 15-point lift to adjusted EBITDA growth, so the reported margin improvement is not entirely clean. Kyndryl said hyperscaler-related revenues of more than $550 million grew 27.2% year-over-year.
Cash generation remains the main constraint. Quarterly operating cash flow improved to $172 million, but free cash flow was negative $34 million, and first-half free cash flow was negative $434 million against full-year guidance of $400 million to $500 million. The company attributes part of the pressure to heavy capital spending, acquisition spending and restructuring-related payments; the planned $400 million to $500 million of annualized savings does not arrive until fiscal 2028. The company reported that free cash flow was a use of $34 million in the quarter.
The reaffirmed outlook keeps the business on track, but does not raise the bar. Kyndryl still expects constant-currency revenue to be flat to down 2%, adjusted pretax income of $600 million to $700 million and free cash flow of $400 million to $500 million. The better-than-expected quarter helps preserve that plan, while the still-negative free cash flow and ongoing restructuring show that the transition is not yet complete. Kyndryl said its workforce-rebalancing actions are expected to produce annualized run-rate operating expense savings of approximately $400 million to $500 million in fiscal 2028.
Bottom line: Kyndryl delivered a narrow earnings beat and showed continued strength in its newer consulting and hyperscaler businesses. The event modestly strengthens the transition story, but declining revenue and weak cash conversion keep it from being a major upgrade to the business view.
Fiscal Q3 results, early February 2027
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