Kyndryl Holdings announced that its Chief Financial Officer, David Wyshner, and General Counsel, Edward Sebold, had both left the company effective immediately, creating a sudden leadership vacuum in the finance and legal functions. The company also disclosed that its Audit Committee is conducting a review of cash‑management practices, related disclosures—including the drivers of its adjusted free‑cash‑flow metric—and the effectiveness of its internal control over financial reporting, following voluntary document requests from the SEC’s Division of Enforcement. The review will cover the period of the most recent quarterly filing and the first two quarters of fiscal 2026, and the company expects to report material weaknesses in internal control for those periods.
In its Q3 FY2026 earnings release, Kyndryl reported revenue of $3.90 billion, a 3% year‑over‑year increase from $3.80 billion in the prior year. Adjusted earnings per share were $0.52, missing the consensus estimate of $0.60 by $0.08, or 13%. Net income fell sharply to $57 million from $215 million a year earlier, largely due to higher operating expenses and a one‑time charge related to restructuring costs. The company cut its fiscal 2026 constant‑currency revenue guidance to a decline of 2% to 3%, down from a prior forecast of 1% growth, and reduced its adjusted pretax income outlook.
The revenue miss was driven by a modest decline in the Kyndryl Consult segment, which saw a 1% drop in revenue as some large‑scale modernization projects were delayed. The Alliances segment, however, grew 4% as new contracts with hyperscalers were signed, partially offsetting the weakness in Consult. The net income decline was amplified by a $150 million one‑time restructuring charge and higher interest expense, which eroded profitability even as operating income remained near the prior‑year level.
Management explained that the earnings miss reflects a combination of “temporary headwinds in the consulting market and the impact of a restructuring initiative that is expected to generate long‑term cost savings.” CEO Martin Schroeter said the company is “focused on delivering profitable growth and maintaining a strong balance sheet” while the internal control review is “being conducted expeditiously to restore confidence in our financial reporting.” The company has not yet named an interim CFO, but it has engaged an external advisory firm to assist with the control assessment.
The market reacted sharply to the news. Trading in Kyndryl’s shares was halted twice after the opening bell on February 9, and the stock fell roughly 55% in the days that followed. Oppenheimer downgraded the company to “Perform” from “Outperform” and removed its price target, citing the leadership departures and the SEC inquiry. Several law firms have initiated investigations into potential securities fraud, and the company’s delayed filing of its Form 10‑Q has raised concerns about the timeliness and accuracy of its disclosures.
These developments underscore significant governance and financial reporting risks for Kyndryl. The simultaneous loss of its CFO and General Counsel, coupled with an ongoing internal control review and a delayed quarterly filing, erodes investor confidence and signals potential systemic issues in the company’s financial oversight. The earnings miss and downward guidance further suggest that the company’s growth trajectory may be slower than previously anticipated, and the market’s reaction reflects heightened scrutiny of Kyndryl’s ability to maintain reliable financial reporting and execute its strategic initiatives.
The content on EveryTicker is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.