Kyndryl Holdings, Inc. (NYSE: KD) filed its Form 10‑Q for the quarter ended December 31, 2025 on February 17, 2026. The filing confirms that no restatement of the current period or any previously reported financial statements is required, but it also discloses material weaknesses in the company’s internal control over financial reporting.
The quarter’s financial results show revenue of $3.9 billion, a 3% year‑over‑year increase on a reported basis and flat in constant currency. Net income was $57 million, or $0.25 per diluted share on a reported basis, while adjusted earnings per share were $0.52, falling short of consensus estimates of $0.60–$0.67. Compared with the prior quarter, revenue rose from $3.7 billion and net income fell from $68 million, reflecting a shift in the mix of services and the impact of longer sales cycles.
Segment performance highlights continued growth in Kyndryl Consult, which expanded 24% year‑over‑year, and a 58% jump in hyperscaler‑related revenue to $500 million. These gains were driven by strong demand for cloud, AI and security services, but overall revenue remained flat in constant currency due to headwinds in legacy IBM‑related work and slower uptake in certain geographic markets.
Management updated its fiscal‑year 2026 outlook, guiding adjusted pretax income to $575–$600 million, an adjusted EBITDA margin of roughly 17.5%, free cash flow of $325–$375 million, and a constant‑currency revenue decline of 2%–3%. The guidance reflects concerns about longer sales cycles, headwinds from the evolving IBM partnership, and the company’s investment in consult growth and hiring adjustments.
The audit committee noted material weaknesses in cash‑management practices, vendor payment deferrals, disclosure processes and senior finance tone at the top. A remediation plan has been outlined to strengthen controls and prevent future lapses, underscoring governance risks that could affect the accuracy of future financial reporting.
"In the third quarter, we drove growth in Kyndryl Consult and through our alliances with hyperscalers and other leading technology providers. Our signings continue to reflect the vital role we play in the operation of customers' technology estates, our deep expertise in mission‑critical services and our innovation in AI, cloud and security," said Chairman and CEO Martin Schroeter. "We are operating with a clear strategic mindset. We remain focused on delivering our multi‑year objectives, driving profitable growth and most importantly providing innovative and world‑class services for our customers." Interim CFO Harsh Chugh added, "Revenue was behind what we were expecting. The variances versus our expectations were concentrated in our strategic markets and UK operations, which we are taking actions to address. And despite our efforts to get deals over the finish line, we have continued to experience longer sales cycles."
Investors have focused on the governance concerns highlighted by the material control weaknesses, the ongoing SEC review of cash‑management practices, and the recent departures of key financial executives. These factors have tempered enthusiasm for the earnings release, even as the company reports modest revenue growth and outlines a cautious but forward‑looking outlook.
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