KD

Research · Sep 3, 2026

[KD] Kyndryl Thesis 2026: Alliance Revenue Crosses 50% of Signings as Adj. Pre-Tax Turns Positive

Kyndryl's FY2025 (ended March 2025) hit its first positive adj. pre-tax income since the November 2021 IBM spin, as alliance signings crossed 50% of total (Microsoft/AWS/Google hybrid cloud managed services at 600-800 bps higher margin than legacy contracts) and below-cost legacy contracts fell to ~10% of revenue from ~30% in FY2023. Revenue declined ~7% as planned. FY2026 thesis: revenue stabilization at ~$13-14B by FY2027 as legacy roll-offs slow, with 15-17% EBITDA margins generating $1B+ FCF — the re-rating from 0.7x revenue (managed decline) to 1.2-1.5x revenue (IT services compounder).