Kyndryl’s second quarter results saw a negative market reaction, as sales declined and missed Wall Street’s revenue expectations. Management attributed the revenue shortfall to ongoing headwinds in its legacy focus accounts and customers increasingly procuring IBM hardware and software directly. CEO Martin Schroeter cited positive momentum in Kyndryl Consult and hyperscaler partnerships, but acknowledged that lengthening sales cycles and workforce rebalancing charges weighed on profitability. He stated, “AI, modernization and cyber preparedness remain important priorities for enterprises,” but also noted that “there is more work ahead.”
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Kyndryl (KD) Q2 CY2026 Highlights:
- Revenue: $3.62 billion vs analyst estimates of $3.64 billion (3.3% year-on-year decline, 0.7% miss)
- Adjusted EPS: -$0.12 vs analyst estimates of -$0.17 (29.4% beat)
- Adjusted EBITDA: $512 million vs analyst estimates of $460.6 million (14.2% margin, 11.2% beat)
- Operating Margin: -1.2%, down from 3.3% in the same quarter last year
- Market Capitalization: $2.91 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Kyndryl’s Q2 Earnings Call
- Yu Lee (Guggenheim Securities) asked about the assumptions behind the Consult segment’s growth and sales cycle duration. CEO Martin Schroeter explained that high single to low double-digit growth is expected, with robust signings and consistent sales cycles.
- Kevin Krishnaratne (Scotiabank) inquired about headwinds in European markets and evolving AI sovereignty concerns. Schroeter said trends remain consistent with guidance, citing complexity and regulatory issues but not longer deal cycles.
- Tien-Tsin Huang (JPMorgan) focused on workforce reskilling and redeployment amid AI-driven transformation. Schroeter detailed how automation frees staff for higher-value work, while Chugh emphasized success in reskilling and managing costs.
- Bradley Clark (BMO Capital Markets) asked about Kyndryl’s advantage in winning new logos and pricing dynamics. Schroeter highlighted the company’s Agentic AI Framework, Kyndryl Bridge, and industry expertise as differentiators, especially in consulting.
- Spencer Anson (Susquehanna) queried the scale and opportunity in mainframe modernization and its impact on the IBM relationship. Schroeter stressed Kyndryl’s market-leading expertise and the continued importance of mainframe services for customers.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) sustained revenue growth in Kyndryl Consult and hyperscaler partnerships, (2) evidence that workforce rebalancing and automation initiatives deliver the expected improvement in margins, and (3) further reduction in the impact of legacy focus account headwinds. The pace of new contract signings and execution against AI-driven modernization goals will remain critical markers.
Kyndryl currently trades at $13.47, down from $14.69 just before the earnings. Is there an opportunity in the stock? See for yourself in our full research report (it’s free).
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