Kyndryl (KD) Citi’s 2025 Global Technology, Media and Telecommunications Conference summary

Strategic transformation and growth initiatives

• Gained investment capacity and freedom of action post-spin, enabling partnerships with major hyperscalers and a shift to a services-focused culture.

• Developed the "Three A's" strategy: Advanced Delivery, Alliances, and Focus Accounts, to drive innovation and align with customer needs.

• Focused investments in workforce skills, especially hyperscaler credentials, security, resiliency, and AI, as well as the Kyndryl Bridge platform for service delivery and automation.

• The focus accounts initiative restructured inherited contracts, improving profitability by expanding scope and renegotiating terms, now contributing $925 million annually with a target of $1 billion.

• Consult and alliances businesses are key growth vectors, with Consult growing from 10% to over 20% of revenue and alliances expected to reach $1.8 billion this year.

Financial performance and outlook

• Engineered a revenue decline to improve profitability, with a shift from break-even inherited contracts to higher-margin, value-added services.

• Achieved positive revenue growth in Q4 2025 and significant margin expansion over two years, despite a Q1 shortfall attributed to timing of deals and focus account transitions.

• Book-to-bill ratios remain above one, supporting future growth; managed services revenue decline is expected to taper as growth vectors scale.

• Targets for fiscal 2028 include tripling cash flow, doubling profit to $1.2 billion, and achieving mid-single-digit revenue growth, driven by a shift in revenue mix toward higher-margin backlog.

• Cash tax payments are expected to remain flat, supporting strong free cash flow growth as profit increases.

AI and innovation impact

• AI and automation are central to service delivery, with Kyndryl Bridge leveraging machine learning for efficiency and quality improvements.

• AI is viewed as a profit tailwind, enabling labor cost reduction without compromising value, and is not expected to replace core infrastructure services.

• Regulatory considerations are significant for AI adoption in mission-critical systems, with ongoing advisory roles for clients.

• The Apps, Data, and AI practice is experiencing rapid growth, driven by customer demand for data architecture, networking, and security for AI implementations.