Kyndryl (KD) Q1 2025 earnings summary

Executive summary

• Fiscal Q1 FY2025 revenue was $3.74 billion, down 11% year-over-year (8% in constant currency), reflecting strategic exits from low-margin streams and currency effects.

• Net income improved to $11 million from a prior-year loss of $141 million, driven by lower depreciation, cost actions, and operating efficiencies.

• Adjusted EBITDA reached $556 million (14.9% margin), with adjusted pre-tax income up 96% to $92 million.

• Kyndryl Consult delivered double-digit revenue growth and signings up 49% year-over-year in constant currency, with $210 million in hyperscaler revenue.

• Strategic investments in automation, innovation, and partnerships (notably with SAP, NVIDIA, and Skytap) are positioning the company at the center of key IT trends.

Financial highlights

• Q1 revenue was $3.74 billion, down 8% year-over-year in constant currency; adjusted EBITDA was $556 million (14.9% margin).

• Adjusted pre-tax income grew to $92 million (2.5% margin), and adjusted net income was $31 million with adjusted EPS of $0.13.

• Adjusted free cash flow for Q1 was negative $116 million, reflecting seasonality and workforce rebalancing.

• Total signings for the quarter were $3.1 billion, up 11% year-over-year (14% in constant currency).

• Liquidity at quarter end was nearly $4.5 billion, with $1.3 billion in cash and net debt of $2.0 billion.

Outlook and guidance

• Fiscal 2025 revenue expected to decline 2%-4% in constant currency, implying $15.2-$15.5 billion.

• Adjusted EBITDA margin outlook raised to at least 16.3%; adjusted pre-tax income outlook increased to at least $460 million.

• Adjusted free cash flow for FY25 projected at approximately $300 million, with at least $295 million year-over-year increase.

• Return to revenue growth anticipated in Q4 FY25.

• Currency headwinds expected to reduce FY25 revenue by $220 million and adjusted EBITDA by $90 million.