Kyndryl (KD) Q3 2025 earnings summary

Executive summary

• Q3 FY2025 revenue was $3.74B, down 5% year-over-year, with declines attributed to currency impacts, contract optimization, and the SIS platform divestiture.

• Net income for the quarter was $215M, a turnaround from a prior-year loss, driven by operational efficiencies and a $138M after-tax gain from the SIS sale.

• Adjusted EBITDA grew 14% year-over-year to $704M, with margin expansion to 18.8%; adjusted pretax income rose 154% to $160M.

• Kyndryl Consult delivered double-digit revenue growth, with signings up 35%–45% year-over-year and revenue now exceeding $3B.

• Initiated share repurchases under a $300M program, buying back $30M in Q3, supported by robust liquidity and free cash flow.

Financial highlights

• Adjusted EBITDA for Q3 was $704M (18.8% margin), up from $615M (15.6%) a year ago.

• Adjusted pretax income was $160M (4.3% margin), up from $63M (1.6%) year-over-year.

• Adjusted free cash flow was $171M; cash flow from operations reached $260M; cash balance at quarter-end was $1.5B.

• Net debt stood at $1.7B, with net leverage at 0.7x adjusted EBITDA; total debt was $3.2B.

• Net income margin improved to 5.7% from (0.3)% year-over-year; adjusted EPS was $0.51, compared to a loss in the prior-year period.

Outlook and guidance

• Raised FY2025 guidance: adjusted pretax income of at least $475M (up $310M YoY), adjusted EBITDA margin of at least 16.7%, and adjusted free cash flow of ~$350M.

• Q4 expected to deliver ~2% constant currency revenue growth YoY; currency headwinds to reduce full-year revenue by ~$330M.

• Medium-term targets: triple adjusted free cash flow to ~$1B and double adjusted pre-tax income to at least $1.2B by fiscal 2028.

• Workforce rebalancing and site rationalization actions expected to reduce costs by over $200M in fiscal 2026.

• November divestiture of Canadian SIS platform to reduce H2 revenue by ~$40M.