Kyndryl Stock Rockets as Earnings Beat, Strong Signings and Reaffirmed Outlook Ease Brutal Yearlong Slide

Shares of Kyndryl Holdings Inc. surged more than 26% on Wednesday after the information technology services company reported better-than-expected adjusted earnings, strong contract signings and reaffirmed its full-year outlook, offering relief to investors after a punishing year for the stock.

Kyndryl shares rose $3.40 to $16.34 in Wednesday trading. About 1.7 million shares changed hands, and the gain lifted the company's market value to roughly $3.6 billion. Even after the jump, the stock remains about 50% lower than a year ago.

The rally came as markets absorbed the outcome of Tuesday's U.S. midterm elections. Stock futures recovered from overnight losses after Democrats won control of both chambers of Congress.

Results top forecasts

Kyndryl, which was spun off from IBM, reported results for its fiscal second quarter. Revenue was $3.7 billion, down 1.9% year over year on a reported basis and 0.8% in constant currency.

Pretax income was $112 million and net income was $59 million, while adjusted EBITDA reached $699 million and adjusted net income totaled $92 million.

The adjusted results came in ahead of Wall Street estimates. Investing.com reported adjusted earnings of 42 cents per share, a penny better than the analyst estimate of 41 cents. AlphaStreet, using a different set of analyst estimates, put the beat at 10.5% against a 38-cent consensus.

Shares had been under pressure heading into the report. The stock had closed at $12.94 before the release, down 7.7% over three months and 50.5% over the previous 12 months.

Signings momentum

Contract signings were a key highlight. Trailing 12-month signings totaled $15.5 billion, including $4.1 billion in the second quarter, and Kyndryl signed 43 customer contracts worth more than $50 million each over the past year, 11 of them in the quarter.

On the earnings call, management pointed to accelerating deal activity. Executives said signings grew 34% in the first half of the fiscal year.

Growth areas outperformed the broader business. Kyndryl Consult revenue rose 4.2% in the quarter, reaching $3.6 billion over the past 12 months, an 8.1% increase, while Consult signings climbed 19.1% to $4.6 billion.

Hyperscaler-related revenue topped $550 million in the quarter, up 27.2% from a year earlier.

The U.S. business was a standout. U.S. revenue rose 9.0% to $980 million, while revenue in Japan, Principal Markets and Strategic Markets declined. The company noted the U.S. figure included a 3-point favorable impact from the resolution of a commercial matter.

Chairman and Chief Executive Martin Schroeter said the company's growth areas support its forecast. "Strong signings and continued growth in Kyndryl Consult and hyperscaler-related revenue reinforce our confidence in our fiscal 2027 outlook," he said.

Outlook reaffirmed

The company stood by its full-year targets. Kyndryl continues to expect adjusted pretax income of $600 million to $700 million for fiscal 2027, including about $200 million of workforce rebalancing charges. It also expects free cash flow of $400 million to $500 million.

When it first issued the forecast in May, Kyndryl projected constant-currency revenue flat to down 2% for the year.

Restructuring remains part of the story. Second-quarter results included $38 million of workforce rebalancing charges, compared with $19 million a year earlier.

A tough stretch

The rebound follows a difficult period for Kyndryl shareholders. In August, the company posted a loss of 12 cents per share and revenue of $3.62 billion, short of the $3.67 billion forecast.

Analysts remain cautious overall. AlphaStreet's tally shows Wall Street consensus at zero buy ratings, seven hold and four sell.

Investors will be watching whether strong signings translate into revenue growth in the second half of the fiscal year, along with the pace of savings from the company's cost program.