Breaking Down Kyndryl Holdings, Inc. (KD) Financial Health: Key Insights for Investors

You're looking at Kyndryl Holdings, Inc. (KD) and seeing a complex turnaround story, so let's cut straight to the numbers that matter: the company's financial health is defintely shifting from legacy cleanup to profitable growth, even as top-line revenue remains a headwind. For the full fiscal year 2025, Kyndryl reported revenues of $15.1 billion, a 6% decline year-over-year, which is the necessary cost of shedding low-margin contracts. But this is the real pivot: they delivered a net income of $252 million, a massive swing from the prior year's loss, and generated $446 million in adjusted free cash flow, showing a clear ability to convert earnings to cash. The future growth engine is firing, too, with Kyndryl Consult revenue growing 26% in fiscal 2025, and record total signings hitting $18.2 billion-a 46% year-over-year jump-which is the forward indicator you need to watch. The transformation is working, but you need to know where the near-term revenue risk still lies.

Revenue Analysis

You're looking at Kyndryl Holdings, Inc. (KD) and seeing a revenue dip, which can be concerning. The direct takeaway is this: Kyndryl's fiscal year 2025 revenue was approximately $15.1 billion, a reported decline of 6% year-over-year, but this drop is actually a planned, strategic move to shed low-margin business and pivot toward higher-growth, specialized services.

The company is intentionally shrinking its top-line revenue (the total amount of sales) to improve its profit margins-a classic restructuring play. Here's the quick math: the reported 6% decline in revenue for the fiscal year ended March 31, 2025, reflects the strategic decision to reduce inherited, no-margin and low-margin third-party content from older customer contracts. In constant currency, the decline was a more moderate 4%, which helps you see the impact of currency fluctuations is defintely a factor, but not the primary driver.

The core of Kyndryl's revenue still comes from its massive base of mission-critical enterprise technology services, but the real story is in the segments driving future growth. The shift is already visible in the numbers for its high-value services, which are critical for any investor to track. This change in revenue mix is what matters most.

Breakdown of Primary Revenue Sources and Growth

The company's primary revenue streams fall under its core IT infrastructure services, but the significant changes in the fiscal 2025 data highlight the success of the 'Three-A' initiatives-Alliances, Advanced Delivery, and Accounts. The 'Alliances' initiative, in particular, has driven substantial new revenue through partnerships with cloud hyperscalers (the huge cloud providers like Amazon Web Services or Microsoft Azure).

Kyndryl Consult, the advisory and implementation arm, is the clearest example of this profitable pivot. This segment saw a massive year-over-year revenue increase of 26% in fiscal 2025, showing where the future margin expansion will come from. Also, the revenue tied to cloud hyperscaler alliances exceeded $1.2 billion for the full fiscal year 2025, which is a major new revenue stream.

Here is a snapshot of the major revenue components and their growth trends, which shows the dual nature of the business-a shrinking core and a rapidly expanding consulting arm:

The new signings for fiscal year 2025 were a record $18.2 billion, an increase of 46% year-over-year. That new business, which includes better margins, is the backlog that will translate into positive revenue growth in the coming fiscal years. You can see the full context of who is betting on this turnaround by Exploring Kyndryl Holdings, Inc. (KD) Investor Profile: Who's Buying and Why?

The biggest change in the revenue stream is the deliberate pruning of the low-quality contracts, which is reflected in the negative growth rate. This is not a demand problem; it's a portfolio cleanup. The company is actively choosing higher-margin work over volume, which is why net income for the year was $252 million, compared to a net loss of $340 million in the prior year. That's the kind of margin improvement that makes the revenue decline a non-issue.

Profitability Metrics

When you look at Kyndryl Holdings, Inc. (KD), the headline for fiscal year 2025 is a definitive shift from losses to profitability, driven by a deliberate strategy to shed low-margin contracts. The company's turnaround is real, but it's still a work in progress when you stack it up against the broader IT services industry.

For the full fiscal year 2025, Kyndryl Holdings, Inc. reported total revenue of $15.1 billion. Here's the quick math on how that revenue flowed through to the bottom line, using the reported full-year figures which ended March 31, 2025:

• Gross Profit Margin: The gross profit was $3.143 billion, translating to a gross margin of about 20.8%.
• Operating Profit Margin: The adjusted pretax income, a strong proxy for operating profit, was $482 million, which gives you an adjusted operating margin of 3.2%.
• Net Profit Margin: Net income for the year was $252 million, resulting in a net profit margin of approximately 1.67%.

The company finally turned a profit. That's the big win.

Operational Efficiency and Margin Trends

Kyndryl Holdings, Inc.'s profitability trend shows significant momentum, which is what matters most for a company executing a post-spin-off transformation. In FY2024, the company posted a net loss of $340 million, so the FY2025 net income of $252 million is a massive swing of over half a billion dollars. This margin expansion is directly tied to their strategy to reduce inherited, low-margin third-party content and focus on higher-value services.

The gross margin has been steadily climbing, peaking at 21.2% in the quarter ending March 2025, up from 18.0% in 2024. This is a clear signal of improved operational efficiency (cost management) and a successful shift in the business mix. For instance, their Kyndryl Consult division saw a 47% year-over-year increase in signings for the full fiscal year 2025.

Industry Comparison: A Reality Check

To be fair, Kyndryl Holdings, Inc. is still playing catch-up to the broader IT services sector. The company's margins are improving quickly but remain below the industry average, especially at the gross profit level. Here is how the full-year 2025 results stack up against the general Information Services industry averages from 2024, which is the most recent full-year data available for the sector:

What this estimate hides is the legacy drag. Kyndryl Holdings, Inc.'s gross margin of 20.8% is significantly lower than the industry's 39.29%, reflecting the impact of older, pre-spin contracts that still have lower margins. However, the fact that their adjusted operating margin of 3.2% and net margin of 1.67% are actually slightly better than the industry averages of 2.33% and 1.15%, respectively, suggests their cost-cutting and strategic focus on higher-margin services is offsetting the lower gross profit base.

For investors, the key action is monitoring the gross margin trend. If the gross margin continues its upward trajectory, the operating and net margins will defintely follow, making the business much more resilient. You can read more about the company's financial journey in Breaking Down Kyndryl Holdings, Inc. (KD) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You're looking at Kyndryl Holdings, Inc. (KD) and wondering how they pay for their growth-is it mostly borrowing or shareholder money? The quick answer is that Kyndryl leans heavily on debt, which is common for a company spun out with a significant debt load, but their recent trend shows a deliberate move to manage it while still returning capital to shareholders.

For the fiscal year ended March 31, 2025, Kyndryl Holdings, Inc. reported total debt (short-term and long-term) of approximately $3.2 billion. This is the core of their capital structure, and it's a number we need to keep in context. The long-term portion of this debt stood at around $3.042 billion for the same period.

The Debt-to-Equity Reality Check

The key metric here is the Debt-to-Equity (D/E) ratio, which tells you how much debt the company uses to finance its assets relative to the value of shareholders' equity. For the full fiscal year 2025, Kyndryl Holdings, Inc.'s D/E ratio was approximately 2.38. To be fair, a ratio below 1.5 is generally considered healthy in many sectors, and the broader Information Technology sector often shows a much lower, sometimes negative, net D/E ratio. Kyndryl's D/E is high relative to the typical tech company, which is a risk factor, but it's not unusual for a capital-intensive managed services provider.

Here's the quick math on the leverage: as of September 2025, the D/E ratio had actually climbed to about 3.28, with total stockholders' equity at roughly $1.227 billion and short-term debt at $415 million. That higher ratio-anything over 2.5 is a flashing yellow light-means creditors own a larger claim on the company's assets than the shareholders do. It definitely increases the volatility of shareholder returns.

• High D/E signals reliance on debt financing.
• The ratio of 3.28 (Sep 2025) is significantly above the general tech industry average.
• Kyndryl must generate a strong return on assets to justify this leverage.

Debt Management and Capital Allocation

Kyndryl Holdings, Inc. is actively managing its debt maturity profile. In February 2024, the company issued $500 million of 6.350% Senior Notes due 2034, which was used to repay a term loan set to mature in November 2024. This was a smart move to rebalance their debt and push out a near-term obligation, which is a sign of good treasury management.

The major credit rating agencies view this debt as manageable for now. As of March 2025, S&P Global Ratings affirmed Kyndryl Holdings, Inc.'s 'BBB-' issuer credit rating (Investment Grade) and revised the outlook to Positive, which is a vote of confidence in their ability to improve cash flow. This investment-grade status is crucial because it keeps their borrowing costs lower. Plus, the company is using a mix of debt and equity to fund its path forward:

They are using debt to maintain operations and fund their transformation, but they are also returning capital to shareholders via a buyback program-repurchasing 1.8 million shares at a cost of $64 million in the fourth quarter of fiscal 2025. This shows a balance: they are using debt to stabilize the business while simultaneously rewarding equity holders, which is a defintely a tightrope walk.

You can find more detail on the company's performance in Breaking Down Kyndryl Holdings, Inc. (KD) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You're looking at Kyndryl Holdings, Inc. (KD)'s balance sheet to gauge its ability to meet near-term obligations, and honestly, the picture for fiscal year 2025 was tight, but it shows a clear path of improvement. The core issue is a historical reliance on negative working capital, but the cash flow generation is the real story here.

Assessing Kyndryl Holdings, Inc. (KD)'s Liquidity Position

For the fiscal year ending March 31, 2025, Kyndryl Holdings, Inc.'s liquidity ratios were a clear signal of the challenge they inherited. The Current Ratio was approximately 0.73, and the Quick Ratio was even lower at about 0.38.

• A Current Ratio below 1.0 means Current Assets (what they can quickly convert to cash) are less than Current Liabilities (what they owe in the next year).
• A Quick Ratio of 0.38 is especially low, indicating that Kyndryl Holdings, Inc. relies heavily on inventory or pre-paid expenses-assets that aren't cash or near-cash-to cover immediate debts.

This sub-1.0 ratio translates directly to a negative working capital trend. Negative working capital isn't always a death knell in the services industry, but it does mean the company is constantly managing a short-term funding gap. The good news is that recent data, as of November 2025, shows a significant improvement, with the Current and Quick Ratios both hovering around 1.02, which is a defintely better position for short-term health.

Cash Flow Statements Overview: The Engine of Liquidity

While the balance sheet ratios were weak, the cash flow statement for fiscal year 2025 tells a much stronger story about the underlying business performance and its ability to self-fund. This is where the company's turnaround strategy is really paying off.

Here's the quick math on the cash engine:

The $942 million in Cash Flow from Operations (CFO) is a massive strength for Kyndryl Holdings, Inc., showing the core IT services business is generating substantial cash to cover its costs. The Adjusted Free Cash Flow of $446 million is the cash left over after capital expenditures (investing activities), which is then available for debt repayment, acquisitions, or shareholder returns. This 53% year-over-year surge in FCF is a critical opportunity for you to see the company's strategic initiatives-like reducing inherited low-margin contracts and growing Kyndryl Consult-translate directly to better financial flexibility.

On the financing side, Kyndryl Holdings, Inc. is using this improved cash generation for shareholder returns, having repurchased 1.8 million shares at a cost of $64 million in the fourth quarter of FY2025, under their $300 million program. This signals management's confidence in future cash flows, which is a key strength.

Near-Term Risks and Opportunities

The main risk is that the current ratios for FY2025 were historically low, meaning any unexpected delay in customer payments (receivables) or a sudden need for cash could have created a liquidity crunch. However, the consistent and growing operating cash flow mitigates this risk significantly.

The opportunity is clear: Kyndryl Holdings, Inc. ended FY2025 with a cash balance of $1.8 billion and a total debt of $3.2 billion, resulting in a net debt of $1.4 billion. The positive and growing FCF is the action item here-it means they have the money to pay down that debt and further improve the balance sheet, which will push those current and quick ratios higher. The trend is your friend here. For a deeper look at the strategy driving these numbers, check out Breaking Down Kyndryl Holdings, Inc. (KD) Financial Health: Key Insights for Investors.

Valuation Analysis

You want to know if Kyndryl Holdings, Inc. (KD) is a value play or a trap. The direct takeaway is that, based on late 2025 analyst targets, the stock appears undervalued right now, but its price action over the last year shows significant investor skepticism. The market is pricing Kyndryl Holdings, Inc. like a slow-growth legacy IT firm, but analysts see a clear path to higher earnings.

The stock's valuation multiples for the Fiscal Year 2025 (ending March 31, 2025) are mixed. Kyndryl Holdings, Inc. trades at a Price-to-Earnings (P/E) ratio of approximately 14.36x, which is low for a technology services company and suggests the market is not expecting high growth. However, the Price-to-Book (P/B) ratio of 5.49x is quite high, indicating the stock is trading at a premium relative to its net assets, a common trait for service-based businesses with intangible value.

Here's the quick math on the Enterprise Value-to-EBITDA (EV/EBITDA) ratio, which is a better metric for capital-intensive companies like this: Kyndryl Holdings, Inc.'s FY 2025 EV/EBITDA stands at about 8.04x. This is defintely on the lower end compared to many peers in the IT services sector, which suggests a potential undervaluation when accounting for debt and cash. The low EV/EBITDA is a key indicator that the restructuring and 'Kyndryl Way' strategy might be starting to work, even if the market hasn't fully priced it in yet. You should also review the Mission Statement, Vision, & Core Values of Kyndryl Holdings, Inc. (KD) to understand the strategic backdrop.

The stock price trend over the last 12 months tells a story of volatility and a recent sharp decline. Kyndryl Holdings, Inc. hit a 52-week high of $44.20 but has since plummeted, trading near its 52-week low of $23.28 as of November 2025. The stock's price closed around $24.53 on November 21, 2025, representing a drop of approximately 25.73% over the past year. That's a huge drop.

• 52-Week High: $44.20
• 52-Week Low: $23.28
• 12-Month Price Change: Down 25.73%

Kyndryl Holdings, Inc. does not pay a common stock dividend, so the dividend yield and payout ratio are both 0.00%. This is typical for a company focused on a turnaround and reinvesting capital back into the business for growth and margin expansion, particularly after a spin-off.

Wall Street analysts maintain a consensus rating of Moderate Buy on Kyndryl Holdings, Inc. This indicates that while the stock is not a 'Strong Buy' for everyone, the majority of analysts see significant upside potential from the current price. The average 12-month price target is around $39.50, with individual targets ranging from a low of $30.00 to a high of $40.00. This average target implies an upside of over 60% from the current trading price, suggesting the stock is fundamentally undervalued based on their models.

Here is a summary of the key valuation metrics for Kyndryl Holdings, Inc. (KD) based on recent data:

Risk Factors

You're seeing the headlines about Kyndryl Holdings, Inc. (KD) turning a corner, and that's true-they posted a net income of $252 million in fiscal year 2025, a real swing from the prior year's loss. But as a seasoned analyst, I have to map the near-term risks that could still derail that momentum. The transition from a legacy business is never a straight line.

The biggest challenge is a dual-threat: shedding low-margin legacy contracts while simultaneously scaling the new, high-value business fast enough. Almost a third of Kyndryl Holdings, Inc.'s revenue is still tied up in these older, less profitable deals. That's a massive exposure to revenue erosion if clients are slow to transition or simply walk away. Plus, the IT services market is brutally competitive; failure to attract new customers or sell additional services is a constant threat.

Operational and Financial Hurdles

The internal risks are just as critical as the external market pressures. One of the most serious issues is a persistent material weakness in IT general controls that Kyndryl Holdings, Inc. has flagged. Honestly, this is a red flag for any investor, as it raises real concerns about the integrity of their financial reporting and operational governance. A short-seller report even accused the company of potentially inflating financial metrics like Adjusted EBITDA and free cash flow, which led to a securities investigation.

Here's the quick math on their financial exposure:

• Legacy Revenue Pressure: The company's total fiscal year 2025 revenue was $15.1 billion, but that was a decline of 4% in constant currency, largely due to actively shedding those low-margin contracts.
• Currency Risk: A significant portion of Kyndryl Holdings, Inc.'s revenue and costs are in non-U.S. dollar currencies, exposing them to adverse foreign exchange rate fluctuations.
• Pension Liability: Volatility in credit markets can negatively impact their pension trust assets, potentially requiring incremental funding and creating a liquidity risk.

You're not just buying a stock; you're buying a company in the middle of a complex, multi-year transformation.

Strategic Mitigation and Action

To be fair, Kyndryl Holdings, Inc. is not just sitting still. Their strategy, which you can read more about in their Mission Statement, Vision, & Core Values of Kyndryl Holdings, Inc. (KD), is focused on three clear pillars to mitigate these risks. They are aggressively shifting to higher-margin services, and the numbers show it's working.

Their key mitigation moves are concrete and measurable:

• High-Margin Growth: Kyndryl Consult, their advisory services, saw revenue grow 26% in fiscal 2025. This is the engine that offsets the legacy decline.
• Hyperscaler Alliances: Revenue tied to cloud hyperscaler alliances (like with Amazon Web Services and Microsoft Azure) exceeded $1.2 billion in fiscal 2025, more than double the prior year. This diversification is defintely a buffer against single-vendor reliance.
• Operational Automation: The AI-enabled Kyndryl Bridge platform is the company's internal tool to drive efficiency. It helped free up more than 13,000 delivery professionals and generated $775 million in annualized savings in the fourth quarter of fiscal 2025.

The table below summarizes the financial impact of their strategic pivot, showing how the high-growth areas are already contributing substantially to the bottom line, even as top-line revenue contracts slightly due to the intentional pruning of low-margin business.

The strategy is sound, but the execution needs to be flawless to overcome the operational and legal overhangs. Your next step is to monitor their quarterly reports for clear progress on resolving the material weakness in IT controls. If they can fix that, it will significantly boost investor confidence.

Growth Opportunities

You're looking at Kyndryl Holdings, Inc. (KD) and wondering if the post-spinoff turnaround has real legs, especially now that the initial cost-cutting is mostly done. The short answer is yes, the growth story is shifting from pure cost-out to strategic, higher-margin expansion. The key takeaway is that their focus on high-value services and partnerships is already yielding profit growth, even as they deliberately shed older, low-margin revenue.

Kyndryl's strategy is built on three core pillars, which they call the three-A's initiatives-Alliances, Advanced Delivery, and Accounts. These initiatives are the engine for future growth and margin expansion. Honestly, the results for the fiscal year ending March 31, 2025, show this is working: total signings hit a record $18.2 billion, a massive 46% increase year-over-year. That's future revenue with better margins built in.

Here's the quick math on their strategic focus:

• Alliances: Kyndryl exceeded its hyperscaler revenue target, bringing in nearly $1 billion in fiscal year 2025 through partnerships with giants like Microsoft and Google.
• Advanced Delivery: The AI-enabled Kyndryl Bridge operating platform is a major differentiator, generating approximately $775 million in annualized savings by year-end 2025 by freeing up over 13,000 delivery professionals.
• Accounts: By addressing low-margin contracts, the company realized $900 million in annualized benefits, surpassing their initial goal.

This focus on higher-margin work is why net income for fiscal year 2025 was $252 million, a significant swing from the prior year's loss.

Future Revenue and Earnings Projections

While the company reported fiscal year 2025 revenues of $15.1 billion, which was a reported decline as they pruned those bad contracts, the future is about quality over quantity. Management is guiding for positive constant-currency revenue growth in fiscal year 2026, which runs from April 2025 to March 2026, and analysts project revenue to rise at a modest 3.5% per year over the long term. That's a realist view.

The real story is in the earnings and cash flow. For fiscal year 2026, the company expects adjusted pretax income of at least $725 million, a substantial jump from the $482 million adjusted pretax income in fiscal year 2025. Adjusted free cash flow is also expected to rise to approximately $550 million in FY 2026.

What this estimate hides is the long-term goal: Kyndryl aims to more than double its adjusted pretax income to at least $1.2 billion and triple its adjusted free cash flow to at least $1 billion by fiscal year 2028. That's a strong trajectory.

Competitive Advantages and Strategic Initiatives

Kyndryl's biggest competitive advantage is its massive, entrenched base of mission-critical enterprise technology services, coupled with a diversified services portfolio. They are the world's largest IT infrastructure services provider, so they have a seat at the table with nearly every major corporation. This is defintely a high barrier to entry for competitors.

The growth segment driving this is Kyndryl Consult, their advisory services, which saw revenue growth of 26% in fiscal year 2025. This consulting arm is crucial because it leads to modernization projects-cloud, AI, and security-where the margins are much higher than in legacy managed services. For a deeper dive into their long-term vision, you should review their Mission Statement, Vision, & Core Values of Kyndryl Holdings, Inc. (KD).

The company is well-positioned to capitalize on the AI boom by providing comprehensive AI services focused on strategy and implementation, helping businesses build AI-ready infrastructures. This shift to advisory and advanced services is what will keep their earnings growth-projected at 42.6% per year-significantly outpacing revenue growth.

Next Step: Focus your due diligence on the quarterly Kyndryl Consult revenue growth in the coming quarters; that's the bellwether for their successful business mix shift.