Analyst(s): Fernando Montenegro
Publication Date: May 8, 2025
Kyndryl’s Q4 FY 2025 financial results show progress from the company’s transformation, with a return to constant-currency revenue growth (+1.3% YoY) and improved margins. Adjusted pretax income increased 510% YoY to $185 million, while adjusted EBITDA grew 23% to $698 million, reflecting the ongoing execution of Kyndryl’s “three-As” initiatives.
What is Covered in this Article:
- Kyndryl’s Q4 FY 2025 financial results and FY 2025 performance
- Impact of “three-As” initiatives on profitability
- FY 2026 outlook and strategic positioning
- Alignment to strategic tailwinds
The News: Kyndryl Holdings Inc. (NYSE: KD) reported Q4 FY 2025 results, with revenue of $3.8 billion, representing a 1% year-on-year (YoY) decline on a reported basis but a 1.3% increase in constant currency. Pretax income came in at $118 million, compared to a loss of $4 million in Q4 FY 2024. Net income improved to $68 million, or $0.28 per diluted share, versus a net loss of $45 million in the prior-year period.
Adjusted EBITDA grew 23% YoY to $698 million, while adjusted pretax income rose 510% to $185 million. The company reported cash flow from operations of $581 million and adjusted free cash flow of $335 million.
For the full fiscal year 2025, Kyndryl reported revenue of $15.1 billion, reflecting a decline of 6% on a reported basis and 4% in constant currency. It also reported an adjusted EBITDA of $2.5 billion (up 6% YoY) and adjusted pretax income of $482 million (up 192% YoY). Total signings for FY 2025 reached $18.2 billion, up 46% YoY.
Kyndryl Chairman and Chief Executive Officer Martin Schroeter highlighted their cloud, modernization, applications, AI, and security capabilities as well as a positive outlook for FY26 towards their longer-term FY28 objectives. Further details discussed in the post-release earnings call include management highlighting a $1 billion financial services deal and success in expanding client relationships, with a healthcare customer, for example, expected to generate 33% more annual revenue over five years. FY2026 will mark the final year of elevated IBM software costs, improving future margin predictability. The company also expects hyperscaler-related revenue to reach $1.8 billion in FY2026, a 50% increase from FY2025.
Kyndryl Q4 FY 2025 Earnings Show Growth, Margin Expansion
Analyst Take: Kyndryl’s Q4 FY 2025 results represent a noteworthy milestone in the company’s transformation. The return to constant-currency revenue growth for the first time since its spinoff from IBM is a positive sign. This follows several quarters of portfolio restructuring, addressing low-margin contracts and divesting assets while navigating a competitive landscape and broader macroeconomic trends.
“Three-As” Initiatives Deliver Meaningful Returns
Kyndryl’s transformation strategy has centered on its “three-As” initiatives, which continue to yield positive results:
- Alliances Initiative: Hyperscaler partnerships accelerated, with Q4 revenue from cloud alliances reaching $375 million. For the full year, hyperscaler-related revenue grew significantly to $1.2 billion, exceeding the company’s target of nearly $1 billion.
- Advanced Delivery Initiative: According to the company, greater adoption of the Kyndryl Bridge platform generated annualized savings of approximately $775 million, exceeding the $750 million target, as it freed up human capital for deployment to higher-value tasks.
- Accounts Initiative: Kyndryl’s work to address contract profitability delivered $900 million in annualized benefits by year-end, surpassing the $850 million target. Kyndryl is working to create a healthier revenue base by addressing unprofitable contracts inherited from IBM.
FY 2026 Outlook and Beyond
Kyndryl’s FY 2026 outlook projects adjusted pretax income of at least $725 million (a $243 million increase from FY 2025), an adjusted EBITDA margin of approximately 18%, and adjusted free cash flow of roughly $550 million. During the earnings call, CFO David Wyshner also highlighted that FY 2026 will be the final year of outsized IBM software cost increases ($150 million), after which only standard market inflationary adjustments will apply—a significant inflection point for margin predictability. Management projects hyperscaler-related revenue to reach $1.8 billion in FY 2026, a 50% YoY increase supporting the company’s path toward its FY 2028 targets. The ongoing share repurchase program also signals confidence in long-term value.
Alignment to strategic tailwinds
Kyndryl appears well-positioned to capitalize on broader technology adoption and modernization trends, with key initiatives around cloud, AI, and cybersecurity, among others. More broadly, Kyndryl is evolving from a traditional IT services provider to a strategic transformation partner. The earnings call revealed a pattern of expanding relationships with existing clients by adding higher-value services.
One interesting aspect of this, particularly evidenced in conversations with senior IT leaders, is the broader preference for relying precisely on these key strategic partners to help organizations navigate technology change. This allows Kyndryl to expand its business with clients as they deliver change in various environments. The growing acceptance of AI-based technology, which Kyndryl leverages for its Kyndryl Bridge, is also a favorable tailwind for the company.
While the company does need to navigate short-term and long-term considerations—the current uncertainty over the impact of new tariffs and the need to establish longer-term relationships more independently of its former IBM parent, for example—the current results and outlook look positive.
Read the full press release on Kyndryl’s website.
Disclosures: While preparing this work, the author used Anthropic Claude Sonnet for summarization and editing. After using this service, the author reviewed and edited the content as needed. The author takes full responsibility for the publication’s content.
Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
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Author Information
Fernando Montenegro serves as the Vice President & Practice Lead for Cybersecurity at The Futurum Group. In this role, he leads the development and execution of the Cybersecurity research agenda, working closely with the team to drive the practice's growth. His research focuses on addressing critical topics in modern cybersecurity. These include the multifaceted role of AI in cybersecurity, strategies for managing an ever-expanding attack surface, and the evolution of cybersecurity architectures toward more platform-oriented solutions.
Before joining The Futurum Group, Fernando held senior industry analyst roles at Omdia, S&P Global, and 451 Research. His career also includes diverse roles in customer support, security, IT operations, professional services, and sales engineering. He has worked with pioneering Internet Service Providers, established security vendors, and startups across North and South America.
Fernando holds a Bachelor’s degree in Computer Science from Universidade Federal do Rio Grande do Sul in Brazil and various industry certifications. Although he is originally from Brazil, he has been based in Toronto, Canada, for many years.
