Kyndryl Fights Back: The Truth Behind the Misleading Report

Ladies and gentlemen, buckle up! We've got a situation brewing with Kyndryl, the world's largest IT infrastructure services provider. A misleading report has been circulating, and Kyndryl is not having it. They've issued a statement to set the record straight, and let me tell you, it's a doozy!

First things first, let's talk about the elephant in the room. The report claims that Kyndryl's stock is overvalued and that their free cash flows have been negative for the past four quarters. But here's the thing: Kyndryl's separation from IBM left them with a lot of low-margin client contracts, which has been dragging down their profit margins. But they're not sitting idly by! They've been busy restructuring their deals, boosting the profitability of about half their inherited long-term revenue streams in the first three years of standalone operations.



Now, let's dive into the numbers. Kyndryl's third-quarter fiscal 2025 results are in, and they're not pretty. Revenues declined 5% year-over-year to $3.7 billion, and pretax income was $258 million. But here's the kicker: net income soared to $215 million from a $12 million loss in the prior-year period. That's a 1,700% improvement, folks! And adjusted EBITDA rose 15% to $704 million. That's right, 15%! So, while the revenue decline is concerning, the profitability improvements are nothing short of spectacular.

But wait, there's more! Kyndryl's "three-A" initiatives are in full swing. The Alliances initiative recognized $300 million in revenue tied to cloud hyperscaler alliances, positioning the company to exceed its hyperscaler revenue target of nearly $1 billion in fiscal year 2025. The Advanced Delivery initiative has helped Kyndryl free up more than 12,300 delivery professionals, generating annualized savings of approximately $725 million. And the Accounts initiative has brought the total impact from this initiative to $825 million of annualized benefits.



Now, let's talk about the future. Kyndryl's management has outlined a multi-year growth strategy, emphasizing that over the next three years, the company expects to triple adjusted free cash flow and more than double adjusted pretax earnings. That's right, triple and double! And they've initiated a $300 million share repurchase program, reflecting their confidence in their future growth trajectory.

So, what does all this mean for you, the investor? It means that Kyndryl is not the overvalued, cash-burning company that the misleading report makes them out to be. It means that they're in the midst of a financial makeover, and it's paying off in a big way. It means that you should be paying attention to this stock, because it's got the potential to be a real winner.

But don't just take my word for it. Do your own research, and make an informed decision. Because in the world of investing, knowledge is power. And Kyndryl is a company that's worth knowing about. So, stay tuned, folks. This story is far from over.