Kyndryl’s fourth quarter results were met with a significant negative market reaction, reflecting disappointment as both revenue and non-GAAP profit fell short of Wall Street’s expectations. Management attributed the underperformance to lengthening sales cycles and evolving customer requirements, particularly around artificial intelligence (AI) and data sovereignty. CEO Martin Schroeter described the quarter as one of operational progress but also acknowledged that investments in the company’s consulting business took longer than anticipated to translate into revenue, noting, “the world is getting more complex. AI is making customers rethink how their infrastructure should run.”

Is now the time to buy KD? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Kyndryl’s Q4 Earnings Call

• Tien-Tsin Huang (JPMorgan) pressed management about the sources of the outlook revision, specifically regarding the impact of sales cycle extensions and IBM-related headwinds. CEO Martin Schroeter explained, “We got good performance, but we didn’t accelerate the way we had expected.”
• James Faucette (Morgan Stanley) inquired whether the SEC review of cash management practices influenced forward guidance. Schroeter said the review had no impact on multi-year targets and reiterated that no restatement is expected.
• Ian Zaffino (Oppenheimer and Company) questioned the rationale behind continued share buybacks despite uncertain visibility. Interim CFO Harsh Chug responded that capital allocation remains balanced, with a focus on maintaining financial flexibility and investing in growth.
• James Eric Friedman (Susquehanna) asked about the drivers of reduced free cash flow guidance. Chug cited lower pretax income and working capital usage as the primary factors.
• Jonathan Lee (Guggenheim Partners) sought clarity on the timeline for closing delayed deals and maintaining long-term targets. Chug explained that deal timing is linked to customer renewals, suggesting a potential for recovery over the next few quarters.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be monitoring (1) the pace of large deal signings and the resolution of extended sales cycles; (2) further progress in reducing reliance on IBM-related revenue and growing hyperscaler partnerships; and (3) the adoption and monetization of AI-driven consulting and delivery solutions. Regulatory developments and the company’s ability to manage labor costs will also be important to watch.

Kyndryl currently trades at $12.17, down from $23.49 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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