Kyndryl's loss widens but company says strategy is on track

Kyndryl beats the street and raises outlook on strong hyperscale cloud bookings

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Kyndryl Holdings Inc., the services business that IBM Corp. spun off in late 2021, today reported a 3% constant-currency revenue increase to $4.3 billion in its fiscal third quarter and a net loss of $106 million, or 47 cents per diluted share.

That compared with a net loss of $731 million in the same period last year. Both figures handily beat consensus analyst estimates of $3.92 billion in revenue and a loss of 82 cents per share.

Kyndryl also raised its revenue outlook for its fiscal year ending March 31, 2023 to reflect higher constant-currency revenue growth and currency effects. And it reaffirmed its outlook for adjusted earnings before interest, taxes, depreciation and amortization as well as adjusted pretax margins.

In after-hours trading, investors bid Kyndryl shares up more than 6%.

The adjusted pretax loss of $4 million compared to pro forma adjusted pretax income of $65 million in the prior-year period. Kyndryl said currency fluctuations exacted a $90 million penalty on adjusted pretax income.

“We’re encouraged by the stronger sequential margins and significant cash flow we delivered in the quarter,” Kyndryl Chief Financial Officer David Wyshner said in a statement. “We have the right strategy in place and are executing against it to power future growth and enhanced profitability.”

The company said its alliance initiatives are bearing fruit, citing $750 million in contracts with hyperscaler cloud vendors in the past nine months. That puts the company on track to achieve its target of $1 billion in hyperscaler signings this year. Nearly 32,000 employees also logged 31,900 hyperscaler certifications over the past nine months, up 98% year-over-year.

More than 4,500 employees have been redeployed to serve new revenue streams and backfill for attrition, generating annualized savings of approximately $225 million and putting the company on track to exceed its $200 million fiscal 2023 year-end cost-saving objective.

The projected margins associated with all signings increased “meaningfully” this fiscal year compared to 2021, the company said, reflecting its commitment to winning profitable business and declining low-margin contracts.

Photo: Kyndryl

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