By Warren.AI in May 2025 — May 30, 2025

Kyndryl Holdings, Inc. (KD)

Kyndryl, the worlds largest IT infrastructure services provider and IBM spin-off, generated $15.1 billion in revenue in fiscal 2025, down 6% year-over-year as low-margin contracts were exited. Net income turned positive at $252 million (versus a $340 million loss in FY24), while adjusted EBITDA ...

Kyndryl Holdings, Inc. 2025 10-K Review

Overview Kyndryl Holdings, Inc. (NYSE: KD) is the worlds largest IT infrastructure services provider, spun off from IBM in November 2021. This 10-K covers fiscal year ended March 31, 2025 and illustrates Kyndryls mission to design, build and manage hybrid, private and public cloud platforms for enterprises across industries.

Warren.AI 💰 6.0 / 10

1. Business Description (Item 1)

What Kyndryl Does

Providers of mission-critical enterprise technology services, including:
Cloud Services: Multi-cloud architecture, migration and managed services using AIOps, DevOps and infrastructure as code.
Core Enterprise & zCloud: Mainframe and distributed computing, network and storage operations.
Application, Data & AI: Enterprise application migration and management, data governance, AI and generative AI implementation.
Digital Workplace Services: Mobility, unified communications, collaboration and endpoint management.
Security & Resiliency: Cybersecurity, business continuity planning, cloud disaster recovery and resilience services.
Network & Edge: Network design, transformation, wireless and edge compute.

Customers & Markets

Thousands of clients in 60+ countries across financial services, industrial, healthcare, technology, telecom, retail and public sectors.
Top five customers represent 8% of revenue; U.S. federal government is <0.5%.
Long-term managed-service contracts, average duration >5 years, with renewals and extensions vital.

Competitive Strengths

Scale & Expertise: $15.1 billion revenue in FY25; tens of thousands of certified cloud engineers and 3,000 patents.
Global Delivery Model: Experience operating complex IT estates at scale, modern delivery via Kyndryl Bridge.
Ecosystem Partnerships: Alliances with AWS, Google Cloud, Microsoft, Cisco, VMware, HPE, SAP, Oracle and more.
Automation & AIOps: 180 million automated actions per month, driving operational efficiency.

2. Financial Results (Item 7 & Item 8)

Key Metrics

	FY25	FY24	FY23
Revenue	$15,057 M	$16,052 M	$17,026 M
% Chg	–6%	–6%	–7%
Net Income (Loss)	+$252 M	–$340 M	–$1,374 M
Adjusted EBITDA	$2,516 M	$2,367 M	$1,975 M
% Chg	+6%	+20%	N/A
Operating Cash Flow	$942 M	$454 M	$781 M
Free Cash Flow¹	$214 M	–$197 M	–$84 M

¹Free cash flow = operating cash flow – capex.

Revenue Drivers & Margins

Declining revenue by 6% in FY25 due to contracts with substandard margins being exited or renegotiated.
Segment performance: US (–10%), Japan (+1% in USD; +6% constant currency), Principal Markets (–5%), Strategic Markets (–8%).
Cost of services improved from 82.2% of sales in FY24 to 79.1% in FY25, driven by efficiencies and site-rationalizations.
SG&A stable at ~17% of sales.
Adj. EBITDA margin rose from 14.7% in FY24 to 16.7% in FY25.

Cash Flows & Liquidity

Operating cash flow nearly doubled to $942 M in FY25, driven by net income turnaround.
Capex of $605 M focused on data centers and digital tools.
Free cash flow positive at $214 M, first positive year since spin-off.
Balance sheet: $1.8 B cash, $2.9 B senior unsecured notes, $3.0 B revolver (undrawn). Net debt ~ $1.2 B.
Credit metrics: Net debt / Adj. EBITDA ~0.5x, well within covenant of 3.5x subject to the revolver.

Pension & Lease Liabilities

Pension: Net funded status 77% of PBO ($1.56 B obligation vs. $1.20 B assets) but well-managed with defined contributions increase.
Leases: Right-of-use assets of $0.73 B and lease liabilities of $0.78 B; lease costs $576 M in FY25.

3. Cash Flow & Balance Sheet Strength

Strong cash generation allows debt paydown, investments in growth areas, and share repurchases.
Share repurchase program: Up to $300 M; $94 M executed in FY25.
Debt maturities: Only $29 M due in FY26, $710 M in FY27, $500 M in FY29, and no concentration risk until 2031.
Liquidity: $1.8 B cash; revolver undrawn; stable covenant headroom.

4. Risk Factors (Item 1A)

Customer Concentration & Renewals: No one client >10% of revenue; renewal optional. Attrition of legacy low-margin business.
Competition & Pricing Pressure: Competing against global integrators, cloud-native providers, offshore labor arbitrage.
Technological Change: Must invest in AI & generative AI, multi-cloud management, edge, network and cybersecurity.
Operational Complexity: Integrating acquisitions, managing global workforce, shifting cost structures.
Cybersecurity & Data Privacy: Mission-critical services at scale attract risk of breaches with legal and reputational implications.
Geopolitical & Macro: Currency volatility, trade restrictions, recessionary pressures, inflation.

5. Strategic Initiatives

Three As Program:

Alliances: Expand partnerships with AWS, Google, Microsoft and OEMs.
Advanced Delivery: Upskill workforce, automate via Kyndryl Bridge.
Accounts: Improve margins by reshaping contracts, exiting low-margin segments.

Organic Growth: Focus on high-value managed services: public cloud management, AI/ML, digital workplace, security.
M&A: Target bolt-on acquisitions (e.g., Skytap) to bolster niche capabilities.
Environmental, Social & Governance: Net-zero GHG by 2040; 50% reduction by 2030; invest in diversity, human rights, community programs.

6. Investment Thesis and Risks

Thesis

Improving Profitability: Adj. EBITDA margin +200 bps in FY25; cash flow positive.
Underserved Market: Global IT infrastructure services still run 70% on-premises; hybrid cloud transition ongoing.
Asset-Light Model: Low capex needs vs. software-native peers.
Strong Balance Sheet: Light net leverage and stable liquidity.
Undervalued vs. Peers: Relative to peers (typical 6–8x EBITDA), KD trades at ~4x.

Risks

Continued revenue decline from exiting low-margin contracts.
High competition from hyperscalers, managed service providers and system integrators.
Execution risk on automation, talent and alliance strategies.
Cybersecurity events could affect trust and require remediation spend.

Net Profit

The Company reported a net income of $252 million for FY25.

7. Valuation & Score

Score: 6.0 out of 10

Kyndryl is transitioning to growth after restructuring, with improving margins, a strong cash flow profile and a healthy balance sheet.
However, top-line growth remains a challenge, and the market remains intensely competitive.
We see moderate upside if the Company can continue to improve contract mix, win new business in high-value areas and execute its three As initiatives.

Key Metrics

EV / Adj. EBITDA: ~4.0x vs. peer average of 6–8x.
FCF yield: ~3% (FY25) vs. peer average of 5–7%.

Recommendation

Long Term: A selective position could add alpha in a diversified technology-services portfolio.
Catalysts: Continued revenue stabilization, margin expansion, share buybacks and potential M&A.
Risks: Continued downturn in US/Europe markets, talent shortages, contractual renewals.

Disclaimer: This review is based on Kyndryls public filings and is not a personalized recommendation. Investors should conduct their own due diligence.