Kyndryl Holdings (NYSE:KD) shares plunged more than 32% in premarket trading on Monday after the company reported third-quarter results that missed expectations and cut its revenue outlook for the full year.
The IT infrastructure services provider posted adjusted earnings of $0.52 per share for the quarter ended December 31, 2025, well below the $0.67 analysts had forecast. Revenue totaled $3.9 billion, slightly under the $3.94 billion consensus estimate. While sales rose 3% year over year on a reported basis, they were flat in constant currency terms.
The sharp sell-off reflected investor disappointment not only with the earnings shortfall but also with Kyndryl’s updated fiscal 2026 guidance, which now calls for a constant-currency revenue decline of 2% to 3%.
“In the third quarter, we drove growth in Kyndryl Consult and through our alliances with hyperscalers and other leading technology providers,” said Martin Schroeter, Chairman and Chief Executive Officer of Kyndryl. “We are operating with a clear strategic mindset. We remain focused on delivering our multi-year objectives, driving profitable growth and most importantly providing innovative and world-class services for our customers.”
Kyndryl Consult stood out as a bright spot, with revenue rising 24% year over year in the third quarter. Over the past twelve months, the consulting unit generated $3.6 billion in revenue and $4.1 billion in signings.
The company also reported $500 million in revenue linked to cloud hyperscaler alliances, representing a 58% increase from a year earlier. Management said it remains on track to exceed its initial fiscal 2026 hyperscaler revenue target of $1.8 billion.
Free cash flow for the quarter came in at $217 million, while adjusted EBITDA totaled $696 million. During the period, Kyndryl repurchased 3.7 million shares for $100 million.
Looking ahead, Kyndryl now expects adjusted pretax income of $575 million to $600 million for fiscal 2026, an adjusted EBITDA margin of about 17.5%, and free cash flow in the range of $325 million to $375 million.