According to CRN, Kyndryl’s fiscal 2026 second quarter saw revenue dip 1.4% to $3.72 billion, but the company’s adjusted pretax income more than doubled compared to the same period last year. CEO Martin Schroeter revealed the company just authorized another $400 million in stock buybacks, adding to the existing $300 million repurchase program. The consulting business showed strong momentum with accelerating signings, while the company’s work with hyperscalers is on track to grow from $1.2 billion to $1.8 billion this year. Schroeter emphasized that despite the revenue softness in the first half, the company maintains its full-year growth guidance and enters the second half with a stronger backlog position.
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<h2 id="profit-over-revenue“>The profit story looks solid
Here’s the thing about Kyndryl’s numbers – they’re telling two different stories. On one hand, revenue is down slightly, which isn’t great. But on the other hand, profits are absolutely soaring. More than two-and-a-half times last year’s pretax income? That’s not just good – that’s transformational for a company that’s only been independent from IBM for four years.
What’s really interesting is how they’re achieving this. Schroeter talked about “higher-yield” deals in the pipeline, meaning contracts that generate revenue faster. Basically, they’re signing more consulting work that gets realized quickly rather than just long-term managed services contracts. And they’re adding capacity to meet this demand. So while the top line might look soft temporarily, the quality of their business is clearly improving dramatically.
Turning VMware chaos into opportunity
While other partners are panicking about Broadcom’s changes to VMware, Kyndryl is actually benefiting. Schroeter positioned this as a strategic advantage – because they don’t have their own cloud to push, they’re seen as a trusted, neutral partner. “We’re non-denominational,” he said, which is corporate-speak for “we’ll run your workloads wherever makes sense for you.”
This is actually pretty clever positioning. While everyone else is trying to move customers to their specific cloud platforms, Kyndryl can just focus on running VMware environments efficiently. And given how sticky these workloads tend to be, that could become a really stable revenue stream. It’s one of those situations where not having your own dog in the fight actually becomes an advantage.
<h2 id="growth-drivers”>Where the acceleration comes from
Schroeter pointed to three key growth drivers for the second half. First, the consulting business is accelerating because they’ve added capacity and have strong demand. Second, the hyperscaler alliance work is growing rapidly – they’re projecting 50% growth this year. Third, the pipeline is the strongest they’ve ever had with “higher yielding deal content.”
But here’s what I’m watching most closely: that consulting acceleration. Consulting work tends to be higher margin and faster to recognize than traditional infrastructure management. If they can really ramp that up while maintaining their core business, we could see both revenue and profits moving in the right direction simultaneously. The $400 million additional buyback authorization suggests management is pretty confident about their cash flow generation too.
The bigger picture for enterprise IT
Kyndryl’s story reflects some interesting trends in the enterprise IT services market. Companies are clearly still investing in digital transformation, but they’re being more strategic about it. The fact that Kyndryl is seeing increased interest around workload placement due to trade and supply chain concerns suggests that geopolitical factors are driving IT decisions more than ever.
And honestly, the minimal impact from H1-B visa changes and tariffs tells you something about their business model. They’re not heavily dependent on visa workers, and digital services aren’t subject to the same trade pressures as physical goods. In an uncertain global environment, that might actually be a competitive advantage. The question is whether they can maintain this profit momentum while getting revenue growth back on track. Based on Schroeter’s confidence, it seems like they think they can.
