Dive Brief:
- Kyndryl executives reassured investors after reporting flat year-over-year revenue growth for the three months ended Dec. 31. The infrastructure services provider expects revenue to decline 2% to 3% in constant currency for the fiscal year 2026, which ends March 31, according to a revised FY2026 outlook.
- “We’re in a services business, operating mission-critical systems that require multiyear customer commitments,” Kyndryl Chairman and CEO Martin Schroeter said during the company’s Q3 2026 earnings call Monday. “With the accelerating pace of new AI capabilities being introduced and regulatory uncertainties specifically on data sovereignty, long-term agreements have become more complex, and therefore, sales cycles are taking longer.”
- To add to the woes, Kyndryl is facing regulatory scrutiny of its cash management practices after receiving voluntary document requests from the Securities and Exchange Commission’s Division of Enforcement, according to a Monday filing. “We are cooperating with the SEC,” Schroeter said. “We do not expect a restatement or other impact to our financial statements.”
Dive Insight:
While global spending on IT services remains robust, growth spreads asymmetrically.
Gartner expects the IT services industry to remain the largest segment of global tech spending this year, accounting for $1.86 trillion as it grows roughly 9% year over year. However, 81% of partners fear they will underperform the market average, according to an Omdia poll of 25,000 channel organizations.
Kyndryl was grappling with multiple headwinds at the end of the year, even as its consulting unit’s revenue increased 29% to $3.6 billion for the 12 months ending Dec. 31. Several market factors drove signings to decrease 3% in Q3, Kyndryl Global Head of Practices, Corporate Development and Administration Harsh Chugh said during the earnings call.
Chugh was appointed interim CFO following the departure of former CFO David Wyshner Monday. Kyndryl also appointed Mark Ringes interim general counsel and Bhavna Doegar interim corporate controller, effective immediately, the company said in its Q3 earnings release.
Doeger joined Kyndryl as SVP of finance and strategy in December and replaced Vineet Khurana, who stepped down from SVP and Global Controller to assume another position in the company, according to an SEC filing. Ringes, who served as the company’s deputy general counsel since 2024, took over for departing General Counsel Edward Sebold.
Schroeter offered few details on the executive shake-up, focusing instead on the myriad reasons for the revenue outlook shift.
“The world is getting more complex,” Schroeter said. “AI is making customers rethink how their infrastructure should run. The sovereignty discussions around the world are top of mind for everybody. We just didn’t accelerate as we expected we would.”
Kyndryl is continuing to experience growing pains stemming from its 2021 spin-off from IBM.
“Customers are increasingly moving away from the bundled model inherited from the IBM spin-off, where they purchased IBM's innovation directly through Kyndryl's service agreements,” Brad Shimmin, VP Practice Lead of data intelligence, analytics and infrastructure at Futurum Group, told Channel Dive in an email. “They are instead engaging in independent procurement strategies that are reducing the volume of IBM-related content flowing through Kyndryl's books.”
Schroeder acknowledged that “the way we collaborate with IBM, one of our key alliance partners, is continuing to evolve.”
The issues run deeper for Kyndryl and are an industrywide phenomenon triggered by the rise of AI, according to Shimmin.
“Kyndryl’s services are sensitive to AI adoption for the simple reason that AI is not merely a software add-on,” said Shimmin. “AI is forcing a fundamental rearchitecture of the underlying infrastructure that Kyndryl manages. As with all companies of this size and with this degree of responsibility, Kyndryl will have to find a way to work within an unbundled universe separate from IBM, by focusing on helping customers choose their innovation regardless of origin.”
