Kyndryl: 3 Key Takeaways for Long-Term Investors

On its earnings call, held on Nov. 4, 2026, for its fiscal 2027 second quarter ended Sept. 30, Kyndryl (NYSE:KD) announced that it reaffirmed its full-year financial outlook. Long-term investors care because the company is shifting toward higher-margin advisory work to expand free cash flow, or cash left after spending on operations and capital projects. Three things management said on the call stand out.

1. Scope Expansions and New Logos Drive Large Deal Signings

Kyndryl is expanding beyond traditional infrastructure maintenance by winning larger enterprise agreements. Over the last 12 months, the company secured 43 contracts worth over $50 million each, with 11 of those signed in fiscal Q2 alone, as customers upgraded core computing systems.

Across those 43 large deals, approximately one-third of the value contained scope expansions and new logos, compared to about a quarter in the same period last year.
-- Martin Schroeter, Chairman and Chief Executive Officer

2. Operational Efficiencies Lift Gross Margins Across Contracts

Gross margin, the percentage of revenue remaining after direct delivery costs, reached 22.5% in the first half of the fiscal year. Management expects cost reductions and automation in service delivery to drive additional margin expansion through the rest of the year.

The improvement that you are seeing in gross margin is really related to stronger gross margins, and we expect them to continue to improve throughout this year.
-- Ellen Johnson, Chief Financial Officer

3. Modernization Demand Keeps Consulting Signings Ahead of Revenue

Enterprise clients are turning to Kyndryl Consult, the company's advisory unit, to deploy artificial intelligence (AI) and upgrade cybersecurity defenses. Over the past 12 months, new contract commitments in consulting exceeded realized revenue.

Over the last 12 months, Kyndryl Consult signings have exceeded revenue, reflecting continued enterprise demand for AI, modernization, and cyber preparedness as customers balance innovation and transformation with operational stability.
-- Martin Schroeter, Chairman and Chief Executive Officer

Looking Ahead

Demand for cloud infrastructure and operational automation remains steady across enterprise clients.

We're seeing momentum in Kyndryl Consult, in hyperscaler-related revenue streams, and in modernization, while improving the quality of our signings and driving greater efficiency across the business.
-- Martin Schroeter, Chairman and Chief Executive Officer

The company retains structural cost advantages from its operational data, which creates high switching costs for customers. Management is monitoring contract pricing discipline and progress toward generating $400 million to $500 million in annual free cash flow. As corporate technology environments grow more complex, Kyndryl is positioning its consulting services to capture broader software management spending.

As customers modernize and scale innovation across their businesses, we can build on that trusted position to help them transform the systems they depend on and expand the value Kyndryl delivers.
-- Martin Schroeter, Chairman and Chief Executive Officer

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