KD · Kyndryl Holdings
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $19.01
Note written ·
Price against the kill line
11.6% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $19.01, on record since 11 November 2026. The shares are up 32.2% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $19.01, about 11% over the 11 November 2026 close and above Scotiabank's $19 target, which would show the shares leading the S&P 500; a raised fiscal 2027 free-cash-flow range would also prove the call wrong.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 4 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 3,651
- Revenue, change on a year (%)
- −1.9
- Gross margin (%)
- 23.5
- Free cash flow, four quarters ($M)
- 90.0
- Net cash, cash less debt ($M)
- −3,019
- Price to earnings (×)
- 46.9
- Enterprise value to sales (×)
- 0.4
- Free-cash-flow yield (%)
- 2.5
All filed numbers
What Kyndryl Holdings reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) |
|---|---|---|---|
| first filed | 3,651 | −1.9 | 23.5 |
| first filed | 3,618 | −3.3 | 21.4 |
| first filed | 3,769 | −0.8 | 22.5 |
| first filed | 3,859 | +3.1 | 21.8 |
| first filed | 3,721 | −1.4 | 21.5 |
| first filed | 3,743 | +0.1 | 21.3 |
| Pre-tax income ($M) | 112 |
| Net income ($M) four quarters: 78.0 | 59.0 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −7.1 |
| Operating cash flow ($M) | 789 |
| Capital spending ($M) | 699 |
| Free cash flow ($M) | 90.0 |
| Cash and short-term investments ($M) | 1,659 |
| Debt ($M) non-current long-term debt plus current debt | 4,678 |
| Net cash, cash less debt ($M) | −3,019 |
| Deferred revenue ($M) −1.5% on a year | 1,202 |
| Backlog, orders not yet delivered ($M) −2.6% on a year | 33,100 |
| Receivables ($M) | 1,217 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 1,077 |
| Market value ($M) | 3,662 |
| Enterprise value, market value plus net debt ($M) | 6,681 |
| Enterprise value to sales (×) | 0.4 |
| Enterprise value to operating income (×) | Not available |
| Price to earnings (×) | 46.9 |
| Price to book value (×) | 3.4 |
| Free-cash-flow yield (%) | 2.5 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 15.2% of shares outstanding sold short, 7.1 days of average trading to cover, −3.5% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $177K |
The thesis
Kyndryl's shares are more likely to lag the S&P 500 than lead it over the next three months. Profit and signings improved in the September quarter, but free cash flow got worse, and the price already reflects a recovery the cash numbers have not yet shown. The fiscal third-quarter report, expected around early February 2027, settles whether the $400–500 million fiscal 2027 free-cash-flow target holds.
Kyndryl's 4 November 2026 report showed real gains. Adjusted pretax income rose to $150 million from $123 million a year earlier, and signings rose to $4.1 billion from $2.8 billion, according to the company release. Free cash flow was a $34 million outflow, which made the first half a $434 million outflow. Management still reaffirmed the full-year target.
The shares closed at $17.13 on 11 November 2026, above the $16 average 12-month analyst target reported by fiscal.ai on 5 November 2026. At that price, the market is treating the reaffirmed guidance as likely to be met. Since the report, company news has consisted of product launches with Amazon Web Services (AWS) on 5 November 2026 and ServiceNow on 9 November 2026, plus a survey report on 10 November 2026. None of it included new financial figures.
The rating is Low. The second-half cash ramp the target needs is steep, a similar ramp failed in fiscal 2026, and the Securities and Exchange Commission (SEC) inquiry into cash management is still open.
Bullish and bearish views on Kyndryl Holdings, Inc.
The bull case on Kyndryl Holdings, Inc. (KD), in brief: signings rebuilt the order book. The bear case: the cash target needs a steep ramp.
Bull case
- Signings rebuilt the order book. September-quarter signings of $4.1 billion included 11 contracts above $50 million. Trailing-twelve-month signings reached $15.5 billion on 30 September 2026, up from $14.2 billion three months earlier (company releases, 5 August 2026 and 4 November 2026).
- Profit turned positive and margins rose. Adjusted pretax income swung to $150 million from a $37 million first-quarter loss. The margin on adjusted EBITDA (earnings before interest, tax, depreciation and amortization) rose to 19.1% from 17.2% a year earlier (company release, 4 November 2026).
- Restructuring charges are nearly finished. Workforce charges reached $190 million in the first half, against about $200 million expected for fiscal 2027. Kyndryl expects savings to begin in the second half and targets a $400–500 million cut in its annual cost run rate in fiscal 2028 (company release, 4 November 2026).
- Cloud-partner work keeps growing. Hyperscaler-related revenue rose 27.2% to above $550 million in the September quarter (company release, 4 November 2026). Kyndryl added an AWS agentic-AI modernization offering on 5 November 2026 and an autonomous-operations product on the ServiceNow Store on 9 November 2026.
- Expectations started low. An AlphaStreet tally cited by IBTimes on 5 November 2026 found no positive analyst ratings, seven neutral and four negative. Adjusted earnings per share of $0.42 beat Benzinga's $0.38 estimate.
Bear case
- The cash target needs a steep ramp. Finsee calculates that the $450 million midpoint requires about $884 million of free cash flow in the second half, up 46.1% from $605 million a year earlier. Its review of the 4 November 2026 report also shows net capital spending up 64.8% to $206 million in the quarter.
- A similar ramp failed last year. Morgan Stanley said in November 2025 that Kyndryl needed a back-half ramp to hit its goals. On 9 February 2026 the company cut fiscal 2026 free-cash-flow guidance to $325–375 million from about $550 million, and the shares closed at their 52-week closing low of $10.59 that day.
- Growth lines slowed in the quarter. Hyperscaler-related revenue growth eased to 27.2% from 34% in the June quarter. Kyndryl Consult growth eased to 4.2% from 10% (company releases, 5 August 2026 and 4 November 2026).
- Liquidity tightened and funding costs rose. Cash fell to $1.66 billion on 30 September 2026 from $2.62 billion on 31 March 2026, against $4.06 billion of debt. On 28 September 2026 Kyndryl issued $1 billion of 7.80% and 7.875% notes, partly to repay 2.05% notes (company release, 4 November 2026).
- The governance overhang remains open. The 4 November 2026 release still lists remediating material weaknesses as a risk. The weaknesses disclosed in February 2026 involved deferred vendor payments between quarters (Yahoo Finance), which bears directly on how the cash numbers are read. This note could not confirm what the September-quarter Form 10-Q, filed 4 November 2026, says about the SEC inquiry.
Price setup
The shares closed at $17.13 on 11 November 2026. They closed at $12.94 on 3 November 2026 (IBTimes) and $16.84 on 4 November 2026, so the report accounts for almost all of the gain. Since then, closes have ranged from $16.18 on 5 November 2026 to $17.27 on 10 November 2026. The 3-month change is 22.9%, measured from $13.94 on 13 August 2026.
As of 11 November 2026, the 50-day moving average was $13.25 and the 200-day was $13.16, both well below the price. The last close is 38.5% below the 52-week intraday high of $27.84 set on 11 December 2025, before the free-cash-flow cut and the SEC disclosure.
Analyst targets sit on either side of the price. Susquehanna's target is $16 (raised from $13, neutral rating) and Scotiabank's is $19 (sector perform), according to Benzinga on 5 November 2026. Share buybacks slowed to $97 million in the first half from $151 million a year earlier (company release, 4 November 2026). The insider transactions reported on SEC Form 4 since August are share awards on 12 August 2026, including to Chief Financial Officer Ellen Tobi Johnson at $12.99, and tax withholding on 1 September 2026. None is an open-market purchase.
Catalysts ahead
- ~3 February 2027 (est.): Fiscal third-quarter 2027 results (quarter ending 31 December 2026); date not yet confirmed by the company. December-quarter free cash flow is the first direct test of whether the $400–500 million fiscal 2027 target can still be reached after a $434 million first-half outflow.
What would change the view
A daily close above $19.01, about 11% over the 11 November 2026 close and above Scotiabank's $19 target, which would show the shares leading the S&P 500; a raised fiscal 2027 free-cash-flow range would also prove the call wrong.
What it trades with
Kyndryl reported on 4 November 2026, the same day the Dow rose 2.9% after the midterm elections and hyperscalers gained (Benzinga). Part of the report-day jump likely came from that broad rally. A reversal in large-cap technology would pressure the shares even if nothing changed at the company.
The case depends on Kyndryl's own cash flow and governance more than on its peer group. The AI enterprise software and IT-services peers, including EPAM and Grid Dynamics, sell to similar enterprise budgets but carry neither Kyndryl's SEC inquiry nor its cash-timing questions. A strong December-quarter cash result would matter more to these shares than any peer's report.
The evidence, claim by claim (8)
- Q2 FY27 revenue was $3.651 billion, down 1.9% reported and 0.8% in constant currency; net income was $59 million. Kyndryl Q2 FY27 earnings release, 4 November 2026 · as of
- Q2 FY27 adjusted pretax income was $150 million versus $123 million a year earlier; adjusted EBITDA was $699 million, a 19.1% margin. Kyndryl Q2 FY27 earnings release, 4 November 2026 · as of
- Free cash flow was a $34 million outflow in Q2 FY27 versus a $22 million inflow a year earlier, and a $434 million outflow over six months. Kyndryl Q2 FY27 earnings release, 4 November 2026 · as of
- Q2 FY27 signings were $4.1 billion versus $2.8 billion a year earlier; trailing-twelve-month signings were $15.5 billion. Kyndryl Q2 FY27 earnings release, 4 November 2026 · as of
- FY27 guidance was reaffirmed: constant-currency revenue flat to down 2%, adjusted pretax income $600–700 million, free cash flow $400–500 million. Kyndryl Q2 FY27 earnings release, 4 November 2026 · as of
- Hyperscaler-related revenue exceeded $550 million in Q2 FY27, up 27.2%; Kyndryl Consult revenue rose 4.2%. Kyndryl Q2 FY27 earnings release, 4 November 2026 · as of
- Cash and equivalents were $1.659 billion and debt $4.059 billion; $1 billion of 7.80% and 7.875% notes were issued on 28 September 2026. Kyndryl Q2 FY27 earnings release, 4 November 2026 · as of
- Scotiabank raised its Kyndryl target to $19 with a sector-perform rating; Susquehanna raised its target to $16 from $13 with a neutral rating. Benzinga, 5 November 2026 · as of
Sources
- Finviz ·
- Kyndryl (KD) Q2 2027 earnings review · finsee.ai
- Kyndryl Stock Rockets as Earnings Beat, Strong Signings and Reaffirmed Outlook Ease Brutal Yearlong Slide · ibtimes.com.au
- Kyndryl discloses ‘material weaknesses’ in delayed 10-Q · finance.yahoo.com
- Kyndryl Needs Back-Half Ramp to Hit 2026 Goals, Morgan Stanley Says · itiger.com
- Kyndryl uses agentic AI to accelerate enterprise modernization with AWS · finviz.com
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