Kyndryl Holdings, Inc (NYSE:KD) is gaining momentum in its post-International Business Machines Corp (NYSE:IBM) transformation.
The KD Analyst: On Wednesday, Guggenheim analyst Jonathan Lee initiated coverage on Kyndryl with a Buy rating. His price forecast is currently $30.
Lee argues that Kyndryl has executed a disciplined and effective turnaround strategy since its 2021 spin-off from IBM.
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The Analyst Thesis: Management's "Triple A" framework focused on Alliances, Advanced Delivery, and Accounts. It improved contract-signing quality, automating operations, and enforcing tighter contract discipline, Lee says.
Despite operating in a slow-growth segment of the IT services market, Kyndryl has a profitable and sustainable free cash flow.
Lee noted that Kyndryl has worked to replace legacy IBM-related deal flow by expanding partnerships with hyperscalers and technology vendors.
Those alliances help Kyndryl shift toward higher-value offerings, including consulting, cloud-enabled managed services, cybersecurity, and data and AI solutions, the analyst noted.
At the same time, he said the company is aggressively standardizing service delivery to boost productivity and free teams to support higher-margin opportunities.
By focusing on contract economics, Kyndryl has exited or repriced lower-quality engagements, strengthening its portfolio and expanding margins. Management aims to triple cash flow, double pretax earnings, and deliver single-digit revenue growth by 2028, and early results show progress: adjusted EBITDA margins rose from 12% in 2022 to 16.7% in 2025, alongside positive free cash flow.
While the shift away from legacy infrastructure pressures revenue from traditional data centers, growth in cloud-based services is expected to offset declines.
The IT infrastructure services market could expand from $900 billion today to $1.2 trillion by 2029, and with high barriers to entry and limited scaled competitors, Kyndryl is well-positioned to stabilize and gain market share.
Risks include delays in deal signings, pricing pressure, cybersecurity execution, and muted valuations, but analysts view Kyndryl as a standout turnaround opportunity in infrastructure outsourcing.
Lee projected third-quarter revenue of $3.93 billion and adjusted EPS of $0.85.
Price Action
Kyndryl shares traded higher by 1.34% at $25.78 on Friday, according to Benzinga Pro data.
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