Kyndryl says its return to profitability is ahead of schedule as it delivers strong fourth-quarter results – Business

Information technology infrastructure services company Kyndryl Holdings Inc. said today it has traveled further than anticipated on its road to profitability, and it has the numbers to back up those claims.

In its fiscal 2024 fourth quarter results, it surpassed analysts’ expectations on earnings and revenue, offering strong guidance for the coming quarter too, sending its stock higher in after-hours trading.

The company reported a loss before certain costs such as stock compensation of a penny a share, coming in ahead of the Street’s forecast of a two-cent-per-share loss. Revenue for the period came to $3.85 billion, down 10% from a year earlier, but some way ahead of the consensus estimate of $3.76 billion.

All told, the company lost $45 million in the quarter, improving enormously on the $737 million loss in the same period one year ago.

For the full year March 31, 2024, Kyndryl reported revenue of $16.1 billion, a decline of 6%.

Kyndryl Chairman and Chief Executive Officer Martin Schroeter (pictured) characterized fiscal 2024 as a “year of acceleration and achievement” that was driven by contributions from employees located all around the world. “As we start our new fiscal year, we have pivoted from transformation to growth,” he insisted. “Our strategic progress, our strong growth in Kyndryl Consult and our expansion of our Kyndryl Bridge operating platform solidify our leadership position in mission-critical IT services, while also driving meaningful financial progress,”

Kyndryl is a provider of IT services that once operated as a division of IBM Corp. It’s organized into six global managed services practices, each managing a different aspect of technology: applications, data and AI; core enterprise and zCloud, IBM’s mainframe-as-a-service offering; digital workplace; network and edge; security and resiliency; and cloud. It also offers a customer advisory practice that combines managed services, advisory services and implementation.

The company was spun out of IBM in November 2021, and ever since then it has been trying to reinvent itself by shedding its lower-margin businesses to concentrate on the more profitable ones. It has also added new services focused on cloud infrastructure providers such as Amazon Web Services Inc., Microsoft Corp., Google Cloud and, of course, IBM, as part of its plan to return to consistent profitability.

Today, Schroeter told analysts on a conference call that the company’s plans are now running well ahead of schedule. “We’re now targeting an earlier return to revenue growth, in the fourth quarter of this fiscal year,” he said.

Those comments were music to the ears of investors, who were already buoyed by the encouraging results. Kyndryl’s stock, which had stayed flat during the regular trading session, jumped by just under 6% after-hours.

During the quarter, one of the main areas of strength was Kyndryl’s Consult business unit, which delivered revenue growth of 15% compared to the same period last year. That number is all the more impressive given the relatively poor performance of other IT consulting firms this year, such as Accenture Plc. Kyndryl Consult now accounts for about 15% of the company’s total revenue.

Looking ahead to the coming year, Kyndryl said it sees fiscal 2025 revenue growing by between 2% and 4%, which implies a forecast range of between $15.2 billion and $15.5 billion, just ahead of Wall Street’s consensus estimate of $15.28 billion.

Schroeter added that the company expects to see positive revenue growth on a constant currency basis by the end of the March 2025 quarter, ahead of its earlier forecast of constant currency growth in the second half of that year. His comments suggest that Kyndryl is now at least two quarters ahead of schedule.

According to Schroeter, the company has benefited from building and evolving “really deep, meaningful relationships” with technology giants such as Microsoft and Amazon, creating a $500 million revenue stream. That business will continue to grow, he promised, saying it will rise to around $1 billion during the coming year.

The company’s partnerships are “vital”, Schroeter told Yahoo Finance in an interview. “They’ve been a great part of our turnaround story and we expect that to continue,” he added.

Photo: SiliconANGLE