Executive Summary

Returned to positive constant-currency revenue growth with Q4 revenue $3.80B (+1.3% cc, -1% reported) and strong profitability expansion; adjusted EPS was $0.52 and adjusted EBITDA $698M, while signings surged to $5.5B and full-year signings hit a record $18.2B .
Modest beats vs S&P Global consensus: revenue $3.80B vs $3.77B consensus and adjusted EPS $0.52 vs $0.51; beats were driven by 45% YoY Kyndryl Consult growth and more than double hyperscaler-related revenue in Q4, aided by 3A initiatives (Alliances, Advanced Delivery, Accounts) . Values retrieved from S&P Global.*
FY26 outlook calls for at least $725M adjusted pretax income, ~18% adjusted EBITDA margin (+~130 bps YoY), ~1% cc revenue growth, and ~$550M adjusted FCF; management reiterated multi-year path to high single-digit adjusted PTI margins and >$1B adjusted FCF by FY28 .
Key catalysts: sustained book-to-bill >1x and gross profit book-to-bill >1x, accelerating hyperscaler and Consult momentum, and the final year of outsized IBM software cost headwinds in FY26, positioning margins for further expansion thereafter .

What Went Well and What Went Wrong

What Went Well
- Positive cc revenue inflection and strong profitability: Q4 adjusted EBITDA margin rose to 18.4% (+370 bps YoY) and adjusted PTI reached $185M (6x YoY), reflecting execution on the 3A initiatives; “we achieved a significant milestone by returning our top line to positive constant currency growth” (CEO) .
- Record signings, better quality backlog: $5.5B in Q4 signings (FY total $18.2B), with projected pretax margins in the high-single digits and gross profit book-to-bill at 1.5x over the LTM, adding >$4.5B projected gross profit to backlog (CFO) .
- Kyndryl Consult and hyperscaler momentum: Consult revenue +45% YoY in Q4, and hyperscaler-related revenue >2x Y/Y (Q4 ~$375–$378M; FY ~$1.2B), surpassing the FY25 ~$1B target .
What Went Wrong
- Reported revenue still down YoY and mix pressures: Q4 revenue -1% reported; the U.S. and Principal Markets segments declined YoY (-2% and -6% reported), partly reflecting “stepping away from empty-calorie revenues” and mix normalization .
- Net margin compression sequentially: net income margin was 1.8% in Q4 vs 5.7% in Q3 as mix, seasonal costs, and charges weighed; Q4 included $23M workforce rebalancing and a contractually required IBM software cost increase .
- IBM software costs remain a headwind into FY26 (~$150M incremental in FY26), albeit the last outsized step-up; management expects no further “outsized cost moves” afterward (CFO) .

Financial Results

Quarterly performance (oldest → newest):

Metric	Q2 FY25 (Sep 30, 2024)	Q3 FY25 (Dec 31, 2024)	Q4 FY25 (Mar 31, 2025)
Revenue ($B)	$3.774	$3.744	$3.800
Diluted EPS (GAAP)	($0.19)	$0.89	$0.28
Net Income ($M)	($43)	$215	$68
Net Income Margin (%)	(1.1%)	5.7%	1.8%
Adjusted EBITDA ($M)	$557	$704	$698
Adjusted EBITDA Margin (%)	14.8%	18.8%	18.4%
Adjusted Pretax Income ($M)	$45	$160	$185
Adjusted EPS ($)	$0.01	$0.51	$0.52

Q4 vs S&P Global consensus:

Metric	Q4 FY25 Actual	Q4 FY25 Consensus	Delta
Revenue ($B)	$3.800	$3.7739*	+$0.0261B
Adjusted/Primary EPS ($)	$0.52	$0.5062*	+$0.0138

Values retrieved from S&P Global.*

Segment revenue (Q4 FY25 vs Q4 FY24):

Segment (Q4)	Revenue ($M)	YoY Reported	YoY Constant Currency
United States	$969	(2%)	(2%)
Japan	$605	4%	6%
Principal Markets	$1,273	(6%)	(3%)
Strategic Markets	$953	3%	8%
Total	$3,800	(1%)	1%

KPI trends (Q3 vs Q4):

KPI	Q3 FY25	Q4 FY25
Signings ($B)	$4.1	$5.5
Kyndryl Consult Revenue Growth (YoY)	+26%	+45%
Hyperscaler-related Revenue ($M)	~$300	~$375 (PR) / $378 (CFO)
Cash from Operations ($M)	$260	$581
Adjusted Free Cash Flow ($M)	$171	$335

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Pretax Income	FY26	n/a	≥ $725M	Introduced
Adjusted EBITDA Margin	FY26	n/a	≈ 18% (+~130 bps YoY)	Introduced
Adjusted Free Cash Flow	FY26	n/a	≈ $550M	Introduced
Constant-Currency Revenue Growth	FY26	n/a	~1%	Introduced
Cash Taxes	FY26	n/a	≈ $175M	Introduced
Net Capex	FY26	n/a	≈ $675M	Introduced
Depreciation	FY26	n/a	≈ $675M	Introduced
Q1 Adjusted Pretax Income	Q1 FY26	n/a	+30% to +50% vs $92M in Q1 FY25	Introduced

Notes: FY26 includes a final ~$150M IBM software cost increase; management expects no further outsized IBM-driven cost steps thereafter .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 FY25)	Previous Mentions (Q3 FY25)	Current Period (Q4 FY25)	Trend
Book-to-bill / Backlog Quality	Record $5.6B Q2 signings; high-single-digit PTI margins on signings	5th straight quarter of signings growth; LTM signings +31%	FY book-to-bill >1x; 55 contracts >$50M; 1 $1B/6yr deal; gross profit book-to-bill 1.5x (LTM)	Improving
Kyndryl Consult	Double-digit growth; signings +81% YoY in Q2	Revenue +26% YoY; signings +35%	Revenue +45% YoY; signings +37% in Q4; accretive margins	Accelerating
Hyperscaler Alliances	$260M Q2 revenue; tracking to nearly $1B FY	>$300M Q3; on track to >$1B FY	~$375–$378M Q4; ~$1.2B FY; FY26 target ≥$1.8B	Accelerating
Advanced Delivery / Kyndryl Bridge	>11,500 freed; ~$700M annualized savings	$725M annualized savings	>13,000 freed; ~$775M annualized savings (ahead of goal)	Improving
Accounts Initiative	$775M annualized benefits	$825M annualized	$900M annualized; target raised to $1B (CFO)	Improving
IBM Software Costs	Ongoing headwind	+$50M YoY Q3 headwind	FY26 final ~$150M step-up; no further outsized moves expected	Easing after FY26
Macro / Tariffs	—	Hedging mitigated FX; tariff volatility monitored	Business insulated by multi-year contracts; limited U.S. gov’t and China exposure	Stable
Capital Allocation	New $300M buyback authorization (Nov)	Repurchased 0.86M shares for $30M	Repurchased 1.8M shares for $64M; $206M capacity remaining	Ongoing

Management Commentary

Strategic posture: “We are uniquely positioned to address secular IT trends like cloud migration, increasingly hybrid IT environments, cybersecurity risks and the adoption of AI… our revenue book-to-bill ratio above 1x foreshadows future revenue growth” (CEO) .
3A initiatives as growth pillars: “Our three-A initiatives have transformed our company… shifted from being initiatives that drove our turnaround to pillars of our profitable growth strategy” (CEO) .
Backlog quality and margins: “With an average projected gross margin of 26% on our $18.2B of signings… we’ve added over $4.5B of projected gross profit to our backlog… gross profit book-to-bill… 1.5x” (CFO) .
IBM software costs tapering: “This should be the last year in which we’re talking about IBM software cost increases… FY26 includes the $150M… going forward, we don’t expect any outsized cost moves” (CFO) .
FY26 cadence: “We estimate… adjusted EBITDA margin… approximately 18%… adjusted pretax income… at least $725M… constant currency revenue growth… about the full year rate each quarter” (CFO) .

Q&A Highlights

Sustainability of book-to-bill: Management expects to maintain book-to-bill >1x over the medium term, citing capability-led momentum and pipeline strength (CEO) .
ACV/duration mix: ~75–80% of signings growth from activity; ~20–25% from longer durations; Consult converts faster while managed services strengthens backlog (CFO) .
Revenue outlook conservatism: Despite 46% FY signings growth, FY26 revenue growth set at ~1% cc, reflecting mix roll-off of legacy contracts; focus remains on earnings/FCF compounding (CEO) .
Capital allocation: Continued organic investments (Consult, Bridge, alliances), selective tuck-ins, and buybacks; sees value in repurchases at current levels (CEO) .
Macro insulation and Bridge leverage: Multi-year, mission-critical contracts and Bridge-led optimization provide resilience and cost savings opportunities for customers (CEO/CFO) .

Estimates Context

Q4 FY25 performance vs S&P Global consensus: Revenue $3.80B vs $3.77B consensus; adjusted/Primary EPS $0.52 vs $0.506; both modest beats driven by Consult (+45% YoY) and hyperscaler alliances (>2x YoY) . Values retrieved from S&P Global.*
Street models may need to raise FY26 EBITDA/FCF given management’s explicit ~18% adjusted EBITDA margin and ~$550M adjusted FCF guide, while acknowledging the final ~$150M IBM software cost headwind embedded in FY26 (potential margin tailwind in FY27+) .

Key Takeaways for Investors

Quality growth setup: Record signings with high-single-digit PTI margins and a gross profit book-to-bill >1x point to durable earnings expansion as post-spin contracts comprise more of revenue .
Near-term beats, medium-term re-rating lever: Modest Q4 beats and FY26 guidance for margin/FCF expansion support the path to high single-digit adjusted PTI margins by FY27–28 .
Engines of upside: Kyndryl Consult (accretive, double-digit growth) and hyperscaler alliances (FY26 ≥$1.8B) are scaling faster than the core, lifting blended margins .
Cost overhang abating: FY26 should be the last year of outsized IBM software cost pressure; thereafter, incremental margin headwinds fade, supporting further margin expansion (CFO) .
Cash returns: With investment-grade balance sheet (net leverage ~0.6x adj. EBITDA), buybacks are active and likely ongoing alongside reinvestment in growth .
Watchlist items: Execution on backlog conversion, sustained book-to-bill >1x, cadence of Consult growth, U.S. and Principal Markets stabilization, and any variance in IBM cost trajectory or FX .
Trading lens: Positive narrative on backlog quality and FY26–28 margin/FCF trajectory; near-term prints likely driven by signings cadence and quarterly cc revenue growth progression (management expects quarterly growth near full-year rate) .

Additional detail and sources:

Q4 earnings press release and 8-K Exhibit 99.1, including segment and cash flow tables .
Q4 earnings call transcript (prepared remarks and Q&A) .
Prior quarters for trend analysis: Q3 FY25 press release and call ; Q2 FY25 press release .
Relevant Q4 press releases on AI/alliances: AI Private Cloud services (Apr 16) and Microsoft adaptive cloud collaboration (May 13) .