According to CRN, Kyndryl reported fiscal Q2 2026 revenue of $3.72 billion, down 1.4% year-over-year, but the real story is elsewhere. Adjusted pretax income more than doubled compared to last year, marking the fifth consecutive quarter with book-to-bill ratio above one. CEO Martin Schroeter revealed the board just approved another $400 million stock buyback authorization, adding to last year’s $300 million program. The company’s consulting business is accelerating with strong signings and added capacity, while hyperscaler alliance work is on track to grow from $1.2 billion to $1.8 billion this year. Schroeter also noted that Broadcom’s VMware changes and H1-B visa fee hikes have had “little to no impact” on their operations.
Sponsored content — provided for informational and promotional purposes.
<h2 id="profit-over-revenue“>The profit story is what matters
Here’s the thing about enterprise IT services – revenue numbers can be deceiving. Kyndryl’s slight revenue dip completely masks what’s actually happening beneath the surface. Their profit more than doubling? That’s massive. And the fact they’re pouring another $400 million into buybacks tells you everything about their cash flow confidence.
Schroeter basically said they’re trading lower-margin legacy work for higher-yield consulting and managed services. The pipeline has “higher yielding deal content” meaning more upfront revenue recognition. When you’re shifting from low-margin infrastructure management to high-value consulting, temporary revenue softness is actually a feature, not a bug.
Consulting is hitting its stride
Now this is where it gets interesting. Kyndryl Consult is apparently accelerating in the second half, and they’ve actually added capacity to meet demand. That’s the kind of problem you want to have. They’ve got the signings and now they’re scaling to deliver.
But here’s what really stands out – their hyperscaler alliance business growing 50% from $1.2B to $1.8B? That’s not just incremental growth, that’s transformational. They’re positioning themselves as the Switzerland of cloud services – “non-denominational” as Schroeter put it – which makes them appealing to VMware and other vendors who don’t want workloads migrating to competing clouds.
Some unexpected competitive moats
So apparently all the hand-wringing about Broadcom’s VMware changes? Kyndryl’s actually benefiting from it. Their scale and neutrality make them a trusted partner when everyone else is nervous. And the trade/tariff discussions? They’re seeing it as a tailwind because companies are rethinking supply chains and workload placement.
Think about it – when complexity increases, who do you call? The people who manage complexity for a living. Kyndryl’s basically becoming the emergency plumber for enterprise IT infrastructure. You don’t call them when things are running smoothly – you call them when everything’s on fire.
The runway looks clear
With backlog improving, divestitures wrapped up, and their best pipeline ever heading into the second half, Schroeter sounds genuinely confident about hitting their full-year targets. The fact they haven’t adjusted guidance despite the revenue softness speaks volumes.
And honestly, minimal exposure to federal business and H1-B visas? That’s probably saving them some headaches right now. They’re focused on commercial and state government work where the real margin opportunities live. So while the headline revenue number might raise eyebrows, the underlying business seems to be firing on all cylinders where it actually matters.
