IT infrastructure services provider Kyndryl (NYSE: KD) fell short of the market’s revenue expectations in Q4 CY2025 as sales rose 3.1% year on year to $3.86 billion. Its non-GAAP profit of $0.52 per share was 13.7% below analysts’ consensus estimates.

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"In the third quarter, we drove growth in Kyndryl Consult and through our alliances with hyperscalers and other leading technology providers. Our signings continue to reflect the vital role we play in the operation of customers' technology estates, our deep expertise in mission-critical services and our innovation in AI, cloud and security," said Kyndryl Chairman and Chief Executive Officer Martin Schroeter.

Company Overview

Born from IBM's managed infrastructure services business in a 2021 spinoff, Kyndryl (NYSE: KD) is the world's largest IT infrastructure services provider that designs, builds, and manages technology environments for enterprise customers.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $15.12 billion in revenue over the past 12 months, Kyndryl is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because finding new avenues for growth becomes difficult when you already have a substantial market presence. To expand meaningfully, Kyndryl likely needs to tweak its prices, innovate with new offerings, or enter new markets.

As you can see below, Kyndryl’s revenue declined by 4.8% per year over the last five years, a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Kyndryl’s annualized revenue declines of 4.1% over the last two years align with its five-year trend, suggesting its demand has consistently shrunk.

This quarter, Kyndryl’s revenue grew by 3.1% year on year to $3.86 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

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Operating Margin

Although Kyndryl was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 2.1% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, Kyndryl’s operating margin rose by 13.1 percentage points over the last five years. Still, it will take much more for the company to show consistent profitability.

This quarter, Kyndryl generated an operating margin profit margin of 2.9%, down 3.7 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Kyndryl’s full-year EPS flipped from negative to positive over the last four years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Kyndryl, its two-year annual EPS growth of 66.3% was higher than its four-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, Kyndryl reported adjusted EPS of $0.52, up from $0.51 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Kyndryl’s full-year EPS of $1.79 to grow 81.7%.

Key Takeaways from Kyndryl’s Q4 Results

We struggled to find many positives in these results. Its EPS missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 25.3% to $17.55 immediately after reporting.

The latest quarter from Kyndryl’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).