Kyndryl (KD): Assessing Valuation as Earnings Beat, Revenue Miss, and AI Initiatives Shape the Outlook

Kyndryl Holdings (NYSE:KD) is in the spotlight after quarterly results that topped earnings expectations but missed on revenue, reflecting longer decision timelines for clients. Management maintained its full-year outlook and highlighted sustained momentum in key business segments.

See our latest analysis for Kyndryl Holdings.

Despite the latest upbeat quarterly earnings and headline-grabbing announcements, including expanded AI services, a deepened partnership with Dow, and an increased buyback plan, Kyndryl’s share price has struggled, falling over 27% year-to-date. Still, with a 3-year total shareholder return of 153%, the longer-term momentum suggests the company’s transformation efforts may have lasting potential.

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With a steep year-to-date decline and a substantial discount to analyst targets, does Kyndryl’s recent pullback open the door for value seekers, or is the market already accounting for its future growth prospects?

Most Popular Narrative: 34.9% Undervalued

Kyndryl’s fair value, according to the consensus narrative, stands at $39.50 and is well above the last close of $25.72. This gap highlights a view that the stock is trading at a meaningful discount, thanks to ongoing changes in the business model and fresh growth initiatives.

The accelerating adoption of hybrid and multi-cloud environments is fueling demand for Kyndryl's advanced integration and management services. This is evidenced by a 44% year-over-year increase in signings and substantial growth in hyperscaler-related revenues, which supports ongoing revenue expansion and a higher recurring revenue base. The company's focus on expanding AI, data, and cybersecurity services, supported by investments in proprietary initiatives like Kyndryl Bridge and new alliances such as Databricks, is allowing Kyndryl to address rising complexity and security requirements. This supports both higher margins and new revenue streams.

Read the complete narrative.

Curious what bold forecast powers this large upside? The narrative banks on sustained revenue and margin expansion, placing a big bet on technology partnerships and operational reinvention. Ready to uncover which assumptions justify such a steep discount to fair value?

Result: Fair Value of $39.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent reliance on legacy contracts and unpredictable client transitions could weigh on Kyndryl’s growth and dampen these optimistic assumptions.

Find out about the key risks to this Kyndryl Holdings narrative.

Build Your Own Kyndryl Holdings Narrative

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A great starting point for your Kyndryl Holdings research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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