Q1 2027 Kyndryl Holdings Inc Earnings Call

August 5, 2026

Operator: Good day, and thank you for standing by. Welcome to the fiscal Q1 2027 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during the session, please press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Lori Chaitman, Global Head of Investor Relations. Please go ahead.

Speaker #1: Good day, and thank you for standing by. Welcome to the fiscal first quarter 2027 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker #1: After the presentation, there will be a question-and-answer session. To ask a question during the session, please press *11 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker #1: To withdraw your question, please press *11 again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today.

Speaker #1: Lori Chaitman, Global Head of Investor Relations. Please go ahead.

Speaker #2: Good morning, everyone, and welcome to Kyndryl's earnings call for the first fiscal quarter ended June 30, 2026. Before we begin, I'd like to remind you that our remarks today include forward-looking statements.

Lori Chaitman: Good morning, everyone, welcome to Kyndryl's earnings call for the Q1 fiscal quarter, 30 June 2026. Before we begin, I'd like to remind you that our remarks today include forward-looking statements. These statements do not guarantee future performance and speak only as of today, the company assumes no obligation to update its forward-looking statements except as required by law. Actual outcomes or results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties. For more information on some of these risks and uncertainties, please see the Risk Factors section of our annual report on Form 10-K for the year ended 31 March 2026, as such, factors may be updated from time to time in the company's subsequent filings with the SEC. Also in today's remarks, we refer to certain non-GAAP financial metrics.

Speaker #2: These statements do not guarantee future performance and speak only as of today, and the company assumes no obligation to update its forward-looking statements. Except as required by law.

Speaker #2: Actual outcomes or results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties. For more information on some of these risks and uncertainties, please see the Risk Factors section of our annual report on Form 10-K for the year ended March 31, 2026, and as such, factors may be updated from time to time in the company's subsequent filings with the SEC.

Speaker #2: Also in today's remarks, we refer to certain non-GAAP financial metrics. Definitions and additional information about our calculation of non-GAAP financial metrics as well as a reconciliation of non-GAAP metrics to GAAP metrics for historical periods are provided in the presentation materials for today's event.

Lori Chaitman: Definitions and additional information about our calculation of non-GAAP financial metrics, as well as a reconciliation of non-GAAP metrics to GAAP metrics for historical periods, are provided in the presentation materials for today's event, which are available on our website at investors.kyndryl.com. Following our prepared remarks, we'll hold a Q&A session. I'd now like to turn the call over to Kyndryl's Chairman and Chief Executive Officer, Martin Schroeter. Martin?

Speaker #2: Which are available on our website at investors.kyndryl.com. Following up with pair remarks will hold a Q&A session. I'd now like to turn the call over to Kyndryl's Chairman and Chief Executive Officer, Martin Schroeter.

Speaker #2: Martin,

Speaker #3: Thank you, Lori, and thanks to each of you for joining us. In the first quarter, we executed on our key priorities and made progress in our targeted growth areas supported by continued strengths in the United States.

Martin Schroeter: Thank you, Lori, thanks to each of you for joining us. In the Q1, we executed on our key priorities and made progress in our targeted growth areas, supported by continued strengths in the United States. Signings and revenue grew in Kyndryl Consult, we continued to see positive momentum with hyperscalers. We continue to invest in the areas where we see opportunity, Kyndryl Consult, our alliance partnerships, and our Agentic AI capabilities through Kyndryl Bridge and our IP to support and modernize our customers' most complex mission-critical IT estates. At the same time, we took actions to further streamline our operations. While there is more work ahead, our strategic priorities remain clear. We're focused on delivering our fiscal 2027 outlook and our 2028 objectives.

Speaker #3: Signings and revenue grew in Kyndryl Consult, and we continued to see positive momentum with hyperscalers. We continue to invest in the areas where we see opportunity, Kyndryl Consult, our alliance partnerships, and our agentic AI capabilities through Kyndryl Bridge and our IP to support and modernize our customers' most complex, mission-critical IT estates.

Speaker #3: And at the same time, we took actions to further streamline our operations. While there is more work ahead, our strategic priorities remain clear. We're focused on delivering our fiscal 2027 outlook and our 2028 objectives.

Speaker #3: With more revenue expected to come from higher-margin post-spin signings this year and next, the quality of that revenue base gives us confidence in our ability to increase profitability and deliver more than $1.2 billion in adjusted pre-tax income and a billion in free cash flow in fiscal 2028.

Martin Schroeter: With more revenue expected to come from higher-margin post-spin signings this year and next, the quality of that revenue base gives us confidence in our ability to increase profitability and deliver more than $1.2 billion in adjusted pre-tax income and $1 billion in free cash flow in fiscal 2028. These targets can be achieved on low single-digit constant currency revenue growth. Harsh will provide more detail in a few minutes on our recent financial results and our outlook. Last quarter, we outlined the priorities that support our fiscal 2028 targets. As we highlighted, we entered the fiscal year with a 5-point improvement in beginning backlog versus fiscal 2026. Four months into the year, our pipeline consists of more scope expansions and new logos that support future signings growth and better mix of higher-value services.

Speaker #3: And these targets can be achieved on low single-digit constant currency revenue growth. Harsh will provide more detail in a few minutes on our recent financial results and our outlook.

Speaker #3: Last quarter, where they outlined the priorities that support our fiscal 2028 targets. As we highlighted, we entered the fiscal year with a 5-point improvement in beginning backlog versus fiscal 2026, and four months into the year, our pipeline consists of more scope expansions and new logos that support future signings growth and better mix of higher-value services.

Speaker #3: AI, modernization, and cyber preparedness remain important priorities for enterprises around the world as they balance innovation and transformation with operational stability in an uncertain macro environment.

Martin Schroeter: AI, modernization, and cyber preparedness remain important priorities for enterprises around the world as they balance innovation and transformation with operational stability in an uncertain macro environment. This is driving demand for Kyndryl Consult, with signings exceeding revenue over the last 12 months. These same dynamics are creating opportunities across our alliance ecosystem, with customers' modernization needs accelerating demand in both public and private cloud. We continue to sign deals with average projected pre-tax margins in the high single digits, reflecting our focus on higher-value services and pricing discipline central to our transformation. Through our advanced delivery initiative, we are embedding more automation and AI into our operations, improving productivity and upskilling our teams for higher-value work. With Kyndryl Bridge, our AI-powered services delivery platform, we're providing our customers with the technology foundation to deploy, govern, and orchestrate AI agents and agentic workflows across complex IT estates.

Speaker #3: This is driving demand for Kyndryl Consult, with signings exceeding revenue over the last 12 months. These same dynamics are creating opportunities across our alliance ecosystem with customers' modernization needs accelerating demand in both public and private cloud.

Speaker #3: We continue to sign deals with average projected pre-tax margins and the high single digits reflecting our focus on higher-value services and pricing discipline central to our transformation.

Speaker #3: Through our advanced delivery initiative, we are embedding more automation and AI into our operations improving productivity and upskilling our teams for higher-value work. And with Kyndryl Bridge, our AI-powered services delivery platform, we're providing our customers with the technology foundation to deploy, govern, and orchestrate AI agents and agentic workflows across complex IT estates.

Speaker #3: In parallel, we're taking workforce rebalancing actions to address lower-than-normal voluntary attrition and our SG&A costs, with savings expected to begin in the back half of this year.

Martin Schroeter: In parallel, we're taking workforce rebalancing actions to address lower than normal voluntary attrition and our SG&A costs, with savings expected to begin in the back half of this year. We'll continue to share our progress against these signposts as we drive our business toward our multi-year objectives. I want to focus my discussion on total signings performance. While our customers remain thoughtful and deliberate in their IT decision-making, we're seeing demand for AI-led modernization, especially where Kyndryl Consult and our hyperscaler alliances help customers address their mission-critical needs. We're encouraged that over the last 6 months, our total signings have exceeded our revenue. Deal size and composition are additional proof points that demonstrate how we're executing our strategy. Over the last 12 months, we signed 40 deals in excess of $50 million, of which 10 were signed in Q1.

Speaker #3: We'll continue to share our progress against these signposts as we drive our business toward our multi-year objectives. I want to focus my discussion on total signings performance.

Speaker #3: While our customers remain thoughtful and deliberate in their IT decision-making, we're seeing demand for AI-led modernization, especially where Kyndryl Consult and our hyperscaler alliances help customers address their mission-critical needs.

Speaker #3: We're encouraged that over the last six months, our total signings have exceeded our revenue. Deal size and composition are additional proof points that demonstrate how we're executing our strategy.

Speaker #3: Over the last 12 months, we signed 40 deals in excess of $50 million, of which 10 were signed in the first quarter. And among these 40 large deals, approximately 30% of their value consists of scope expansion or our new logos, which compares to 15% in fiscal 2025.

Martin Schroeter: Among these 40 large deals, approximately 30% of their value consists of scope expansion or are new logos, which compares to 15% in fiscal 2025. Strong signings in Kyndryl Consult and momentum in hyperscalers are translating to revenue growth in these targeted areas. Kyndryl Consult revenue grew 14%, and hyperscaler-related revenue streams grew 48% in the last 12 months on a year-over-year basis. Performance in Kyndryl Consult and hyperscalers has partially offset the revenue headwinds from focus accounts over the last few years, and more recently, lengthening sales cycles and customers' decisions to procure hardware and software directly from IBM. Kyndryl Consult's results demonstrate broad demand from enterprises looking to design and scale agentic AI across their business workflows, modernize complex hybrid IT environments, and strengthen cybersecurity and resilience.

Speaker #3: Strong signings in Kyndryl Consult and momentum with hyperscalers are translating to revenue growth in these targeted areas. Kyndryl Consult revenue grew 14%, and hyperscaler-related revenue streams grew 48% in the last 12 months, on a year-over-year basis.

Speaker #3: Performance in Kyndryl Consult and hyperscalers has partially offset the revenue headwinds from focus accounts over the last few years, and more recently, lengthening sales cycles and customers' decisions to procure hardware and software directly from IBM.

Speaker #3: Kyndryl Consult's results demonstrate broad demand from enterprises looking to design and scale agentic AI across their business workflows. We have modernized complex hybrid IT environments and strengthened cybersecurity and resilience.

Speaker #3: To meet that demand, we've been expanding our consulting skills and capabilities, including investments in forward-deploy engineers, human systems architects, and AI innovation labs, where we co-create agentic solutions at scale with our Kyndryl agentic framework.

Martin Schroeter: To meet that demand, we've been expanding our consulting skills and capabilities, including investments in forward deploy engineers, human systems architects, and AI innovation labs, where we co-create agentic solutions at scale with our Kyndryl Agentic Framework. To further address customers' modernization and AI needs, we've been expanding our relationships with our alliance partners. Recently, we expanded our alliance with AWS to help enterprises adopt and scale agentic AI as they modernize and run mission-critical workloads in the cloud. We also expanded our work with Microsoft Azure to help customers design, build, and operate cloud architectures that align with evolving data residency and operational requirements. We continue to strengthen collaborations with partners such as Broadcom, Dell, HP Enterprise, and Red Hat to support customers' modernization efforts in complex private and hybrid cloud environments. AI is accelerating the need for modernization.

Speaker #3: To further address customers' modernization and AI needs, we've been expanding our relationships with our alliance partners. Recently, we expanded our alliance with AWS to help enterprises adopt and scale agentic AI as they modernize and run mission-critical workloads in the cloud.

Speaker #3: We also expanded our work with Microsoft Azure to help customers design, build, and operate cloud architectures that align with evolving data residency and operational requirements.

Speaker #3: And we continue to strengthen collaborations with partners such as Broadcom and Dell, HP Enterprise and Red Hat, to support customers' modernization efforts in complex private and hybrid cloud environments.

Speaker #3: AI is accelerating the need for modernization. Every day, I speak with business and technology leaders in different industries in nearly every customer conversation comes back to the same long-term themes.

Martin Schroeter: Every day, I speak with business and technology leaders in different industries, and nearly every customer conversation comes back to the same long-term themes. First, enterprises are eager to realize the benefits of AI, but many are trying to deploy next-generation technologies on infrastructure, applications, and processes that were not designed for them. As you've heard me say before, it's like trying to run a new 200-mile-per-hour capable bullet train on tracks built for a 30-mile-per-hour world. Equally challenging, as our Kyndryl People Readiness Report found, there's also a lack of skills, with only 23% of business leaders said their workforce is ready for AI. The need for Kyndryl's expertise and modernization capabilities to continue running their business while transforming it, that run and transform and run approach, is where Kyndryl is differentiated.

Speaker #3: First, enterprises are eager to realize the benefits of AI, but many are trying to deploy next-generation technologies on infrastructure applications and processes that were not designed for them.

Speaker #3: As you've heard me say before, it's like trying to run a new 200-mile-per-hour capable bullet train on tracks built for 30-mile-per-hour worlds. Equally challenging, as are Kyndryl people readiness report found, there's also a lack of skills as only 23% of business leaders said their workforce is ready for AI.

Speaker #3: The need for Kyndryl's expertise in modernization capabilities to continue running their business while transforming it, that run-and-transform-and-run approach, is where Kyndryl is differentiated. Second, AI, cybersecurity, and data residency regulations and mandates are becoming fundamental considerations in how customers plan and invest in IT.

Martin Schroeter: Second, AI, cybersecurity, and data residency regulations and mandates are becoming fundamental considerations in how customers plan and invest in IT. Enterprises increasingly want greater control over their data, their AI models, and their digital infrastructure. Kyndryl helps our customers navigate and build technology foundations that can adapt to the evolving regulatory requirements, geopolitical realities, and business needs over the long term. Third, and related to the previous theme, cybersecurity and resilience remain top priorities. As agentic AI becomes more powerful, as we've seen with recent frontier models and further embedded into how enterprises operate, our customers need strong guardrails and policies to bolster the governance and security of their critical systems. This is especially important in the highly regulated and mission-critical environments where Kyndryl has deep expertise in governing, securing data across complex hybrid environments, and adhering to unique compliance requirements.

Speaker #3: Enterprises increasingly want greater control over their data, their AI models, and their digital infrastructure, and Kyndryl helps our customers navigate and build technology foundations that can adapt to the evolving regulatory requirements geopolitical realities and business needs over the long term.

Speaker #3: Third, and related to the previous theme, cybersecurity and resilience remain top priorities. As agentic AI becomes more powerful, as we've seen with recent frontier models and further embedded into how enterprises operate, our customers need strong guardrails and policies to bolster the governance and security of their critical systems.

Speaker #3: This is especially important in the highly regulated and mission-critical environments where Kyndryl does deep expertise in governing, securing data across complex hybrid environments and adhering to unique compliance requirements.

Speaker #3: Fourth, customers increasingly want open and interconnected platforms for flexibility and choice across public cloud, private cloud, and on-premises environments. As technology ecosystems become even more diverse and interconnected, organizations need agile platforms that integrate seamlessly across environments and applications enabling interoperability, reducing vendor lock-in, and accelerating innovation.

Martin Schroeter: Fourth, customers increasingly want open and interconnected platforms for flexibility and choice across public cloud, private cloud, and on-premises environments. As technology ecosystems become even more diverse and interconnected, organizations need agile platforms that integrate seamlessly across environments and applications, enabling interoperability, reducing vendor lock-in, and accelerating innovation. Finally, while most AI investments were initially justified through productivity gains, customers are increasingly looking beyond efficiency toward growth, towards speed, and toward new business outcomes. These are structural and durable trends that leverage our heritage and expertise in mission-critical IT infrastructure, our ecosystem, Kyndryl Bridge, and our differentiated portfolio of agentic AI capabilities. We're helping customers simplify complexity and build technology environments that can adapt as business, regulatory, and technology requirements evolve while improving resilience, security, and operational performance.

Speaker #3: And finally, while most AI investments were initially justified through productivity gains, customers are increasingly looking beyond efficiency toward growth, toward speed, and toward new business outcomes.

Speaker #3: These are structural and durable trends that leverage our heritage and expertise in mission-critical IT infrastructure and our ecosystem Kyndryl Bridge and our differentiated portfolio of agentic AI capabilities.

Speaker #3: We're helping customers simplify complexity and build technology environments that can adapt as business, regulatory, and technology requirements evolve while improving resilience, security, and operational performance.

Speaker #3: Now let's talk about three tangible examples of how we're helping customers deliver business outcomes across the modernization continuum using an agentic AI approach. First, with a large global payments company that we've been working with for decades, the challenge wasn't deciding to modernize.

Martin Schroeter: Let's talk about three tangible examples of how we're helping customers deliver business outcomes across the modernization continuum using an Agentic AI approach. First with a large global payments company that we've been working with for decades, the challenge wasn't deciding to modernize. It was to better understand the complexities and dependencies across decades of mission-critical mainframe applications to modernize effectively, maximize their ROI, and drive the agility and scale that the business required. We expanded our scope to roll out Kyndryl's Agentic Modernization Platform with prepackaged AI modernization workflows, which can be scaled to support multiple customer teams globally carrying out modernization work. We deployed our engineers to develop additional AI workflows to meet the customer's unique modernization and tech stack needs. We expanded our scope with a leading European financial institution to transform its operations and technology while improving efficiency and meeting increasingly complex regulatory requirements.

Speaker #3: It was to better understand the complexities and dependencies across decades of mission-critical mainframe applications to modernize effectively, maximize their ROI, and drive the agility and scale that the business required.

Speaker #3: We expanded our scope to roll out Kyndryl's agentic modernization platform with prepackaged AI modernization workflows, which can be scaled to support multiple customer teams globally carrying out modernization work.

Speaker #3: We deployed our engineers to develop additional AI workflows to meet the customer's unique modernization and tech stack needs. Next, we expanded our scope with a leading European financial institution to transform its operations and technology while improving efficiency and meeting increasingly complex regulatory requirements.

Speaker #3: This customer wants to modernize applications, infrastructure, and operations at the same time, not as separate initiatives. We're bringing together Kyndryl Consult, Kyndryl Bridge, and our managed services expertise to implement an AI-native agentic banking platform.

Martin Schroeter: This customer wants to modernize applications, infrastructure, and operations at the same time, not as separate initiatives. We're bringing together Kyndryl Consult, Kyndryl Bridge, and our managed services expertise to implement an AI-native Agentic banking platform. This end-to-end modernization effort will automate its operations, strengthen security and resilience, improve overall decision-making, and enhance the customer experience. We were recently awarded a new logo with a global technology company to help streamline software engineering and IT operations using the Kyndryl Agentic AI Framework. This will help them grow while improving security, resilience, and speed. By combining Kyndryl's expertise in Agentic software development, platform engineering, and IT operations, we will deliver a scalable, secure, and efficient technology foundation that supports their expanding Edge AI global business while reducing deployment complexity and operational risk.

Speaker #3: This end-to-end modernization effort will automate its operations, strengthen security, and resilience, improve overall decision-making, and enhance the customer experience. And then we were recently awarded a new logo with a global technology company to help streamline software engineering and IT operations using the Kyndryl agentic AI framework.

Speaker #3: This will help them grow while improving security, resilience, and speed. By combining Kyndryl's expertise in agentic software development, platform engineering, and IT operations, we will deliver a scalable, secure, and efficient technology foundation that supports their expanding edge AI global business while reducing deployment complexity and operational risk.

Speaker #3: And all three examples are AI-led modernization approach is accelerating transformation timeline and improving efficiency, strengthening the resilience of their mission-critical technology environments. We rewarded new scope with each of these customers and now expect to expand into new areas, demonstrating the breadth of our capabilities and, importantly, creating opportunities to deepen and expand our long-term strategic relationships with our customers.

Martin Schroeter: In all three examples, our AI-led modernization approach is accelerating transformation timeline and improving efficiency, strengthening the resilience of their mission-critical technology environments. We were awarded new scope with each of these customers and now expect to expand into new areas, demonstrating the breadth of our capabilities, and importantly, creating opportunities to deepen and expand our long-term strategic relationships with our customers. We're a trusted advisor and a long-term partner for our customers with differentiated solutions that center on achieving tangible business results. With the expectation that higher value signings continue to improve, our focus is clear: Drive profitable growth and stronger free cash flow. With that, I'd like to pass the call over to Harsh to discuss our quarterly results and our fiscal year outlook. Harsh.

Speaker #3: We're a trusted advisor and a long-term partner for our customers with differentiated solutions that center on achieving tangible business results. With the expectation that higher value signings continue to improve, our focus is clear.

Speaker #3: Drive profitable growth and stronger free cash flow. And with that, I'd like to pass the call over to Harsh to discuss our quarterly results and our fiscal year outlook.

Speaker #3: Harsh.

Speaker #2: Thanks, Martin. And hello, everyone. Today, I will focus my comments on our first quarter results and outlook for fiscal year 2027. In Q1, we generated 3.6 billion of revenue, down 3% year over year on both a reported and constant currency basis.

Harsh Chugh: Thanks, Martin, hello, everyone. Today, I will focus my comments on our Q1 results and outlook for fiscal year 2027. In Q1, we generated $3.6 billion of revenue, down 3% year over year on both as reported and constant currency basis. For the second consecutive quarter, we delivered 5% revenue growth in the US as our AI-led modernization approach continues to resonate with our customers. We exited the period with 12-month signings of $14.2 billion, of which $3.9 billion was signed in Q1. As Martin noted, it was encouraging to see signings gain momentum as we exited the March quarter and kicked off our new fiscal year. Our adjusted EBITDA in the quarter was $512 million, and our adjusted pre-tax loss was $37 million. The year over year declines in earnings and margin were primarily driven by $152 million of workforce rebalancing charges incurred in the quarter.

Harsh Chugh: Thanks, Martin, hello, everyone. Today, I will focus my comments on our Q1 results and outlook for fiscal year 2027. In Q1, we generated $3.6 billion of revenue, down 3% year-over-year on both as reported and constant currency basis. For the second consecutive quarter, we delivered 5% revenue growth in the US as our AI-led modernization approach continues to resonate with our customers. We exited the period with 12-month signings of $14.2 billion, of which $3.9 billion was signed in Q1. As Martin noted, it was encouraging to see signings gain momentum as we exited the March quarter and kicked off our new fiscal year. Our adjusted EBITDA in the quarter was $512 million, and our adjusted pre-tax loss was $37 million. The year-over-year declines in earnings and margin were primarily driven by $152 million of workforce rebalancing charges incurred in the quarter.

Speaker #2: For the second consecutive quarter, we delivered 5% revenue growth in the US, as our AI-led modernization approach continues to resonate with our customers. We exited the period with 12-month signings of $14.2 billion, of which $3.9 billion was signed in Q1.

Speaker #2: As Martin noted, it was encouraging to see signings gain momentum as we exited the March quarter and kicked off our new fiscal year. Our adjusted EBITDA in the quarter was 512 million, and our adjusted pre-tax loss was 37 million.

Speaker #2: The year-over-year declines in earnings and margin were primarily driven by 152 million of workforce rebalancing charges incurred in the quarter. These charges had more than a 4-point impact on adjusted pre-tax income margin in the quarter.

Harsh Chugh: These charges had more than a four-point impact on adjusted pre-tax income margin in the quarter. Our three A's initiative has become central to how we run the business. As the savings from our workforce actions begin to materialize, we expect to see greater operating leverage flow through to the bottom line. Through our alliances, we generated more than $530 million of hyperscaler-related revenue streams in the quarter, with $2 billion over the last 12 months. We continue to expect hyperscalers to be a positive contributor to revenue and earnings growth going forward. Through advanced delivery, we are embedding more AI-based technology into our services through Kyndryl Bridge, driving continuous productivity improvements, reducing cost, and further increasing our already strong service levels.

Speaker #2: Our 3As initiatives have become central to how we run the business. As the savings from our workforce actions begin to materialize, we expect to see greater operating leverage flow through to the bottom line.

Speaker #2: Through our alliances, we generated more than 530 million of hyperscaler-related revenue streams in the quarter with 2 billion over the last 12 months. We continue to expect hyperscalers to be a positive contributor to revenue and earnings growth going forward.

Speaker #2: Through advanced delivery, we are embedding more AI-based technology into our services through Kyndryl Bridge, driving continuous productivity improvements, reducing cost, and further increasing our already strong service levels.

Speaker #2: And while the work to address focus accounts through our accounts initiative is largely behind us, the discipline we developed continues to inform how we pursue higher-value growth.

Harsh Chugh: While the work to address focus accounts through our accounts initiative is largely behind us, the discipline we developed continues to inform how we pursue higher value growth through scope expansions, new logos, our expanding consulting and agentic AI capabilities in our broad alliance ecosystem. I want to provide an update on what we have been sharing on our evolving partnership with IBM, largely driven by how customers are consuming IBM innovation. This chart illustrates a three-point adverse impact on revenue performance in constant currency, driven by our focus accounts initiative in earlier years, and more recently by this evolving relationship. As we have described before, at the time of the spinoff, approximately 40% of revenue from our inherited commercial agreements were in a low to no margin position.

Speaker #2: Through scope expansions, new logos, our expanding consulting and agentic AI capabilities, and our broad alliance ecosystem, I want to provide an update on what we have been sharing regarding our evolving partnership with IBM.

Speaker #2: Largely driven by how customers are consuming IBM innovation. This chart illustrates a 3-point adverse impact on revenue performance in constant currency driven by our focus accounts initiative in earlier years and more recently by this evolving relationship.

Speaker #2: As we have described before, at the time of the spin-off, approximately 40% of revenue from our inherited commercial agreements were in a low-to-no-margin position.

Speaker #2: To give you a sense of the magnitude of this, when we were spun off, the annualized run rate of our spend with IBM was nearly $4 billion.

Harsh Chugh: To give you a sense of the magnitude of this, when we were spun off, the annualized run rate of our spend with IBM was nearly $4 billion. Over the past four years, we have addressed most of the focus accounts, leading to improved profitability gains. In fact, our spend with IBM over the last 12 months was less than $2 billion, less than half of the spend since we spun off. During fiscal 2026, especially in H2, customers increasingly procured certain IBM hardware and software directly from IBM, while continuing to rely on Kyndryl for high-value services. That pattern has continued into fiscal 2027 and is creating a similar headwind to our top-line performance over the last 12-month period. Importantly, these changes do not affect the scope or margin profile of our services or our ability to grow services content over time.

Speaker #2: Over the past four years, we have addressed most of the focus accounts leading to improved profitability gains. In fact, our spend with IBM over the last 12 months was less than $2 billion.

Speaker #2: Less than half of the spend since we spun off. During fiscal 2026, especially in second half, customers increasingly procured certain IBM hardware and software directly from IBM.

Speaker #2: While continuing to rely on Kyndryl for high-value services. That pattern has continued into fiscal 2027 and is creating a similar headwind to our top-line performance over the last 12-month period.

Speaker #2: Importantly, these changes do not affect the scope or margin profile of our services. Or our ability to grow services content over time. However, they do reduce the size of our signings.

Harsh Chugh: However, they do reduce the size of our signings and consequently, our revenue growth over time. As we have said, this has limited impact on our earnings. Our outlook for fiscal 2027 continues to be based on the assumption that we'll see similar headwinds throughout the remainder of the year. Turning to cash flow. As a reminder, our Q1 is a seasonal use of cash driven by working capital timing. This year, free cash flow was $401 million outflow. Compared to the same period a year ago, we had higher payments related to multi-year renewals and annual prepaid software subscriptions and lower billing and collections. This was partially offset by lower broad-based annual incentive compensation payments. Importantly, working capital dynamics were contemplated in our full year fiscal 2027 outlook.

Speaker #2: And consequently, our revenue growth over time and as we have said, this has limited impact on our earnings. Our outlook for fiscal 2027 continues to be based on the assumption that we'll see similar headwinds throughout the remainder of the year.

Speaker #2: Turning to cash flow, as a reminder, our first quarter is a seasonal use of cash, driven by working capital timing. This year, free cash flow was a $401 million outflow.

Speaker #2: Compared to the same period, a year ago, we had higher payments related to multi-year renewals and annual prepaid software subscriptions and lower billing and collections.

Speaker #2: This was partially offset by lower broad-based annual incentive compensation payments. Importantly, working capital dynamics were contemplated in our full year fiscal 2027 outlook. As we move through the year, we expect meaningfully higher earnings particularly in second half and stronger working capital to drive free cash flow.

Harsh Chugh: As we move through the year, we expect meaningfully higher earnings, particularly in H2, and stronger working capital to drive free cash flow. While quarter-to-quarter dynamics can vary, we continue to target a strong conversion of earnings to free cash flow on a full year basis. We have provided a bridge from our adjusted pre-tax income to our free cash flow, as well as a bridge from our adjusted EBITDA to our free cash flow in the appendix and more information on the free cash flow metric calculation. Our financial position remains strong. Our cash balance at 30 June was $2.1 billion. Our debt maturities are well-laddered from late 2026 to 2041. We plan to refinance or use cash on hand to fund our near-term debt maturity of $700 million.

Speaker #2: While quarter-to-quarter dynamics can vary, we continue to target a strong conversion of earnings to free cash flow on a full-year basis. We have provided a bridge from our adjusted pre-tax income to our free cash flow, as well as a bridge from our adjusted EBITDA to our free cash flow in the appendix, and more information on the free cash flow metric calculation.

Speaker #2: Our financial position remains strong. Our cash balance at June 30th was $2.1 billion. Our debt maturities are well laddered. From late 2026 to 2041, we plan to refinance or use cash on hand to fund our near-term debt maturity of $700 million.

Speaker #2: Our net leverage ratio exiting the quarter was 0.8 times. And our investment grade rating was recently reaffirmed by Fitch Moody's and S&P. Under the share repurchase authorization, we bought $5 million of shares of common stock at a cost of $64 million in the first quarter since the inception of the program.

Harsh Chugh: Our net leverage ratio exiting the quarter was 0.8x, and our investment-grade rating was recently reaffirmed by Fitch, Moody's, and S&P. Under the share repurchase authorization, we bought 5 million shares of common stock at a cost of $64 million in Q1. Since the inception of the program, we have repurchased 8% of our outstanding shares. On capital allocation, our top priorities are to maintain an investment-grade balance sheet and financial flexibility. We have remained focused on winning business with healthy margins which takes significant discipline as enterprises prolong decision-making. Over the last 4 years, we have signed contracts with projected gross margins in the mid-20s and projected pre-tax margins in the high single digits. We have again included a gross profit book-to-bill chart that illustrates how we have been creating and capturing value in our business.

Harsh Chugh: Our net leverage ratio exiting the quarter was 0.8x, and our investment-grade rating was recently reaffirmed by Fitch, Moody's, and S&P. Under the share repurchase authorization, we bought 5 million shares of common stock at a cost of $64 million in Q1. Since the inception of the program, we have repurchased 8% of our outstanding shares. On capital allocation, our top priorities are to maintain an investment-grade balance sheet and financial flexibility. We have remained focused on winning business with healthy margins which takes significant discipline as enterprises prolong decision-making. Over the last four years, we have signed contracts with projected gross margins in the mid-20s and projected pre-tax margins in the high single digits. We have again included a gross profit book-to-bill chart that illustrates how we have been creating and capturing value in our business.

Speaker #2: We have repurchased 8% of our outstanding shares. On capital allocation, our top priorities are to maintain an investment grade balance sheet and financial flexibility.

Speaker #2: We have remained focused on winning business with healthy margins. We take significant discipline as enterprises prolong decision-making. Over the last four years, we have signed contracts with projected gross margins in the mid-20s and projected pre-tax margins in the high single digits.

Speaker #2: We have again included a gross profit book-to-bill chart that illustrates how we have been creating and capturing value in our business. With an average projected gross margin of 25% on signings over the last 12 months, we have added more gross profit dollars to our backlog than we have reported as gross profit over the same period.

Harsh Chugh: With an average projected gross margin of 25% on signings over the last 12 months, we have added more gross profit dollars to our backlog than we have reported as gross profit over the same period. Having a gross profit book-to-bill ratio at or above one demonstrates the quality of post-spin signings and the expected future profit growth from committed contracts. As Martin Schroeter highlighted, new scope and new logos continue to increase as a percent of our large deal signings. Turning to our outlook for fiscal 2027, we continue to expect adjusted pre-tax income to be in the range of $600 million to $700 million. This pre-tax income outlook includes approximately $200 million of workforce rebalancing charges and a similar amount of savings associated with these actions to offset the charges.

Harsh Chugh: With an average projected gross margin of 25% on signings over the last 12 months, we have added more gross profit dollars to our backlog than we have reported as gross profit over the same period. Having a gross profit book-to-bill ratio at or above one demonstrates the quality of post-spin signings and the expected future profit growth from committed contracts. As Martin Schroeter highlighted, new scope and new logos continue to increase as a percent of our large deal signings. Turning to our outlook for fiscal 2027, we continue to expect adjusted pre-tax income to be in the range of $600 to 700 million. This pre-tax income outlook includes approximately $200 million of workforce rebalancing charges and a similar amount of savings associated with these actions to offset the charges.

Speaker #2: Having a gross profit book-to-bill ratio at or above one demonstrates the quality of post-spin signings and the expected future profit growth from committed contracts.

Speaker #2: And as Martin highlighted, new scope and new logos continue to increase as a percent of our large deal signings. Turning to our outlook for fiscal 2027, we continue to expect adjusted pre-tax income to be in the range of $600 million to $700 million.

Speaker #2: This pre-tax income outlook includes approximately $200 million of workforce rebalancing charges and a similar amount of savings associated with these actions to offset the charges.

Speaker #2: In fiscal 2028, these actions are expected to yield annualized savings in the range of $400 to $500 million. Looking at the second quarter, we expect adjusted pre-tax income to be relatively in line with the 123 million we reported last year which includes more workforce rebalancing charges compared to the prior year.

Harsh Chugh: In fiscal 2028, these actions are expected to yield annualized savings in the range of $400 million to $500 million. Looking at Q2, we expect adjusted pre-tax income to be relatively in line with the $123 million we reported last year, which includes more workforce rebalancing charges compared to the prior year. The progress we are making on our workforce actions are on track to what we have previously outlined. For the full year, we continue to expect our free cash flow in the range of $400 million to $500 million. We continue to expect revenue to be flat to down 2% in constant currency, with year-over-year trends projected to improve each quarter. Within that, we expect Kyndryl Consult and our alliances-related revenue streams will continue to grow.

Harsh Chugh: In fiscal 2028, these actions are expected to yield annualized savings in the range of $400 million to $500 million. Looking at Q2, we expect adjusted pre-tax income to be relatively in line with the $123 million we reported last year, which includes more workforce rebalancing charges compared to the prior year. The progress we are making on our workforce actions are on track to what we have previously outlined. For the full year, we continue to expect our free cash flow in the range of $400 to 500 million. We continue to expect revenue to be flat to down 2% in constant currency, with year-over-year trends projected to improve each quarter. Within that, we expect Kyndryl Consult and our alliances-related revenue streams will continue to grow.

Speaker #2: The progress we are making on our workforce actions are on track toward we have previously outlined. For the full year, we continue to expect our free cash flow in the range of $400 million to $500 million.

Speaker #2: We continue to expect revenue to be flat to down 2% in constant currency with year-over-year trends projected to improve each quarter. Within that, we expect Kindryl Holdings and our alliances related revenue streams will continue to grow.

Speaker #2: At the same time, as I discussed earlier, we're assuming that our evolving relationship with IBM will be a similar headwind to what we have been experiencing.

Harsh Chugh: While at the same time, as I discussed earlier, we are assuming that our evolving relationship with IBM will be a similar headwind to what we have been experiencing. Taking into consideration the pace of signings over the last 15 months and what we expect to sign in Q2, we expect our H2 2027 revenue to be stronger than H1. Let me now pass the call back to Martin. Martin.

Speaker #2: Taking into consideration the pace of signings over the last 15 months and what we expect to sign in the second quarter, we expect our second half 2027 revenue to be stronger than the first half.

Speaker #2: Let me now pass the call back to Martin. Martin.

Speaker #3: Thank you, Harsh. To wrap up, we are executing against a clear strategy in a market where customers need trusted partners to modernize mission-critical environments adopt AI and navigate increasing complexity.

Martin Schroeter: Thank you, Harsh. To wrap up, we are executing against a clear strategy in a market where customers need trusted partners to modernize mission-critical environments, adopt AI, and navigate increasing complexity. We're seeing momentum in the areas that matter most, Kyndryl Consult, hyperscalers, alliance-led growth, and AI-led modernization. Our differentiated capabilities, including Kyndryl Bridge and Agentic AI, are helping customers deliver tangible business outcomes while creating opportunities to expand our relationships. At the same time, we continue to improve the quality of our signings, embed automation into our operations, and drive greater efficiency across the business. Taken together, these actions give us confidence in our ability to deliver on our fiscal 2027 and our fiscal 2028 targets. Operator, let's now move on to questions.

Speaker #3: We're seeing momentum in the areas that matter most: Kyndryl Holdings, hyperscalers, alliance-led growth, and AI-led modernization. Our differentiated capabilities, including Kyndryl Bridge and agentic AI, are helping customers deliver tangible business outcomes while creating opportunities to expand our relationships.

Speaker #3: At the same time, we continue to improve the quality of our signings and bed automation into our operations and drive greater efficiency across the business.

Speaker #3: Taken together, these actions give us confidence in our ability to deliver on our fiscal 2027 and our fiscal 2028 targets. Operator, let's now move on to questions.

Speaker #1: Thank you, Martin. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Operator: Thank you, Martin. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jonathan Lee with Guggenheim Securities. Jonathan, your line is open.

Speaker #1: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jonathan Lee with Guggenheim Security.

Speaker #1: Jonathan, your line is open.

Speaker #4: Great. Thanks for taking my questions. Can you help us think through what's contemplated in the fiscal 27 outlook across the key moving pieces specifically the assumed consult growth pace the level of signings conversion assumed and any embedded assumptions around sales cycle duration?

Jonathan Lee: Great. Thanks for taking my questions. Can you help us think through what's contemplated in the fiscal 2027 outlook across the key moving pieces, specifically the assumed consult growth pace, the level of signings conversion assumed, and any embedded assumptions around sales cycle duration? Where do you see the biggest sources of upside and downside relative to the flat to down to constant currency revenue outlook range?

Speaker #4: Where do you see the biggest sources of upside and downside relative to the flat to down to constant currency revenue outlook range?

Speaker #5: Sure. Thank you. And thanks for the time this morning. A couple of comments I'll ask Harsh obviously if he wants to add anything. To my answer, so first let's start where you did which is on consult at the beginning of the year when we provided our guidance revenue guidance we said consult would be kind of high single low double digit and I think you know we've just printed a 10 so we feel very good about the start we had to stay within that range and have consult deliver what we've embedded in our initial guidance.

Martin Schroeter: Sure. Thank you, and thanks for the time this morning. A couple of comments. I'll ask Harsh, obviously, if he wants to add anything to my answer. First, let's start where you did, which is on consult. At the beginning of the year when we provided our revenue guidance, we said consult would be kind of high single, low double digit, and I think, we've just printed a 10, so we feel very good about the start we had to stay within that range and have consult deliver what we've embedded in our initial guidance. Additionally, we feel really good about the signings in Q1. As everybody knows, we have to keep the signings machine going, and the 50% growth in consult in Q1 says our assumption for the year, it looks quite good.

Speaker #5: Additionally, we feel really good about the signings in the first quarter as everybody knows you know we have to keep the signings machine going and the 50% growth in consult in the first quarter says our assumption for the years it looks quite good.

Speaker #5: I would add to that by the way that in addition to the first quarter where we had good consult growth I'd also say that we had a good July in signing.

Martin Schroeter: I would add to that, by the way, that in addition to Q1 where we had good consult growth, I'd also say that we had a good July in signings. I think we feel like we're on track to deliver what we said for the year. Now, let's recognize that while the 50% growth, for instance, in signings in consult in Q1 is certainly a help, we also have a tough compare in Q2 with consult. Again, doesn't affect the year. We're still confident in the year. On sales cycles, look, given what we do and the role we play in our customers' environments, our customers are making long-term decisions, that hasn't changed.

Speaker #5: So, I think we feel like we're on track to deliver what we said for the year. Now, let's recognize that while the 50% growth, for instance in signings in Consult, in the first quarter is certainly a help, we also have a tough compare in the second quarter with Consult.

Speaker #5: Again, it doesn't affect the year—we're still confident in the year. On sales cycles, look, given what we do and the role we play in our customers' environments, our customers are making long-term decisions, and so that hasn't changed.

Speaker #5: At the same time we run mission critical we run their hearts and lungs so there's a big component of trust in how our customers make decisions and that hasn't changed.

Martin Schroeter: At the same time, we run mission-critical, we run their hearts and lungs, there's a big component of trust in how our customers make decisions, and that hasn't changed. At the same time, the world's getting more complex, and since we had our last earnings call, for instance, Mythos was announced, and that's certainly captured the attention of the enterprise tech world. Our customers are making long-term decisions on mission-critical elements, and the complexity of technology, and what they're thinking through is still ever present. In certain instances, is there a new dynamic, like sovereignty, for instance, in Europe? Sure. That's a discussion that leads into the overall sales cycle. I wouldn't say that we're seeing dramatically different sales cycles, again, relative to the role we play in the world on long-term commitments, the role of trust in running mission-critical, and the complexity of technology.

Speaker #5: At the same time the world's getting more complex and since we had our last earnings call for instance Mithos was announced and that's you know that's certainly captured the attention of the enterprise tech world.

Speaker #5: So our customers are making long-term decisions on mission critical elements and the complexity of technology and what they're thinking through is still ever present.

Speaker #5: Is there, you know, in certain instances, is there a new dynamic—like sovereignty, for instance, in Europe? Sure, that's a discussion that leads into the overall sales cycle, but I wouldn't say that we're seeing dramatically different sales cycles, again, relative to the role we play in the world on long-term commitments, the role of trust in running mission critical, and the complexity of technology.

Speaker #5: Harsh anything?

Martin Schroeter: Harsh, anything you'd add?

Harsh Chugh: Yeah. There's a couple of things I would add. We continue to see momentum in a hyperscaler that we have continued to see. I think the higher value elements that we have in our signings, once again, the new scope and new logo, it continued at a pace of 30%, as Martin mentioned in his prepared remarks, compared to 2025 fiscal, which was like 15%. We do see a good mix of pipeline for new scope and new logo as we look forward as well.

Speaker #2: Yeah, a couple of things I would add: we continue to see momentum in hyperscalers—kind of what we have continued to see—and I think the higher-value elements that we have in our signings, once again, the new scope and new logo, it continued at a pace of 30%, as Martin mentioned in his prepared remarks, compared to fiscal 2025, which was like 15%. And we do see a good mix of pipeline for new scope and new logo as we look forward as well.

Speaker #1: Great.

Jonathan Lee: I appreciate the thorough responses there. Thank you.

Speaker #4: I appreciate the thorough responses there.

Speaker #3: Thank you.

Speaker #1: Thanks Jonathan. Operator next question please. Our next question will be from Kevin Krishnaratna with Scotiabank. Kevin your line's open.

Lori Chaitman: Thanks, Jonathan. Operator, next question, please.

Operator: Our next question will be from Kevin Krishnaratne with Scotiabank. Kevin, your line's open.

Speaker #6: Hey there, good morning. Good strength, you know, continued strength in the US, but I want to switch to the principal markets, and maybe Europe is down 8% in constant currency—7% last quarter.

Kevin Krishnaratne: Hey there. Good morning. Good strength, continued strength in the US. I want to switch to the principal markets, maybe Europe was down 8%, constant currency 7% last quarter. I think that's expected. You did talk last quarter about some of the headwinds on AI sovereignty and buying decisions. Just curious, was that ahead or below your expectations, and how do you see trends out of Europe evolving into Q2, Q3?

Speaker #6: I mean I think that's expected. You did talk last quarter about some of the headwinds on AI sovereignty and buying decisions but just curious was that ahead or below your expectations and how do you see trends out of Europe evolving into Q2 Q3?

Speaker #5: Yeah so a couple things. It is all consistent with what we've assumed as we started the year and still supports our guidance for the full year.

Martin Schroeter: Yeah. A couple of things. It is all consistent with what we've assumed as we started the year and still supports our guidance for the full year. The trends, as I just talked about, that we see in terms of deal closings and cycle times are not a lot different. Again, does Europe sometimes have a sovereignty discussion? It does sometimes. By and large, it's the complexity of the environments that our customers are dealing with. It's the choices they have, and they know that while they need to commit over the long term to Kyndryl to run their infrastructure and mission-critical, they also know that in three months, somebody can make an announcement that changes the world of AI again. It's all of these things that I think come to a head a little bit more so in Europe than here in the US.

Speaker #5: And the trends as you know as I just talked about that we see in terms of deal closings and cycle times are not a lot different.

Speaker #5: Again does Europe sometimes have a sovereignty discussion. It does sometimes but by and large it's the complexity of the environments that our customers are dealing with.

Speaker #5: It's the choices they have. And they know that they know that while they need to commit over the long term to kindle to run their infrastructure mission critical they also know that in three months somebody can make an announcement that changes the world of AI again.

Speaker #5: And so it's all of these things that I think come to a head a little bit more so in Europe than here in the US.

Speaker #5: Obviously, the world changes here in the U.S. as well, but the sovereignty issue is not at all an issue here in the U.S. So no, the short answer is: all consistent with what we assumed for our guidance.

Martin Schroeter: Obviously, the world changes here in the US as well. The sovereignty issue is not at all an issue here in the US. No, the short answer is all consistent with what we assumed for our guidance. We're not seeing any trends, if you will, that would suggest the deal cycles are getting longer. It's just the world in which we live, and it's the role we play in our customers. Harsh, anything you'd add?

Speaker #5: We're not seeing any trends, if you will, that would suggest the deal cycles are getting longer. It's just the world in which we live, and it's the role we play in our customers' organizations.

Speaker #6: Harsh anything you did?

Harsh Chugh: Yeah, I think it's consistent with what we had talked about. If you remember in last couple of quarters, we had talked about UK as well as the European segment of strategic markets. That has been kind of what we have continued to see. It was as we were anticipating and not impacting our view for what we see the full year.

Speaker #2: Yeah I think it's consistent with what we had talked about if you remember in last couple of quarters we had talked about UK as well as the European segment of strategic markets like that has been kind of what we have continued to see.

Speaker #2: So it was as we were anticipating and not impacting our view for what we see for the full year.

Speaker #6: Thank you.

Kevin Krishnaratne: Thank you.

Speaker #1: Thanks. Operator, next question, please. Our next question will be from Kenjen Huang with JP Morgan. Your line is open.

Lori Chaitman: Thanks. Operator, next question, please.

Operator: Our next question will be from Tien-Tsin Huang with J.P. Morgan. Your line is open.

Operator: Our next question will be from Tien-Tsin Huang with JPMorgan. Your line is open.

Speaker #7: Hey, terrific, thanks so much. Hi, Martin. Hi, Harsh and Lori. Just thinking about the workforce in general, so you've got robust signings.

Tien-Tsin Huang: Hey. Terrific. Thanks so much. Hi, Martin. Hi, Harsh and Lori. Just thinking about the workforce in general. You've got robust signings, you've got some savings on the way from the workforce rebalancing. I'm curious if you can just comment on resourcing or headcount and just your line of sight there in reskilling and lining up the workforce to deliver on the AI-led monetization and the value-added services work that you're focusing on. Do you feel good about the pathway there? I would expect you'll probably see some increase in revenue per head or PTI per head, just again, just looking for more detail there. Thanks.

Speaker #7: You've got some savings on the way from the workforce rebalancing. I'm curious if you can just comment on resourcing or headcount and just your, you know, your line of sight there, and reskilling and lining up the workforce to deliver on the AI-led modernization and the value-added services work that you're focusing on.

Speaker #7: Do you feel good about the pathway there? I would expect you'll probably see some increase in revenue per head, or PTI per head, but just, again, just looking for more detail there.

Speaker #5: Yeah sure. Thanks Kenjen. A couple of comments and again I'll invite Harsh if he wants to add anything. You know our use of AI which we've talked about for a number of years already starting with the machine learning we use from the bridge data that we have in order to automate things now moving into an agentic world and for us we have 1800 or so agents in the infrastructure helping us get to solutions faster.

Martin Schroeter: Yeah, sure. Thanks, Tien-Tsin. A couple of comments, and again, I'll invite Harsh if he wants to add anything. Our use of AI, which we've talked about for a number of years already, starting with the machine learning we use from the Bridge data that we have in order to automate things. Now moving into an agentic world, for us, we have 1,800 or so agents in the infrastructure helping us get to solutions faster, helping us reduce impact events, helping us reduce errors, helping us automate things. It's very real for us, and it is something that allows us to free up people and reposition them in higher value roles still with a customer base that trusts them. We've been very successful in doing that.

Speaker #5: Helping us reduce impact events. Helping us reduce errors. Helping us automate things. So it's very real for us and it is something that allows us to free up people and reposition them in higher value roles still with a customer base that trusts them.

Speaker #5: And so we've been very successful in doing that. I think of redeployed in tens of thousands of people since we started this process. And I expect that to continue.

Martin Schroeter: I think we've redeployed in tens of thousands of people since we started this process, and I expect that to continue. There is a chance that agentic can accelerate some of that, but we're just assuming that we can continue to free people up and redeploy them. Remember, our business model is one that's paid on outcomes. We have to deliver uptime, we have to deliver resiliency features, we have to deliver security features. I think what we've proven to ourselves, to our customers, and to our investors is that as long as we continue to deliver on those outcomes, and again, agentic and automation actually improves quality, improves the way we deliver. We get to keep a piece of the savings we can generate as we manage those contracts. I think our customers see the benefit in efficiency, they see the benefit in quality.

Speaker #5: There is a chance that agentic can accelerate some of that but we're just assuming that we can continue to free people up and redeploy them.

Speaker #5: And remember our business model is one that's paid on outcomes. So you know we have to deliver uptime. We have to deliver resiliency features.

Speaker #5: We have to deliver security features. And I think what we've proven to ourselves to our customers and to our investors is that as we as long as we continue to deliver on those outcomes and again agentic and automation actually improves quality improves the way we deliver we get to keep a piece of the savings we can generate as we manage those contracts.

Speaker #5: And I think our customers see the benefit in efficiency. They see the benefit in quality. And I think that is part of how we've generated about a billion in cumulative savings since we were spun out using again machine data kindle bridge and our ability to automate and our advanced delivery initiative.

Martin Schroeter: I think that is part of how we've generated about $1 billion in cumulative savings since we were spun out using, again, machine data, Kyndryl Bridge, and our ability to automate in our advanced delivery initiative. All while our net promoter scores on the run part of our business, which is what our customers are really looking at, continues to improve. We're in world-class territory on NPS. We're in world-class territory on quality of service. Look, the use of AI, the use now of agentic is very real for us. It's how our advanced delivery part of our strategy has generated a lot of value. Our model is one, again, that allows us to continue down this path and continue to redeploy. Harsh, anything you'd add?

Speaker #5: All while our all while our net promoter scores on the run part of our business which is what our customers are really looking at continues to improve.

Speaker #5: We're in world-class territory. On NPS we're in world-class territory. On quality of service. So look the use of AI the use now of agentic is very real for us.

Speaker #5: It's how our advanced delivery part of our strategy has generated a lot of value. And our model is, once again, one that allows us to continue down this path and continue to redeploy.

Speaker #5: Harsh anything you did?

Harsh Chugh: Yeah, I would say some of the deals that you heard Martin talk about, I think it's important to talk about the value that we bring through the forward deployed engineers that we bring, as well as the agentification that we're bringing. That's helping us win against some of our competition because some of the insights that we have on the existing environments is unique from our point of view. That's giving us an edge in some of the new scope, new logo that we've won. Also we know how to manage our bench, like in terms of reskilling and redeployment. We have a great success rate in redeployment. We started to have great success in reskilling resources.

Speaker #2: Yeah, I would say, kind of some of the deals that you heard Martin talk about, I think it's important to talk about the value that we bring through the forward-deployed engineers that we bring, as well as the agentification that we bring in.

Speaker #2: That's kind of helping us win against some of our competition, because some of the insights that we have on the existing environments are unique from our point of view.

Speaker #2: That's kind of giving us an edge in some of the new scope new logo that we've won. But also we know how to kind of manage our bench.

Speaker #2: Like in terms of reskilling and redeployment kind of we have a great success rate in redeployment. We started to have great success in reskilling our resources.

Harsh Chugh: We now, as we talked about exiting last year into this year, importance of workforce management that we are doing, which allows us to manage the cost of something that's stranded. That's allowing us to think about this as a more holistic way that we are approaching it, and you cannot miss agentification as an important element of that.

Speaker #2: And then we now as we talked about exiting kind of last year into this year importance of workforce management that we're doing which allows us to manage the cost of something that's kind of stranded like.

Speaker #2: So that's kind of allowing us to kind of think about this as a more holistic way that we are approaching it and you cannot miss agentification as an important element of that.

Speaker #5: Thanks Kenjen.

Martin Schroeter: Thanks, Sanjeev.

Martin Schroeter: Thanks, Tien-Tsin.

Speaker #1: Thank you. Operator, next question please. At this time, I'd just like to give a final reminder: if you would like to ask a question, please press *11 on your telephone and wait to be announced.

Harsh Chugh: Yes. Thank you.

Tien-Tsin Huang: Yes. Thank you.

Lori Chaitman: Thank you. Operator, next question, please.

Operator: At this time, I'd just like to give a final reminder. If you would like to ask a question, please press star one one on your telephone and wait to be announced. It looks like our next question will be with Bradley Clark from BMO Capital Markets. Bradley, your line is open.

Speaker #1: It looks like our next question will be with Bradley Clark from BMO Capital Markets. Bradley your line is open.

Bradley Clark: Hi, thanks for taking my question. I want to hone in on some of the new logos that were highlighted on the call, and specifically won the presentation. More broadly, in this competitive environment, how is Kyndryl approaching new logos and where do you think your advantages lie as you win new customers, particularly in the consult business? Then if you could also comment on any pricing dynamics that Kyndryl is experiencing approaching new logos for some of these services, versus what you're seeing more in renewals with your existing customers. Thank you.

Speaker #8: Hi thanks for taking my question. I want to hone in on some of the new logos that were highlighted on the call and specifically one in the presentation.

Speaker #8: But you know more broadly like you know in this competitive environment you know how is kindle like approaching new logos and you know what what do you think your advantages lie as you win new customers particularly in the consulting business.

Speaker #8: And then if you could also comment on any pricing dynamics that Kyndryl would be experiencing approaching new logos for some of these services, versus what you're seeing more in the renewals with your existing customers.

Speaker #8: Thank you.

Speaker #5: Yeah sure. Thank you. Thanks for thanks for joining and thanks for the thanks for the question. Look we've had and we've talked about this already at our investor day a couple years ago.

Martin Schroeter: Yeah, sure. Thank you. Thanks for joining and thanks for the question. Look, we've had, we've talked about this already at our Investor Day a couple of years ago. We've added hundreds and hundreds of new customers, that certainly doesn't surprise us. We win for a number of reasons, the most recent wins are tied to our leadership with the Kyndryl Agentic framework, which provides the architecture and the delivery framework so that our customers, we can really industrialize both, not both, but the design, the integration, and the operations of their infrastructure. The Kyndryl Agentic framework is highly unique, highly differentiated in the marketplace. Supported by Bridge. Bridge is the control plane, if you will, that connects the tools, the workflows, the telemetry, and the automation across the enterprise.

Speaker #5: We've added hundreds and hundreds of new customers and that shouldn't I mean certainly doesn't surprise us. We win for a number of reasons and the most recent wins are tied to our leadership with the kindle agentic framework which allows which allows provides the architecture and the delivery framework so that our customers we can really industrialize both not both but the design and the integration and then the operations of their infrastructure.

Speaker #5: So the kindle agentic framework is highly unique highly differentiated in the marketplace. Supported by bridge. Bridge is the control plane if you will that connects the tools and the workflows and the telemetry and the automation across the enterprise.

Speaker #5: It provides us with real-time data and provides our customers with 16 17 18 million insights a month on how their infrastructure infrastructure is running.

Martin Schroeter: It provides us with real-time data, provides our customers with 16, 17, 18 million insights a month on how their infrastructure is running. It also provides us with over 200 million automations a month. All of that's supported by our expertise and our engineering talent in the form of Kyndryl Consult. Some of that we've had, but we've also been very active and very aggressive in investing in Kyndryl Consult to get industry expertise and industry points of view to get the talent that we need in order to help the Kyndryl Agentic framework and Bridge land in the right spot. That expertise has proven to be hugely valuable, is why you see the great Consult signings growth that we've delivered over the last number of years, and the continued revenue growth. These are very complex, as you would imagine, infrastructures.

Speaker #5: And it also provides us with over 200 million automations a month. And then all of that supported by our expertise and our engineering talent in the form of kindle consult.

Speaker #5: And you know some of that we've had but we've also been very very active and very aggressive in investing in kindle consult to get industry expertise and industry points of view to get the talent that we that we need in order to help the kindle agentic framework and bridge land in the right spot.

Speaker #5: And that expertise has proven to be hugely valuable and is why, you know, you see the great consult signings growth that we've delivered over the last number of years and the continued revenue growth.

Speaker #5: These are very complex as you would imagine. Infrastructures and it's not that when AI comes along or when agentic AI comes along that our customers are adding a model or a new application.

Martin Schroeter: It's not that when AI comes along or when agentic AI comes along that our customers are adding a model or a new application. These are models and agents and workflows and applications that need data, and they need to sit on an infrastructure. Somebody, this is why our customers call us, somebody needs to integrate and orchestrate and govern and operate that in a world that is highly complex and at scale. What the expertise we've built, the investments we've made, not only in our people, but in Bridge and our Kyndryl Agentic framework, is highly differentiated in the marketplace. That's why we see a good long-term growth arc for Kyndryl.

Speaker #5: I mean, these are models and agents and workflows and applications that need data, and they need to sit on an infrastructure. And this is why our customers call us.

Speaker #5: Somebody needs to integrate and orchestrate and govern and operate that in a world that is highly complex and at scale. And so you know what the expertise we've built the investments we've made not only in our people but in bridge and our kindle agentic framework is highly differentiated in the marketplace and that's why we see a good long-term growth arc for kindle.

Speaker #1: Thanks Martin. Operator I believe we have one more question in the queue and then Martin's going to close us out with some remarks. Thank you Lori.

Lori Chaitman: Thanks, Martin. Operator, I believe we have one more question in the queue, and then Martin's going to close us out with some remarks.

Operator: Thank you, Lori. Our next question is with Spencer Anton from Susquehanna. Spencer, your line is open.

Operator: Thank you, Lori. Our next question is with Spencer Anson from Susquehanna. Spencer, your line is open.

Speaker #1: Our next question is with Spencer Anson from Susquehanna. Spencer your line is open.

Speaker #4: Great, thanks for taking my question here. You know, there's been a lot of talk over the years about mainframe modernization and COBOL modernization.

Spencer Anton: Great. Thanks for taking my question here. There's been a lot of talk over the years about mainframe modernization and COBOL modernization. Can you just talk to the opportunity you see there, how it might affect your business, and any impact to the relationship with IBM? Thank you.

Spencer Anson: Great. Thanks for taking my question here. There's been a lot of talk over the years about mainframe modernization and COBOL modernization. Can you just talk to the opportunity you see there, how it might affect your business, and any impact to the relationship with IBM? Thank you.

Speaker #4: Can you just talk to the opportunity you see there, how it might affect your business, and any impact to the relationship that I've been...

Speaker #4: Thank you.

Speaker #5: Yeah sure. So look mainframe modernization is a thing. It's real. It's something we're you know we're experts in. We have more scale than than than anybody else in mainframe and mainframe services.

Martin Schroeter: Yeah, sure. Look, mainframe modernization is a thing. It's real. It's something we're experts in. We have more scale than anybody else in mainframe and mainframe services. That scale allows us to invest and create career paths for that next generation of mainframe talent. We have 8,000, 9,000 deep mainframe experts, but those 8,000 or 9,000 look more like my kids, instead of me, because we've invested and partnered with universities to build curriculums, et cetera. Our scale gives us an ability to invest there in what is a very common and important set of dialogues with our customers. Modernization, mainframe being one of those, but modernization in general, is the sort of the top of the list on what customers are thinking about. You heard some of this in our prepared remarks.

Speaker #5: And that scale allows us to it allows us to invest and create career paths for that next generation of mainframe talent. So we have we have you know eight nine thousand deep mainframe experts but those eight or nine thousand look more like my kids instead of me because we've invested and partnered with universities to build curriculums et cetera et cetera et cetera.

Speaker #5: So our scale gives us an ability to invest there in what is a very common and important set of dialogues with our customers. Modernization mainframe being one of those but modernization in general is the is the sort of the top of the list on what customers are thinking about.

Speaker #5: You heard some of this in our prepared remarks. Modernization in order to use the new technologies that are coming out like AI in order to stay ahead of the bad guys and become more secure and resilient and in order to keep up with an ever-changing regulatory environment.

Martin Schroeter: Modernization in order to use the new technologies that are coming out, like AI, in order to stay ahead of the bad guys and become more secure and resilient, and in order to keep up with an ever-changing regulatory environment. Modernization of which, again, mainframe is one where we have more scale than anybody. We, I think, run more than half the world's outsourced mainframes. We're really good at this, and it is driving a lot of interest from customers because, again, I've used this metaphor before, AI and GenAI and agentic AI represents a nice, shiny new bullet train that can go 200 miles an hour, but most customers are still running on tracks that were built for 30 miles an hour. That is sort of a way to capture this idea of modernization.

Speaker #5: So modernization of which again mainframe is one where we have more scale than anybody. We I think run more than half the world's outsourced mainframes so we're really good at this and it is driving a lot of interest from customers because again I've used this metaphor before AI and Gen AI and agentic AI represents a nice shiny new bullet train that can go 200 miles an hour but most customers are still running on tracks that were built for 30 miles an hour.

Speaker #5: So that is sort of a way to capture this idea of modernization. As for the relationship with IBM look our relationship with IBM it's quite good.

Martin Schroeter: As for the relationship with IBM, look, our relationship with IBM it's quite good. It continues to evolve. We spent the first few years working very cooperatively and closely with IBM and our customers to execute our focus account initiative. We're largely through that, not entirely. Some of these have long tails. We've worked very well with IBM and our customer base in order to execute that. Even today, we're lined up with IBM to help customers get to the right answer. By the way, that right answer is quite often a mainframe. Quite often, by the way, we have to modernize in a way that allows customers to continue to deliver the services. Modernization's real. Mainframe is one of those flavors. We have the scale and the investments and the capabilities that nobody else has to do this.

Speaker #5: It continues to evolve. We spent the first few years working very cooperatively and closely with IBM and our customers to execute our focus account initiative.

Speaker #5: We're you know largely through that not entirely. Some of these have long tails but we've worked very well with IBM and our customer base in order to execute that.

Speaker #5: And even today we are you know we're lined up with IBM to help customers get to the right answer. By the way that right answer is quite often a mainframe.

Speaker #5: And quite often by the way we have to modernize in a way that that allows customers to continue to deliver the services. So modernization is real.

Speaker #5: Mainframe is one of those flavors. We have the scale and the investments and the capabilities that nobody else has to do this and it's been a it's been a the partnership with IBM has been good and I expect it will continue to be quite good because our customers you know they need IBM's technology just like they need access to public clouds and all the other complexity we manage.

Martin Schroeter: The partnership with IBM has been good, and I expect it will continue to be quite good because our customers, they need IBM's technology just like they need access to public clouds and all the other complexity we manage.

Speaker #4: Yeah I think the other thing that I would add is kind of eventually customers will decide depending on their business needs kind of what business modernization they need and where the IT environment for them will go.

Harsh Chugh: Yeah, I think the other thing that I would add is, eventually customers will decide, depending on their business needs, what business modernization they need and where the IT environment for them will go. It's important that we are bringing all the capabilities and high-value services to follow their will, which is important to us. Largely the whole ecosystem, we have to be relevant for all the ecosystem players. In some cases, mainframe, including private cloud, will remain relevant for them. They have to exist, especially the customers that we deal with, they exist in all such environment, and they will evolve around cloud, public cloud, they'll evolve around SaaS-based application, they will evolve around private cloud and mainframe, too. There is a relevance that we have to bring across. Modernization for us means we're playing across all the spectrum.

Speaker #4: It's important that we are bringing all the capabilities and high value services to follow their wallet share which is important to us which means largely the whole ecosystem we have to be relevant for all the ecosystem players.

Speaker #4: In some cases mainframe including private cloud will remain relevant for them. So they have to exist especially the customers that we deal with. They exist in all such environment and they will evolve around cloud public cloud.

Speaker #4: They'll evolve around SaaS based application. They will evolve around private cloud and mainframe. So there is a relevance that we have to bring across and modernization for us means we playing across all the spectrum.

Speaker #5: Thanks Harsh. Operator I think that was the last in the queue. So before we close a couple of a couple of notes. One I do want to thank Harsh for stepping into the CFO role and leading our finance organization and being a critical leader here at Kyndryl for the past six months.

Martin Schroeter: Thanks, Harsh. Operator, I think that was the last in the queue. Before we close, a couple of notes. One, I do want to thank Harsh for stepping into the CFO role, and leading our finance organization and being a critical leader here at Kyndryl for the past six months. Of course, before that, he was our first COO. After a distinguished career, Harsh has made the decision to retire. Now he will continue as an executive advisor here to me and to the leadership team. From the very beginning, from the start of Kyndryl, Harsh has been a trusted partner. He's been an exceptional leader, who always puts the success of our customers, the success of the Kyndryls around the world, and quite frankly, the success of Kyndryl first. Harsh, thank you for your leadership. Thank you, Martin.

Speaker #5: And, of course, before that, he was our first COO, and after a distinguished career, Harsh has made the decision to retire. Now, he will continue as an executive advisor here to me and to the leadership team. From the very beginning, from the start of Kyndryl, Harsh has been a trusted partner.

Speaker #5: He's been an exceptional leader. Who always puts the success of our customers the success of the Kyndryls around the world and this quite frankly the success of Kyndryl first.

Speaker #5: So, Harsh, thank you for your leadership. I have nothing but gratitude and thanks for you. Now, as we announced in July, we're pleased to welcome Ellen Johnson as our incoming CFO.

Martin Schroeter: Thank you, Martin.

Martin Schroeter: I have nothing but gratitude and thanks for you. Now, as we announced in July, we're pleased to welcome Ellen Johnson as our incoming CFO. Ellen, highly experienced in driving financial discipline, operational excellence, and she is a great addition to strengthen our leadership team. Ellen officially starts in the role tomorrow, 6 August, and I know she's looking forward to meeting with our investors, our analysts, in the coming weeks and months. Welcome, Ellen. Thank you. Again, every day, we deliver the world-class services our customers and the world relies on.

Speaker #5: Ellen is highly experienced in driving financial discipline and operational excellence, and she is a great addition to strengthen our leadership team. Ellen officially starts in the role tomorrow, August 6th, and I know she's looking forward to meeting with our investors and our analysts in the coming weeks and months.

Speaker #5: So welcome Ellen. Thank you. And again every day you know we deliver the world-class services our customers and the world relies on. Our focus this year is to drive progress across the targeted growth areas of our business including Kyndryl Consult the work we do around the hyperscalers our modernization efforts that's come up a number of times and obviously the role of AI and how our customers deploy it and also how we use it to streamline the way we operate.

Martin Schroeter: Our focus this year is to drive progress across the targeted growth areas of our business, including Kyndryl Consult, the work we do around the hyperscalers, our modernization efforts, that's come up a number of times, and obviously, the role of AI and how our customers deploy it, and also how we use it to streamline the way we operate. We've got a great team around the world that's focused on delivering every day. We are and have been confident in our ability to deliver the year and to deliver our multi-year objectives. Thanks everyone for joining.

Speaker #5: We've got a great team around the world that's focused on delivering every day. We are and have been confident in our ability to deliver the year and to deliver our multi-year objectives.

Speaker #5: So thanks everyone for joining.

Operator: Thank you for participating in today's call. You may now disconnect.

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