Kyndryl Holdings, Inc. (KD)

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2026

Overview

Kyndryl is a leading provider of mission-critical enterprise technology services, offering advisory, implementation and managed service capabilities to thousands of customers in more than 60 countries. As the world’s largest IT infrastructure services provider, the Company designs, builds, manages and modernizes the complex information systems that the world depends on every day.

The Company is organized, managed and classified into four reportable segments by geography: United States, Japan, Principal Markets and Strategic Markets. For additional information on these segments, refer to Note 4 – Segments to our consolidated financial statements included elsewhere in this report.

Financial Performance Summary

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For the three months ended June 30, 2026, we reported $3.6 billion in revenue, a decrease of 3 percent compared to the prior-year period. United States revenue increased 5 percent; Japan revenue decreased 8 percent, and increased 2 percent in constant currency; Principal Markets revenue decreased 7 percent; and Strategic Markets revenue decreased 3 percent, in each case compared to the three months ended June 30, 2025. During the period, growth in Kyndryl Consult and hyperscaler-related revenues were partially offset by lengthening sales cycles and evolving content from the Company’s former parent in the Company’s customer engagements. The net loss was $55 million in the three months ended June 30, 2026 compared to net income of $56 million in the three months ended June 30, 2025, driven by a $127 million increase in workforce rebalancing charges, a $38 million increase in impairment expense driven by the sale of a facility in the United States, and a $22 million increase in selling, general and administrative expenses driven by increased expenses to support future growth, partially offset by a lower provision for income taxes of $50 million and a $40 million gain from the sale of a wholly-owned digital solutions subsidiary in the Principal Markets segment (classified as a transaction-related benefit) in the current period.

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Macro Dynamics

Global markets have continued to experience volatility in 2026, amid ongoing trade tensions and heightened macroeconomic uncertainties, driven by geopolitical developments and conflicts, concerns over changes in global trade policies and the imposition of import tariffs by the United States, reactions from other nations and proposed U.S.

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Management Discussion (continued)

government spending reductions. Increased economic uncertainty has impacted and may continue to impact the level and composition of global macroeconomic activity.

Recent Developments

The Company continues to cooperate with the SEC Division of Enforcement’s investigation relating to the Company’s cash management practices, related disclosures, the efficacy of the Company’s internal control over financial reporting, and certain other matters. The matter is ongoing and the Company cannot currently predict its final outcome. See Note 11 – Commitments and Contingencies in the consolidated financial statements included elsewhere in this report for further information about this and other contingency matters.

In addition, as previously disclosed, the Company identified material weaknesses in internal control over financial reporting. For more information, see “Controls and Procedures” in Part I, Item 4 in this report.

Acquisitions and Divestitures Update

For information concerning our recent acquisitions and divestitures activity, see Note 8 – Acquisitions and Divestitures in the consolidated financial statements included elsewhere in this report.

Segment Results

The following table presents our reportable segments’ revenue and adjusted EBITDA for the three months ended June 30, 2026 and 2025. Segment revenue and revenue growth in constant currency exclude any transactions between the segments.

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NM – not meaningful

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We report our financial results in accordance with U.S. GAAP. We also present certain non-GAAP financial measures to provide useful supplemental information to investors. We provide these non-GAAP financial measures as we believe they enhance visibility to underlying results and the impact of management decisions on operational performance, enable better comparison to peer companies and allow us to provide a long-term strategic view of the business going forward.

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Management Discussion (continued)

Revenue growth in constant currency is a non-GAAP measure that eliminates the effects of exchange rate fluctuations when translating from foreign currencies to the United States dollar. It is calculated by using the average exchange rates that existed for the same period of the prior year. Constant-currency measures are provided so that revenue can be viewed without the effect of fluctuations in currency exchange rates, which is consistent with how management evaluates our revenue results and trends.

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Additionally, management uses adjusted EBITDA to evaluate our performance. Adjusted EBITDA is a non-GAAP measure and defined as net income (loss) excluding income taxes, interest expense, depreciation and amortization (excluding depreciation of right-of-use assets and amortization of capitalized contract costs), charges related to ceasing to use leased/fixed assets, charges related to lease terminations, transaction-related costs and benefits, pension expenses other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, impairment expense, significant litigation costs and benefits, and currency impacts of highly inflationary countries. We believe that adjusted EBITDA is a helpful supplemental measure to assist investors in evaluating our operating results as it excludes certain items whose fluctuation from period to period does not necessarily correspond to changes in the operations of our business.

These disclosures are provided in addition to and not as a substitute for the percentage change in revenue and profit or loss measures on a U.S. GAAP basis compared to the corresponding period in the prior year. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of these measures for comparative purposes.

The following table provides a reconciliation of U.S. GAAP net income (loss) to adjusted EBITDA:

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United States

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Included below are selected results and year-over-year comparisons for the years ended March 31, 2026, 2025 and 2024. The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes included elsewhere in this report. For further information on the comparisons between the years ended March 31, 2025 and 2024 not covered in the “Segment Results” below, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Amendment No. 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025, which was filed with the SEC on February 17, 2026 (the “2025 Form 10-K”).

Overview

Kyndryl is a leading provider of mission-critical enterprise technology services, offering advisory, implementation and managed service capabilities to thousands of customers in more than 60 countries. As the world’s largest IT infrastructure services provider, the Company designs, builds, manages and modernizes the complex information systems that the world depends on every day.

The Company is organized, managed and classified into four reportable segments by geography: United States, Japan, Principal Markets and Strategic Markets. For additional information on these segments, refer to Note 4 – Segments to our consolidated financial statements included elsewhere in this report.

Financial Performance Summary

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Fiscal 2026 Financial Performance

For the year ended March 31, 2026, we reported $15.1 billion in revenue, unchanged compared to the year ended March 31, 2025. The revenue performance included a favorable currency exchange rate impact of three points. United States revenue decreased 2 percent, Japan revenue decreased 3 percent, Principal Markets revenue increased 4 percent and Strategic Markets revenue was unchanged, compared to the year ended March 31, 2025. During the period, the Company experienced growth in Kyndryl Consult and hyperscaler-related revenues and revenue performance was unfavorably impacted by lengthening sales cycles and evolving content from the Company’s former parent in the Company’s customer engagements. Net income of $198 million decreased by $53 million versus the prior year reflecting a $138 million after-tax gain from the sale of our Securities Industry Services (“SIS”) platform in Canada (classified as a transaction-related benefit) in the prior year, partially offset by progress on our key initiatives to drive operating efficiencies. During the period, margins were adversely affected by lengthening sales cycles.

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Fiscal 2025 Financial Performance

For the year ended March 31, 2025, we reported $15.1 billion in revenue, a decline of 6 percent compared to the year ended March 31, 2024. The revenue decline was largely attributable to actions the Company has taken to reduce low-margin components of its customer relationships, as well as currency effects. United States revenue decreased 10 percent, Japan revenue increased 1 percent, Principal Markets revenue decreased 5 percent and Strategic Markets revenue decreased 8 percent, compared to the year ended March 31, 2024. Net income of $252 million improved by $592 million versus the prior year driven by progress on our key initiatives to drive operating efficiencies and increased margins, lower depreciation expense of $180 million and a $138 million after-tax gain from the sale of our SIS platform in Canada.

Macro Dynamics

Global markets have experienced volatility in 2026, amid ongoing trade tensions and heightened macroeconomic uncertainties, driven by geopolitical developments and conflicts, concerns over changes in global trade policies and the imposition of import tariffs by the United States, reactions from other nations and proposed U.S. government spending reductions. Increased economic uncertainty has impacted and may continue to impact the level and composition of global macroeconomic activity.

Recent Developments

The Company continues to cooperate with the SEC Division of Enforcement’s investigation relating to the Company’s cash management practices, related disclosures, the efficacy of the Company’s internal control over financial reporting, and certain other matters. The matter is ongoing and the Company cannot currently predict its final outcome. See Note 14 – Commitments and Contingencies in the consolidated financial statements included elsewhere in this report for further information about this and other contingency matters.

In addition, as previously disclosed, the Company identified material weaknesses in internal control over financial reporting. For more information, see “Controls and Procedures” in Part II, Item 9A in this report.

Acquisitions Update

For information concerning our recent acquisitions activity, including regarding the pending acquisition of Solvinity Group B.V., see Note 10 – Acquisitions and Divestitures in the consolidated financial statements included elsewhere in this report.

Basis of Presentation

We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make estimates and assumptions that impact the amounts reported and disclosed in our consolidated financial statements and the accompanying notes. We prepared these estimates based on the most current and best available information, but actual results could differ materially from these estimates and assumptions. All significant transactions and accounts between Kyndryl entities were eliminated. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts.

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Segment Results

The following table presents our reportable segments’ revenue and adjusted EBITDA for the years ended March 31, 2026, 2025 and 2024. Segment revenue and revenue growth in constant currency exclude any transactions between the segments.

NM – not meaningful

We report our financial results in accordance with U.S. GAAP. We also present certain non-GAAP financial measures to provide useful supplemental information to investors. We provide these non-GAAP financial measures as we believe they enhance visibility to underlying results and the impact of management decisions on operational performance, enable better comparison to peer companies and allow us to provide a long-term strategic view of the business going forward.

Revenue growth in constant currency is a non-GAAP measure that eliminates the effects of

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