Kyndryl Wins Wall Street Support As 'Triple A' Plan Fixes Profits After IBM Split: Analyst

<p><strong>Kyndryl Holdings, Inc</strong> <a class="ticker-link" data-ticker="KD" data-exchange="NYSE" href="https://www.benzinga.com/quote/KD" target="_blank" rel="noopener">(NYSE:<a class="ticker" href="https://www.benzinga.com/quote/KD">KD</a>)</a> <a href="https://www.benzinga.com/24/11/42117143/ibm-spin-off-kyndryl-kicks-off-300m-share-buyback-a-bold-step-to-strengthen-kd-stock">is gaining momentum</a> in its post-<strong>International Business Machines Corp</strong> <a class="ticker-link" data-ticker="IBM" data-exchange="NYSE" href="https://www.benzinga.com/quote/IBM" target="_blank" rel="noopener">(NYSE:<a class="ticker" href="https://www.benzinga.com/quote/IBM">IBM</a>)</a> transformation.</p>



<p><strong>The KD Analyst</strong>: On Wednesday, <strong>Guggenheim </strong>analyst Jonathan Lee initiated coverage on Kyndryl with a Buy rating. His <a href="https://www.benzinga.com/quote/KD/analyst-ratings" target="_blank" rel="noreferrer noopener">price forecast</a> is currently $30.</p>



<p>Lee argues that Kyndryl has executed a disciplined and effective turnaround strategy since its 2021 spin-off from IBM.</p>



<p><strong>Also Read: <a href="https://www.benzinga.com/markets/earnings/25/11/48637575/kyndryl-cloud-soars-in-q2-expands-global-ai-footprint-raises-buyback-by-400-million" target="_blank" rel="noreferrer noopener">Kyndryl Cloud Soars In Q2, Expands Global AI Footprint, Raises Buyback By $400 Million</a></strong></p>



<p><strong>The Analyst Thesis</strong>: Management's "Triple A" framework focused on Alliances, Advanced Delivery, and Accounts. It improved contract-signing quality, automating operations, and enforcing tighter contract discipline, Lee says.</p>



<p>Despite operating in a slow-growth segment of the IT services market, Kyndryl has a profitable and sustainable free cash flow.</p>



<p>Lee noted that Kyndryl has worked to replace legacy IBM-related deal flow by expanding partnerships with hyperscalers and technology vendors.</p>



<p>Those alliances help Kyndryl shift toward higher-value offerings, including consulting, cloud-enabled managed services, cybersecurity, and data and AI solutions, the analyst noted.</p>



<p>At the same time, he said the company is aggressively standardizing service delivery to boost productivity and free teams to support higher-margin opportunities.</p>



<p>By focusing on contract economics, Kyndryl has exited or repriced lower-quality engagements, strengthening its portfolio and expanding margins. Management aims to triple cash flow, double pretax earnings, and deliver single-digit revenue growth by 2028, and early results show progress: adjusted EBITDA margins rose from 12% in 2022 to 16.7% in 2025, alongside positive free cash flow.</p>



<p>While the shift away from legacy infrastructure pressures revenue from traditional data centers, growth in cloud-based services is expected to offset declines. </p>



<p>The IT infrastructure services market could expand from $900 billion today to $1.2 trillion by 2029, and with high barriers to entry and limited scaled competitors, Kyndryl is well-positioned to stabilize and gain market share. </p>



<p>Risks include delays in deal signings, pricing pressure, cybersecurity execution, and muted valuations, but analysts view Kyndryl as a standout turnaround opportunity in infrastructure outsourcing.</p>



<p>Lee projected third-quarter revenue of $3.93 billion and adjusted EPS of $0.85.</p>



<h2 class="wp-block-heading"><strong>Price Action</strong></h2>



<p>Kyndryl shares traded higher by 1.34% at $25.78 on Friday, <a href="https://www.benzinga.com/pro/" target="_blank" rel="noreferrer noopener">according to Benzinga Pro data</a>.</p>



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<p><em>Image: Shutterstock</em></p>