Kyndryl sold less, lost money, and used more cash in the three months ended June 30.
Revenue fell 3.3% to $3.6 billion from $3.7 billion a year earlier. Diluted earnings per share swung from 23 cents positive to 25 cents negative, and operating cash flow fell to negative $310 million from negative $124 million.
The surface reading is simple: a smaller business, with a recent cash drawdown. The filing adds an important qualifier. Kyndryl says the decline came partly from pruning low-margin components of customer relationships signed before its spin-off, rather than from an across-the-board retreat from its markets.
"Principal Markets revenue of $1.3 billion decreased 7 percent, and decreased 8 percent in constant currency, compared to the prior-year quarter, primarily driven by actions the Company has taken to reduce certain low-margin components of its customer relationships entered into before the Spin-off."
Kyndryl, 10-Q, August 5, 2026
Principal Markets' reported results also weakened. Adjusted EBITDA fell 24% to $151 million, more sharply than the segment's revenue decline. The company does not quantify how much of the consolidated revenue drop came from the pruning beyond identifying it as the primary driver for Principal Markets.
The cash picture is less tidy than the year-over-year balance suggests. Cash stood at $2.1 billion at June 30, up from $1.5 billion a year earlier, but it fell $519 million from March 31. Kyndryl spent $310 million in operating activities, $49 million in investing, and $152 million in financing during the three months. Capex also rose 4.2% to $149 million, pushing free-cash-flow margin down 5.6 percentage points to negative 12.7%.
"Interest expense was 0.9% of revenue in the three months ended June 30, 2026 compared to 0.5% in the prior-year quarter, driven by an increase in debt due to cash borrowed under a revolving credit agreement."
Kyndryl, 10-Q, August 5, 2026
The balance sheet therefore carries two separate messages: more cash than a year ago, alongside a quarter in which operations consumed cash and interest expense took a larger share of revenue. Accounts receivable declined 2.3%, so the cash use is not accompanied by a larger reported receivables balance. The filing attributes the lower receivables balance over time largely to factoring tied to pre-spin contracts with extended payment terms.
This matters against Kyndryl's longer revenue path. Annual revenue declined from $17.0 billion in fiscal 2023 to $15.1 billion in fiscal 2025, then was essentially flat at $15.1 billion in fiscal 2026. The latest period reopens the question of whether the low-margin work removal is a finite reshaping of the business or part of a continuing contraction, while the cash outflow adds a separate operating test.
Kyndryl's next quarterly report will provide the next direct comparison for Principal Markets revenue and adjusted EBITDA, alongside operating cash flow and borrowing under the revolving credit agreement. The unresolved tension is that Kyndryl is shrinking some work even as the latest period shows weaker profit and heavier cash use.