What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-05-29 compared with 2025-05-30 · 137 added, 136 removed, 297 unchanged (48% of the section changed)

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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, 2024 and 2023 not covered in the “Segment Results” below, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (the “2024 Form 10-K”).

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”).

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

Year Ended March 31,

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GAAP, see “⸺Segment Results.”

In January 2022, the Company changed its fiscal year-end to March 31 from December 31.

The year-over-year comparison for the year ended March 31, 2023 and the results of operations for the twelve months ended March 31, 2022 were derived from our unaudited quarterly consolidated financial statements as previously reported.

(Dollars in millions)

Organization of Information

Kyndryl Holdings, Inc.

was formed as a wholly-owned subsidiary of IBM in September 2021 to hold the operations of the infrastructure services unit of IBM’s Global Technology Services segment.

On November 3, 2021, Kyndryl separated from IBM through a spin-off that was tax-free for U.S.

federal tax purposes.

Following the Separation, Kyndryl became an independent, publicly-traded company and the world’s leading IT infrastructure services provider.

Financial Performance Summary

Macro Dynamics

In fiscal year 2025, we saw continuing demand for information technology services, despite concerns about economic growth, geopolitical tensions and inflationary pressures.

Most economists, including the International Monetary Fund, expect positive global macroeconomic growth to continue in calendar year 2025.

Global markets have experienced increased volatility in recent months, driven by geopolitical developments, concerns over the imposition of import tariffs by the United States, reactions from other nations and proposed U.S.

government spending reductions.

Increased economic uncertainty may impact the level of global macroeconomic activity.

Fiscal 2026 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 declined 10 percent, Japan revenue increased 1 percent, Principal Markets revenue declined 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 and a $138 million after-tax gain from the sale of our SIS platform in Canada.

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.

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 unprofitable and low-margin components of its customer relationships.

United States revenue declined 9 percent, Japan revenue declined 6 percent, Principal Markets revenue declined 2 percent and Strategic Markets revenue decreased 7 percent, compared to the year ended March 31, 2023.

Net loss of $340 million improved by $1.0 billion versus the prior-year period driven by progress on our key initiatives to drive operating efficiencies, increased margins and reduced transaction-related costs tied to our Separation.

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

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(2) Represents net amounts not allocated to segments.

The Company made a minor change to its geographic reportable segments effective June 1, 2024 to reflect how the Company manages its operations and measures business performance, transitioning the reporting and management of its operations in Australia/New Zealand from the Principal Markets segment to the Strategic Markets segment.

All historical segment information has been recast to reflect this change.

(3) Effective June 1, 2024, the Company made a minor change to its geographic reportable segments to reflect how it manages its operations and measures business performance, transitioning the reporting and management of its operations in Australia/New Zealand from the Principal Markets segment to the Strategic Markets segment.

Historical fiscal 2024 segment information was recast to reflect this change in the 2025 Form 10-K.

We report our financial results in accordance with U.S.

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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 this measure for comparative purposes.

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.

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Adjusted EBITDA year-over-year change

For the year ended March 31, 2026, United States revenue of $3.8 billion decreased 2 percent compared to the year ended March 31, 2025, primarily reflecting the expiration of certain low-margin contracts entered into before the Spin-off.

Adjusted EBITDA increased $110 million from the prior year, primarily driven by progress on our key initiatives to drive operating efficiencies and lower sales, general and administrative expenses of $57 million attributable to the Company's compensation plans driven by current-year performance.

For the year ended March 31, 2025, United States revenue of $3.9 billion decreased 10 percent compared to the year ended March 31, 2024, reflecting the Company’s efforts to reduce certain low-margin revenues and the expiration of other low-margin contracts entered into before the Spin-off.

Adjusted EBITDA decreased $56 million from the prior year, primarily driven by lower revenue and the impact of the inclusion of workforce rebalancing charges in adjusted EBITDA in fiscal 2025.

For the year ended March 31, 2024, United States revenue of $4.3 billion decreased 9 percent compared to the year ended March 31, 2023, driven by the Company’s efforts to reduce certain low-margin revenues.

Adjusted EBITDA decreased $58 million from the prior year, primarily driven by an increase in software costs of $67 million resulting from an amendment of the contract with a software provider that re-allocated costs among our segments, partially offset by increased operating efficiencies and higher margins on recent signings.

Year Ended March 31,

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Adjusted EBITDA year-over-year change

For the year ended March 31, 2026, Japan revenue of $2.3 billion decreased 3 percent, and decreased 4 percent in constant currency, compared to the year ended March 31, 2025, driven by actions the Company has taken to reduce certain low-margin components of its customer relationships entered into before the Spin-off.

Adjusted EBITDA increased $96 million from the prior year, driven by progress on our key initiatives to drive operating efficiencies.

For the year ended March 31, 2025, Japan revenue of $2.4 billion increased 1 percent, and increased 6 percent in constant currency, compared to the year ended March 31, 2024, primarily driven by expanding the scope of services we provide to our customers.

Adjusted EBITDA increased $29 million from the prior year, primarily driven by progress on our key initiatives.

For the year ended March 31, 2024, Japan revenue of $2.3 billion decreased 6 percent compared to the year ended March 31, 2023 , driven primarily by an unfavorable currency exchange rate impact of six points.

Adjusted EBITDA decreased $46 million from the prior year, primarily driven by unfavorable currency movements that impacted both non-yen-denominated costs and the translation of earnings into U.S.

Adjusted EBITDA increased $29 million from the prior year, primarily driven by progress on our key initiatives to drive operating efficiencies.

Principal Markets

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Adjusted EBITDA year-over-year change

For the year ended March 31, 2025, Principal Markets revenue of $5.2 billion decreased 5 percent compared to the year ended March 31, 2024, driven by actions the Company has taken to reduce low-margin components of its

customer relationships.

Adjusted EBITDA increased $209 million from the prior year, primarily due to increased operating efficiencies and higher margins on recent signings, as well as a vendor credit.

For the year ended March 31, 2024, Principal Markets revenue of $5.5 billion decreased 1 percent compared to the year ended March 31, 2023, including a favorable currency exchange rate impact of three points.

The revenue decline was largely attributable to actions the Company has taken to reduce low-margin components of its customer relationships.

Adjusted EBITDA increased $354 million from the prior year, primarily due to increased operating efficiencies, higher margins on recent signings and a decrease in software costs of $86 million resulting from an amendment of the contract with a software provider that re-allocated costs among our segments.

For the year ended March 31, 2026, Principal Markets revenue of $5.4 billion increased 4 percent, and decreased 2 percent in constant currency, compared to the year ended March 31, 2025, reflecting the expiration of certain low-margin contracts entered into before the Spin-off.

Adjusted EBITDA decreased $52 million from the prior year, primarily due to a vendor credit of $65 million in the prior year, partially offset by progress on our key initiatives to drive operating efficiencies.

For the year ended March 31, 2025, Principal Markets revenue of $5.2 billion decreased 5 percent, and decreased 4 percent in constant currency compared to the year ended March 31, 2024, driven by actions the Company has taken to reduce low-margin components of its customer relationships.

Adjusted EBITDA increased $209 million from the prior year, primarily due to increased operating efficiencies and higher margins on recent signings, as well as a vendor credit of $65 million.

Strategic Markets

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Adjusted EBITDA year-over-year change

For the year ended March 31, 2026, Strategic Markets revenue of $3.6 billion was unchanged, and decreased 5 percent in constant currency, compared to the year ended March 31, 2025, primarily driven by actions the Company has taken to reduce certain low-margin components of its customer relationships entered into before the Spin-off.

EBITDA increased $16 million from the prior year, primarily due to progress on our key initiatives to drive operating efficiencies.

For the year ended March 31, 2025, Strategic Markets revenue of $3.6 billion decreased 8 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 an unfavorable currency exchange rate impact of three points.

Adjusted EBITDA decreased $36 million from the prior year, primarily driven by the impact of the inclusion of workforce rebalancing charges in adjusted EBITDA in fiscal 2025, partially offset by progress on our key initiatives.

For the year ended March 31, 2024, Strategic Markets revenue of $3.9 billion decreased 7 percent compared to the year ended March 31, 2023, including a favorable currency exchange rate impact of three points.

The revenue decline was largely attributable to actions the Company has taken to reduce low-margin components of its customer relationships.

Adjusted EBITDA increased $158 million from the prior year, primarily due to increased operating efficiencies and higher margins on recent signings, partially offset by an increase in software costs of $29 million resulting from an amendment of the contract with a software provider that re-allocated costs among our segments.

Corporate and Other

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Interest expense

Other expense

Income (loss) before income taxes

Other expense (income)

Income before income taxes

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Cost of services was 79.1% of revenue in the year ended March 31, 2025, compared to 82.2% in the year ended March 31, 2024, driven by lower depreciation expense, increased operating efficiencies, higher margins on recent signings, and a vendor credit.

Selling, general and administrative expenses were 17.2% of revenue in the year ended March 31, 2025, compared to 17.3% in the year ended March 31, 2024.

Transaction-related costs (benefits) were (0.8)% of revenue in the year ended March 31, 2025, primarily due to a $145 million pretax gain from the sale of the SIS platform in Canada, compared to transaction-related costs (benefits) of (0.3)% of revenue in the year ended March 31, 2024, which reflected an agreement that allowed us to collect previously reserved receivables from our former Parent.

Cost of services was 78.2% of revenue in the year ended March 31, 2026, compared to 79.1% in the year ended March 31, 2025, driven by progress on our key initiatives to drive operating efficiencies, including our Advanced Delivery initiative.

Selling, general and administrative expenses were 17.6% of revenue in the year ended March 31, 2026, compared to 17.2% in the year ended March 31, 2025, driven by increased expenses to support future growth.

Transaction-related costs (benefits) were 0.3% of revenue in the year ended March 31, 2026, compared to transaction-related costs (benefits) of (0.8)% of revenue in the year ended March 31, 2025, due to a reserve for an interim arbitration decision on a pre-spin matter in the year ended March 31, 2026, compared to a $145 million pretax gain from the sale of the SIS platform in the year ended March 31, 2025.

Interest expense was 0.6% of revenue in the year ended March 31, 2026 compared to 0.7% in the year ended March 31, 2025.

Other expense was 0.2% of revenue in the year ended March 31, 2025, compared to 0.3% in the year ended March 31, 2024, driven by currency-related hedging gains recorded this year.

Year Ended March 31,

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Cost of services was 82.2% of revenue in the year ended March 31, 2024, compared to 85.2% in the year ended March 31, 2023, driven by increased operating efficiencies, higher margins on recent signings and actions the Company has taken to reduce low-margin components of its customer relationships.

Selling, general and administrative expenses were 17.3% of revenue in the year ended March 31, 2024 compared to 17.1% in the year ended March 31, 2023, driven by lower revenue, partially offset by reduced expenses.

Workforce rebalancing charges were 0.9% of revenue in the year ended March 31, 2024 versus 0.4% of revenue in the prior-year period, due to increased workforce rebalancing actions taken in fiscal 2024.

Transaction-related costs (benefits) were (0.3)% of revenue in the year ended March 31, 2024 compared to 1.5% in the prior-year, driven by reduced rebranding and employee-retention costs and the favorable resolution of certain pre-Separation and Separation-related matters with our former Parent.

Interest expense was 0.8% of revenue in the year ended March 31, 2024 compared to 0.5% in the prior year due to higher interest rates in fiscal 2024.

Cost of services was 79.1% of revenue in the year ended March 31, 2025, compared to 82.2% in the year ended March 31, 2024, driven by lower depreciation expense of $180 million, a vendor credit of $65 million, and progress on our key initiatives to drive operating efficiencies.

Selling, general and administrative expenses were 17.2% of revenue in the year ended March 31, 2025, compared to 17.3% in the year ended March 31, 2024.

Interest expense was 0.7% of revenue in the year ended March 31, 2025 compared to 0.8% in the year ended March 31, 2024.

Other expense was 0.2% of revenue in the year ended March 31, 2025, compared to 0.3% in the year ended March 31, 2024, driven by currency-related hedging gains recorded in the year ended March 31, 2025.

Transaction-Related Costs

The Company classifies certain expenses and benefits related to the Separation, acquisitions and divestitures as Transaction-related costs (benefits) in the Consolidated Income Statement.

Transaction-related costs include gains or losses, employee retention expenses, information technology costs, marketing expenses to establish the Kyndryl brand,

legal, accounting, consulting and other professional service costs, costs and benefits resulting from settlements with our former Parent associated with pre-Separation and Separation-related matters, and other costs related to contract and supplier novation and integration, associated with acquisitions, divestitures or the Separation.

Transaction-related costs include gains or losses, employee retention expenses, information technology costs, marketing expenses to establish the Kyndryl brand, legal, accounting, consulting and other professional service costs, costs and benefits resulting from settlements with our former Parent associated with pre-Separation and Separation-related matters, and other costs related to contract and supplier novation and integration, associated with acquisitions, divestitures or the Separation.

Workforce Rebalancing and Site-Rationalization Charges

Fiscal 2025 Program

During the year ended March 31, 2025, management initiated actions to reduce the Company’s overall cost structure and increase our operating efficiency.

These actions resulted in workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets, and charges related to lease terminations.

During the year ended March 31, 2025, the Company recorded $114 million in workforce rebalancing charges and $48 million in charges related to ceasing to use leased and owned fixed assets, including lease termination charges.

Total cash outlays for this program are expected to be approximately $150 million, of which approximately $110 million has been paid through March 31, 2025, and the remainder is expected to be paid thereafter.

Management expects that these workforce rebalancing and site-rationalization activities will reduce payroll costs, rent expenses and depreciation of property and equipment by more than $200 million in fiscal year 2026.

On May 5, 2026, the Company approved, as part of its ongoing efforts to further streamline operations, workforce rebalancing actions to optimize and support the Company’s financial and operational efficiency in fiscal year 2027.

As a result of these actions, the Company expects to incur workforce rebalancing charges of approximately $200 million, primarily consisting of future cash expenditures for severance and related benefits.

Management expects that these workforce rebalancing activities, once completed, will reduce annual payroll costs and related expenses and result in savings of approximately $400 to $500 million in fiscal year 2028.

There can be no guarantee that we will achieve our expected cost savings.

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Fiscal 2026 Program

During the year ended March 31, 2026, management initiated actions to reduce the Company’s overall cost structure and enhance operating efficiency.

As a result of these actions, the Company recorded workforce rebalancing charges of $60 million for the year ended March 31, 2026.

Total cash outlays for this program are expected to be approximately $60 million, of which approximately $56 million has been paid through March 31, 2026, and the remainder is expected to be paid thereafter.

Management expects that these workforce rebalancing activities will reduce annual payroll costs and related expenses by more than $100 million in fiscal year 2027.

There can be no guarantee that we will achieve our expected cost savings.

Fiscal 2025 Program

During the year ended March 31, 2025, management implemented actions to reduce the Company’s overall cost structure and increase operating efficiency.

During the year ended March 31, 2025, the Company recorded $114 million in workforce rebalancing charges and $48 million in charges related to ceasing to use leased and owned fixed assets.

Total cash outlays for this program are expected to be approximately $150 million, of which approximately $142 million has been paid through March 31, 2026, and the remainder is expected to be paid thereafter.

Management estimates that these workforce rebalancing and site-rationalization activities reduced payroll costs, rent expenses and depreciation of property and equipment by more than $250 million in fiscal year 2026.

Fiscal 2024 Program

During the year ended March 31, 2023, management initiated certain actions to reduce the Company’s overall cost structure and increase our operating efficiency, which continued through the year ended March 31, 2024.

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Effective tax rate

In the year ended March 31, 2025, we recorded income tax expense of $184 million.

In the years ended March 31, 2024 and 2023, we recorded income tax expense of $172 million and $524 million, respectively, on pretax losses,

which resulted in negative effective tax rates.

Our income tax expense for the year ended March 31, 2025, was primarily related to taxes on foreign operations and uncertain tax positions.

Our income tax expense for the year ended March 31, 2024 was primarily related to taxes on foreign operations and uncertain tax positions.

Our income tax expense for the year ended March 31, 2023 was primarily related to the increases in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized, taxes on foreign operations and uncertain tax positions.

The effective tax rate for the year ended March 31, 2025 was higher compared to the year ended March 31, 2024, primarily due to the Company’s pretax income in fiscal year 2025, compared to a pretax loss in 2024.

The effective tax rate for the year ended March 31, 2024 was lower (more negative) compared to the year ended March 31, 2023 primarily due to the Company’s pretax loss being significantly lower in fiscal year 2024.

In the year ended March 31, 2026, we recorded income tax expense of $215 million, and in the year ended March 31, 2025, we recorded income tax expense of $184 million.

In the year ended March 31, 2024, we recorded income tax expense of $172 million on a pretax loss, which resulted in a negative effective tax rate.

Our income tax expense for the years ended March 31, 2026, 2025 and 2024 was primarily related to taxes on foreign operations and uncertain tax positions.

The effective tax rate for the year ended March 31, 2026 was higher compared to the year ended March 31, 2025, primarily due to non-recurring, non-cash tax accruals from the refinement of certain tax positions recorded in the fourth quarter of fiscal 2026, and the jurisdictional mix of our earnings.

The effective tax rate for the year ended March 31, 2025 was higher compared to the year ended March 31, 2024, primarily due to the Company’s pretax income in

fiscal year 2025, compared to a pretax loss in 2024.

For more information, see Note 5 – Taxes in the accompanying Consolidated Financial Statements.

Financial Position

Total assets of $10.5 billion at March 31, 2025 decreased by $138 million (and decreased by $52 million adjusted for currency) from March 31, 2024, primarily driven by:

a decrease of $254 million in accounts receivable primarily due to lower past-due receivables;

a reduction in operating right-of-use assets, net, of $133 million due to amortization outpacing additions;

and a decrease in property and equipment, net, of $104 million due to depreciation outpacing net additions;

partially offset by an increase in cash and cash equivalents of $234 million mainly due to our net income in the period;

and an increase in other non-current assets of $95 million due to an increase in long-term prepaid assets.

Total liabilities of $9.1 billion at March 31, 2025 decreased by $347 million (and decreased by $305 million adjusted for currency) from March 31, 2024, primarily as a result of:

a decrease in operating lease liabilities of $121 million due to a reduction in right-of-use assets;

a decrease in long-term debt of $70 million due to lower finance lease obligations;

a decrease in accounts payable of $57 million due to lower costs;

and a decrease in accrued contract costs of $51 million due to lower volumes.

Total equity of $1.3 billion at March 31, 2025 increased by $209 million from March 31, 2024, principally due to our net income in the period, partially offset by $94 million of share repurchases under our Share Repurchase Program.

Financial Position Dynamics

Total assets of $12.6 billion at March 31, 2026 increased by $2.1 billion (and increased by $1.9 billion adjusted for currency) from March 31, 2025, primarily driven by an increase in deferred costs of $997 million mainly due to an extended and amended multi-year, third-party software agreement and an increase in cash and cash equivalents of $837 million mainly due to $1.0 billion of cash borrowed under a revolving credit agreement, partially offset by a decrease of $304 million due to share repurchases.

Total liabilities of $11.3 billion at March 31, 2026 increased by $2.1 billion (and increased by $2.0 billion adjusted for currency) from March 31, 2025, primarily as a result of an increase in debt of $917 million due to cash borrowed under a revolving credit agreement and an increase in other liabilities of $1.2 billion driven by the extended and amended multi-year, third-party software agreement.

Total equity of $1.3 billion at March 31, 2026 decreased by $39 million from March 31, 2025, principally due to $304 million of share repurchases under our Share Repurchase Program and $94 million of shares repurchased to settle tax withholdings related to the vesting of stock-based awards, partially offset by our earnings of $198 million and other comprehensive income of $86 million in the year, as well as activity related to employee stock plans of $70 million.

Overall pension funded status as of March 31, 2026 was 80% of estimated pension benefit obligation, an increase from 77% at March 31, 2025.

Among our funded pension plans, our funded status as of March 31, 2026 was 110%, an increase from 103% at March 31, 2025.

Liquidity and Capital Resources

We believe that our existing cash and cash equivalents and our revolving credit facility will be sufficient to meet our anticipated operating cash needs, and to fund our planned capital investments, debt maturities and stock repurchases for at least the next twelve months.

As of March 31, 2026, we had cash and cash equivalents of approximately $2.6 billion and approximately $2.2 billion in available borrowing capacity under our revolving credit facility.

Our principal ongoing cash requirements include operating expenses, income taxes, debt service payments and capital expenditures, and may include discretionary debt repayments, stock repurchases and business acquisitions.

Our primary sources of liquidity include available cash and cash equivalents, cash from operations and proceeds obtained from long-term debt.

Additionally, we have access to incremental liquidity, if needed, through borrowings under our revolving credit facility to manage our working capital and investment needs.

As part of our ongoing cash and commercial management strategy with customers and suppliers and as previously disclosed, our standard practice since the time of our spin-off from IBM is to actively manage our working capital, including accounts receivables and accounts payables.

This includes optimizing payment terms and conditions, accelerating certain cash receipts (including through the sale of accounts receivables to third-party financial institutions as described under “Transfers of Financial Assets” below and in Note 1 to the consolidated financial statements) and delaying certain cash payments (including deferring vendor payments quarter to quarter, in certain cases beyond vendor payment terms), and undertaking other discretionary cash and working capital management initiatives.

The magnitude of these practices (including deferrals) varies from period to period.

The effects of these practices, including any impacts on our cash flows, have been and are reflected in our accounts payable, accounts receivable and operating cash flows, which are accounted for in accordance with U.S.

GAAP, the material drivers of which are quantified below under “Cash Flow.” Our working capital and cash flows have also reflected the impact of accrued contract costs in certain periods due to the timing of vendor billings.

We may, from time to time, revise or adapt our cash and working capital management practices as we deem appropriate.

Furthermore, our cash provided from operating activities is somewhat impacted by seasonality.

Working capital needs are generally highest in our first quarter due to annual and biannual payments, such as for pre-paid software subscriptions and incentive payments.

On a continuing basis, we consider various transactions to increase stockholder value and enhance our business results, including acquisitions and divestitures, stock repurchases, and productivity and other efficiency initiatives.

These transactions may result in future cash proceeds or payments.

Our cash flows from operating, investing and financing activities are summarized in the table below.

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Net change in cash, cash equivalents and restricted cash

Net cash provided by operating activities was $942 million for the year ended March 31, 2025, compared to net cash provided by operating activities of $454 million for the year ended March 31, 2024, mainly due to higher earnings.

Net cash used in investing activities was $404 million for the year ended March 31, 2025, compared to a net cash use of $553 million for the year ended March 31, 2024, due to the sale of our SIS platform in Canada partially offset by our acquisition of Skytap.

Net cash used in financing activities totaled $286 million for the year ended March 31, 2025, compared to net cash used by financing activities of $170 million for the year ended March 31, 2024, mainly due to share repurchases of $94 million under the Company’s share repurchase program.

Liquidity and Capital Resources

We believe that our existing cash and cash equivalents and our revolving credit agreement will be sufficient to meet our anticipated cash needs for at least the next twelve months.

Net cash provided by operating activities was $948 million in the year ended March 31, 2026, compared to $942 million in the year ended March 31, 2025, due to the year-over-year increase in net income of $214 million excluding the net gain/loss on asset sales and other, the cash flow effect of which is included in net cash used in investing activities.

Receivables and deferred income partially offset the increase:

current accounts receivable was lower by $200 million driven by the timing of collections in the prior year, and lease and other receivables was higher by $207 million driven by current-year lease transactions;

and deferred income was higher by $195 million due to customer contract terms that enabled higher billings in the current year, as well as amortization outpacing new deferrals in the prior year.

In addition, the decline in accounts payable of $93 million in the current period includes the impact of deferred vendor payments, which largely coincide with delayed receipts from customers.

Net cash used in investing activities was $561 million in the year ended March 31, 2026, compared to a net cash use of $404 million in the year ended March 31, 2025, due to cash provided by the sale of the SIS platform in the year ended March 31, 2025.

Net cash provided by financing activities totaled $457 million in the year ended March 31, 2026, compared to net cash used by financing activities of $286 million in the year ended March 31, 2025, mainly due to $1.0 billion of cash borrowed under our revolving credit agreement partially offset by share repurchases of $304 million under the Company’s Share Repurchase Program.

Senior Unsecured Notes

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In February 2024, we completed a registered offering of $500 million in aggregate principal amount of 6.35% senior unsecured notes due 2034 (the “2034 Notes”).

We received proceeds of $494 million, net of debt issuance costs and discounts.

We received proceeds of $49 4 million, net of debt issuance costs

and discounts.

The 2034 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness.

The Initial Notes and the 2034 Notes are subject to customary affirmative covenants, negative covenants and events of default for financings of this type and are redeemable at our option in a customary manner.

We have outstanding $700 million of fixed-rate notes that mature in October 2026.

We intend to refinance these notes at a future date, subject to market conditions.

Revolving Credit Agreement

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The total facility fees recorded by the Company for the Revolving Credit Agreement were $5 million and $5 million for the years ended March 31, 2026 and 2025, respectively.

As of March 31, 2025, there has been no drawdown on the Revolving Credit Agreement.

In February 2026, the Company borrowed $1 billion under the Revolving Credit Agreement, bearing an interest rate of 4.97%.

The borrowing matures in August 2026 and may be refinanced utilizing the facility.

The Company had approximately $2.2 billion of additional borrowing capacity remaining at March 31, 2026.

Proceeds are intended to be used for working capital and other general corporate purposes, which may include repayment of indebtedness and acquisitions.

The Revolving Credit Agreement includes certain customary mandatory prepayment provisions.

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Transfers of Financial Assets

The Company has entered into arrangements with third-party financial institutions to sell certain financial assets (primarily trade receivables) without recourse.

The Company has entered into arrangements with third-party financial institutions to sell certain financial assets (primarily accounts receivables) without recourse.

The Company has determined these are true sales.

The carrying value of the financial asset sold is derecognized, and a net gain or loss on the sale is recognized, at the time of the transfer.

The first agreement, which was executed in November 2021 and subsequently amended, enabled us to sell certain of our trade receivables to the counterparty.

The first agreement, which was executed in November 2021 and subsequently amended, enabled us to sell certain of our accounts receivables to the counterparty.

The initial term of this agreement was 18 months, and the agreement automatically resets to a term of 18 months after every six months, unless either party elects not to extend.

This agreement was further amended during the quarter ended September 30, 2024 to reduce the committed facility limit from $1 billion to $600 million and to add an incremental uncommitted facility limit of $200 million that is subject to the counterparty’s sole discretion to purchase such incremental amounts.

The second agreement was executed in June 2022 with a separate third-party financial institution and renews automatically on its anniversary date, unless either party elects not to extend.

At this time, the agreement will expire in April 2027.

We have also entered into additional agreements with a separate third-party financial institution that enable us to sell receivables.

These agreements were first executed in June 2022 and subsequently amended to renew automatically every 18 months, unless either party elects not to extend.

These facilities are committed for up to approximately $210 million as of March 31, 2026.

In aggregate, we have committed facilities of up to approximately $810 million as of March 31, 2026.

The net proceeds from these arrangements are reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows.

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The fees associated with the transfers of receivables were $18 million for the year ended March 31, 2026 and $38 million for the year ended March 31, 2025.

The year-to-year decline in the gross proceeds from sales of receivables was primarily due to a higher volume of intra-period factoring transactions in the prior period.

Of the receivables sold and derecognized from the Consolidated Balance Sheet, $0.9 billion, $1.0 billion and $1.1 billion remained uncollected from customers at March 31, 2026, 2025 and 2024, respectively.

Overall, the declining balances of sold receivables have been primarily driven by factoring of receivables from pre-spin customer contracts that gave certain customers extended payment terms.

As we have transitioned to new signings, including with existing customers, fewer customers have used extended payment terms, which has caused these balances in the aggregate to continue to decline.

Supplier Financing Program

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The Company does not provide secured legal assets or other forms of guarantees under the arrangements.

The Company is not a party to the arrangement between its suppliers and the financial institution.

The Company or the financial institution may terminate the agreement upon at least 180 days’ notice.

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Share Repurchase Program

In November 2024, the Company’s Board of Directors authorized a share repurchase program of up to $300 million of the Company’s common stock.

In November 2024, the Company’s Board of Directors authorized a share repurchase program of up to $300 million of the Company’s common stock, and in November 2025, the Company announced that the Board of Directors authorized an additional $400 million of repurchase capacity under this program.

Under the Share Repurchase Program, the Company may repurchase shares of its common stock from time to time in open market transactions and may also repurchase shares in accelerated share buyback programs, tender offers, privately negotiated transactions or by other means.

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The program does not have a set expiration date and may be suspended, modified or discontinued at any time without prior notice.

During the year ended March 31, 2025, the Company repurchased 2.6 million shares of its common stock at an aggregate cost of $94 million under the Share Repurchase Program.

As of March 31, 2025, $206 million remained of our $300 million Share Repurchase Program authorization.

During the years ended March 31, 2026 and March 31, 2025, the Company repurchased 11.6 million and 2.6 million shares of its common stock, respectively, at an aggregate cost of $304 million and $94 million under the Share Repurchase Program, respectively.

As of March 31, 2026, approximately $302 million of capacity remained available under the Share Repurchase Program.

Off-Balance Sheet Arrangements and Contractual Obligations

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If the Company is unable to satisfy, reduce or amend its contractual commitments, it will record the future charges for any payments related to excess commitments as cost of services.

At March 31, 2025, we had short-term (April 2025 through March 2026), mid-term (April 2026 through March 2028) and long-term (April 2028 onward) purchase commitments in the amount of $0.2 billion, $0.6 billion and $0.1 b illion, respectively.

At March 31, 2026, we had short-term (April 2026 through March 2027), mid-term (April 2027 through March 2029) and

long-term (April 2029 onward) purchase commitments in the amount of $0.2 billion, $0.4 billion and $0.3 billion, respectively .

Other Information

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Total signings

Signings increased $5.7 billion, or 46%, in the year ended March 31, 2025 compared to the year ended March 31, 2024, driven by growth in each of our four operating segments.

The Company’s global signings growth spanned a broad range of industries and included a record 55 contracts valued in excess of $50 million.

Signings increased by $332 million, or 3%, in the year ended March 31, 2024 compared to the year ended March 31, 2023.

Signings decreased $4.7 billion, or 26%, in the year ended March 31, 2026 compared to the Company’s strong signings performance during the year ended March 31, 2025, reflecting a record 55 contracts valued in excess of $50 million and a $1.8 billion signing, the largest signing in Kyndryl’s history as an independent company.

Signings performance in the year ended March 31, 2026 was unfavorably impacted by lengthening sales cycles and evolving content from the Company’s former parent in the Company’s customer engagements.

Signings increased $5.7 billion, or 46%, in the year ended March 31, 2025 compared to the year ended March 31, 2024, driven by growth in each of our four operating segments and spanning a broad range of industries.

Management uses signings as a tool to monitor the performance of the business including the business’ ability to attract new customers and sell additional scope into our existing customer base.

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Revenue Recognition

Application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates.

Application of U.S.

GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates.

Specifically, complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting, including whether promised goods and services specified in an arrangement are separate performance obligations.

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Other significant judgments include determining whether we are acting as the principal in a transaction and whether separate contracts should be combined and considered part of one arrangement.

Revenue recognition is also impacted by our ability to determine when a contract is probable of collection and to estimate variable consideration, including, for example, rebates, price concessions, service-level penalties and performance bonuses.

Revenue recognition is also impacted by our ability to determine when a contract is probable of collection and when to estimate variable consideration, including, for example, rebates, price concessions, service-level penalties and performance bonuses.

We consider various factors when making these judgments, including a review of specific transactions, historical experience and market and economic conditions.

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For other types of services contracts, any losses are recorded as incurred.

Key factors reviewed to estimate the future costs to complete each contract are future labor costs, product costs and expected productivity efficiencies.

Key factors reviewed to estimate the future costs to complete each contract include future labor costs, product costs and expected productivity efficiencies.

Capitalization of Contract Costs

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The differences between the actual return on plan assets and the expected long-term return on plan assets are recognized over five years in the expected return on plan assets line in net periodic benefit cost and also as a component of actuarial (gains)/losses, which are recognized over the service lives or life expectancy of the participants, depending on the plan, provided such amounts exceed thresholds which are based upon the benefit obligation or the value of plan assets, as provided by accounting standards.

To the extent the outlook for long-term returns changes such that management changes its expected long-term return on plan assets assumption, a 25-basis-point increase or decrease in the expected long-term return on plan assets assumption would not have a material estimated decrease or increase on the following year’s pretax net periodic benefit cost (based upon plan assets at March 31, 2025 and expected contributions and benefit payments for fiscal 2026).

assumption would not have a material estimated decrease or increase on the following year’s pretax net periodic benefit cost (based upon plan assets at March 31, 2026 and expected contributions and benefit payments for fiscal 2027).

We may voluntarily make contributions or be required, by law, to make contributions to our pension plans.

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Our income tax provisions are calculated based on Kyndryl’s operating footprint, as well as our tax return elections and assertions.

Liabilities related to unrecognized tax benefits for which the Company is liable are reported within the Consolidated Balance Sheet based upon tax authorities’ ability to assert the Company may be the primary obligor for historical taxes, among other factors.

Liabilities related to unrecognized tax benefits for which the Company is liable are reported within the Consolidated Balance Sheet based upon management’s estimates and judgments regarding the resolution of tax positions, including tax authorities’ ability to assert the Company as the primary obligor for historical taxes, including those arising from pre‑spin or transitional periods, among other factors.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets.

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These revisions in the estimates of the potential liabilities could have a material impact on our results of operations and financial position.

Refer to Note 14 – Commitments and Contingencies in the consolidated financial statements in this report for additional information.

Change in Accounting Estimate

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Based on the carrying amount of information technology equipment included in property and equipment, net as of March 31, 2024, the effect of this change in estimate was a reduction in depreciation expense and an improvement of income before income taxes of approximately $180 million, or $0.80 before income taxes per basic share and $0.77 before income taxes per diluted share, for the year ended March 31, 2025.

Cautionary Note Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 .

All statements other than statements of historical fact included in this report, including statements concerning the Company’s plans, objectives, goals, beliefs, business strategies, future events, business condition, results of operations, financial position, business outlook and business trends and other non-historical statements in this report are forward-looking statements.

Such forward-looking statements often contain words such as “aim,” “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “objectives,” “opportunity,” “plan,” “position,” “predict,” “project,” “should,” “seek,” “target,” “will,” “would,” and other similar words or expressions or the negative thereof or other variations thereon.

Forward-looking statements are based on the Company’s current assumptions and beliefs regarding future business and financial performance.

The Company’s actual business, financial condition or results of operations may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties which include, among others:

● failure to attract new customers, retain existing customers or sell additional services to customers;

● failure to meet growth and productivity objectives and maintain our capital allocation strategy;

● competition;

● impacts of relationships with critical suppliers and partners;

● failure to address and adapt to technological developments and trends;

● inability to attract and retain key personnel and other skilled employees;

● impact of economic, geopolitical, public health and other conditions;

● damage to the Company’s reputation;

● inability to accurately estimate the cost of services and the timeline for completion of contracts;

● service delivery issues;

● the Company’s ability to successfully manage acquisitions and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities and higher debt levels;

● the impact of our business with foreign, state and local government customers;

● failure of the Company’s intellectual property rights to prevent competitive offerings and the failure of the Company to obtain, retain and extend necessary licenses;

● the impairment of our goodwill or long-lived assets;

● risks relating to cybersecurity, data governance and privacy;

● risks relating to non-compliance with legal and regulatory requirements;

● adverse effects from tax matters and environmental matters;

● legal proceedings and investigatory risks and potential indemnification obligations;

● impact of changes in market liquidity conditions and customer credit risk on receivables;

● the Company’s pension plans;

● the impact of currency fluctuations;

● risks related to the Company’s common stock and the securities market .

Additional risks and uncertainties include, among others, those risks and uncertainties described in the “Risk Factors” section of this report, as such factors may be updated from time to time in the Company’s subsequent filings with the SEC.

Any forward-looking statement in this report speaks only as of the date on which it is made.

Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis