Why Kyndryl Stock Crashed This Week
Key Points
Kyndryl's fiscal Q3 results wound up being weaker than Wall Street anticipated.
The company slashed its sales and free-cash-flow targets for the current fiscal year.
Kyndryl (NYSE: KD) stock plummeted over the last week of trading. The company's share price plunged 47.9% over the period. Meanwhile, the S&P 500 declined 1.4%, and the Nasdaq Composite declined 2.1%.
Kyndryl released its latest quarterly report this week, and it would be an understatement to say that investors were disappointed with the results. In addition to sales and earnings that came in below Wall Street's targets, the company also lowered its forward guidance.
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Kyndryl's fiscal Q3 results were a dud
On Feb. 9, Kyndryl published results for the third quarter of its 2026 fiscal year -- a period which ended Dec. 31. The business recorded non-GAAP (adjusted) earnings per share of $0.52 on sales of $3.86 billion. Meanwhile, the average analyst estimate had called for a per-share profit of $0.60 and sales of $3.91 billion.
While the company's Kyndryl Consult business grew sales 24% year over year in the quarter, it wasn't enough to stop overall revenue from falling short of expectations. Margins for the period also came in softer than anticipated.
Kyndryl's new full-year guidance was a shocker
In conjunction with its fiscal Q3 report, Kyndryl lowered its full-year guidance. The company now expects free cash flow for the fiscal year to be between $325 million and $375 million -- down from its previous forecast for free cash flow of roughly $550 million. Meanwhile, constant-currency sales are now projected to decline between 2% and 3% this year. Previously, the company had forecasted constant-currency growth of 1%.
Kyndryl's updated forecasts for the fiscal year suggest substantial performance deterioration for the business in the current quarter. While the company reiterated previous targets issued for the 2028 fiscal year, the steep drop-off in sales and free cash flow has caused investors to lose confidence.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kyndryl. The Motley Fool has a disclosure policy.