According to CRN, Kyndryl reported fiscal Q2 2026 revenue of $3.72 billion, down 1.4% year-over-year, but the real story is in profitability. Adjusted pretax income grew more than two-and-a-half times compared to last year, with the company enjoying its fifth consecutive quarter of book-to-bill above one. CEO Martin Schroeter highlighted strong consulting momentum and hyperscaler alliance growth from $1.2 billion to $1.8 billion annually. The board approved a second $400 million share buyback authorization this year, reflecting confidence in cash flow generation and fiscal 2028 targets. Schroeter expects second-half revenue acceleration driven by better backlog position and divestiture impacts wrapping up.
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<h2 id="profit-over-revenue”>The profit story matters more
Here’s the thing about enterprise IT services – revenue numbers can be misleading. While Kyndryl’s top line dipped slightly, the company is clearly executing on its margin improvement strategy. They’re signing higher-yield contracts with better upfront content and more consulting work that burns through faster. Basically, they’re trading lower-margin legacy business for more profitable advisory and transformation work. And it’s working – that 2.5x pretax income growth isn’t something you achieve by accident.
Consulting leads the charge
Schroeter specifically called out Kyndryl Consult as having “good momentum” with acceleration expected in the second half. This isn’t surprising – every major IT services player is pushing consulting hard right now. But Kyndryl has an interesting angle: they’ve actually added capacity to meet demand, which suggests they’re seeing real pipeline strength rather than just hoping for growth. The consulting business tends to have higher margins than traditional managed services, so this shift could explain part of that dramatic profit improvement.
Turning VMware chaos into opportunity
Now here’s where it gets interesting. While many partners are struggling with Broadcom’s VMware changes, Kyndryl claims they’re actually benefiting. Schroeter positions them as “non-denominational” – since they don’t have their own cloud to push, they can be trusted advisors on private cloud architectures. That’s a smart play in today’s fragmented cloud market. Customers are getting increasingly wary of vendor lock-in, and Kyndryl’s neutrality could become a real competitive advantage. They’re basically saying “we’ll run your VMware workloads wherever makes sense for you” rather than trying to migrate everything to a specific cloud.
Where Kyndryl fits in the ecosystem
Looking at the broader landscape, Kyndryl seems to be carving out a unique position. They’re not trying to compete directly with hyperscalers, but rather partnering with them while focusing on the complex integration and management work that enterprises desperately need. The fact that they’re seeing “tailwinds” from supply chain rethinking and trade complexity suggests companies are turning to them for help navigating this messy digital transformation era. And honestly? That might be a smarter play than trying to build another cloud platform from scratch.
