TLDR
- Kyndryl shares collapsed 55% to $10.59 Monday after announcing the exits of CFO David Wyshner, General Counsel Edward Sebold, and Global Controller Vineet Khurana
- The IT infrastructure company disclosed an SEC accounting investigation and identified material weaknesses in financial reporting controls
- Management slashed fiscal 2026 revenue outlook to a 2-3% decline versus prior 1% growth forecast and cut free cash flow guidance to $350 million from $550 million
- Guggenheim removed its price target and downgraded to Neutral while J.P. Morgan issued a double-downgrade to Underweight
- The stock recovered 5% Tuesday to $11.12 but remains down 58% year-to-date and 73% over 12 months
Kyndryl Holdings delivered a knockout punch to investors Monday. The stock crashed 55% to $10.59 as the company dropped multiple bombshells.
Three senior executives left their posts. CFO David Wyshner departed. General Counsel Edward Sebold exited. Global Controller Vineet Khurana stepped down to a lesser role as senior vice president of business operations.
The leadership shakeup came with an even bigger problem. Kyndryl revealed it was cooperating with SEC document requests about accounting practices. The company identified material weaknesses in internal financial controls.
Management promised a remediation plan but offered no timeline or details. Information will come in a delayed quarterly securities filing. Investors face weeks or months of uncertainty.
Wall Street Loses Confidence
Guggenheim analyst Jonathan Lee yanked his price target completely. He downgraded Kyndryl to Neutral from Buy. The firm said the announcements created more questions than answers.
J.P. Morgan went further with a rare double-downgrade. The bank slashed Kyndryl to Underweight from Overweight. Oppenheimer cut its rating to Perform from Outperform.
“We expect investors to continue questioning execution and credibility until management provides an update on material weaknesses,” Lee wrote in a research note.
The stock found buyers Tuesday, climbing 5% to $11.12. But the bounce hasn’t changed Wall Street’s view. Shares remain down 58% this year and 73% over the past year.
Financial Picture Crumbles
Kyndryl gutted its financial forecasts. The company now expects fiscal 2026 revenue to decline 2% to 3%. That’s a dramatic reversal from previous guidance calling for 1% growth.
Free cash flow projections suffered an even bigger blow. Management cut the forecast to $350 million from $550 million. That’s a 36% reduction in expected cash generation.
The revised outlook throws serious doubt on Kyndryl’s 2028 target of $1 billion in adjusted free cash flow. Lee said investors need to see credible management executing a turnaround before believing medium-term targets.
Third-quarter results missed expectations across key metrics. Revenue declined faster than Wall Street anticipated. Profit margins compressed. The IBM spinoff continues struggling to gain traction.
Uncertainty Dominates
The SEC accounting review creates an overhang that could last months. Kyndryl hasn’t provided a timeline for completing the assessment. Potential financial restatements remain on the table.
Management turnover adds another layer of complexity. New executives will need time to evaluate the business and implement changes. Any turnaround timeline just got extended.
Kyndryl’s business model faces structural headwinds. The client base consists primarily of legacy IT infrastructure contracts. These agreements produce steady revenue but limited growth opportunities.
Competition from cloud providers intensifies pressure. Many potential customers choose to build internal capabilities rather than outsource infrastructure management. Winning new business has proven difficult.
The company placed big bets on managed services and consulting. But execution hasn’t delivered expected results. Revenue growth remains elusive while costs stay elevated.
Analysts emphasize that words won’t restore credibility. Management needs to demonstrate concrete progress on fixing internal controls, stabilizing the leadership team, and hitting financial targets.
The delayed quarterly filing represents the next critical milestone. That document should provide specifics about control weaknesses and remediation steps. Until then, investors remain in the dark.
Guggenheim’s Lee made clear the path forward requires multiple things going right simultaneously. The company must fix accounting issues, install permanent leadership, and return to revenue growth. That’s a tall order given current circumstances.
