Kyndryl, a software firm that emerged from an IBM spinoff, has announced job cuts as part of a new cost-saving initiative. The company projects its annual pretax profit will fall below Wall Street's expectations, prompting a significant drop in its stock price.
In early trading, Kyndryl's shares fell over 12%. The company aims to restructure several low-margin contracts inherited from IBM to enhance profitability. This new plan is expected to reduce operating costs by approximately $400 million to $500 million by fiscal 2028.
As part of this restructuring, Kyndryl anticipates incurring around $200 million in charges, primarily for severance and employee benefits. The job cuts follow a series of management changes and a delayed filing of its quarterly report due to identified weaknesses in internal controls.
As of March 31, 2025, Kyndryl employed around 73,000 individuals, but the exact number of positions affected by the cuts has not been disclosed. The company forecasts adjusted pretax income for fiscal 2027 to be between $600 million and $700 million, which is below the analysts' average estimate of $672.7 million.
Despite these challenges, Kyndryl has experienced steady demand for IT services, as businesses continue to prioritize essential software and IT solutions amid ongoing economic uncertainties. This demand has provided some stability for Kyndryl's operations, as its services are critical for daily business functions and the integration of advanced technologies.
In its latest quarter, Kyndryl reported revenue of $3.77 billion, surpassing estimates of $3.75 billion. However, adjusted profits fell short, coming in at 18 cents per share compared to the expected 45 cents.
