Kyndryl stock drops due to accounting review and leadership changes

Kyndryl Holdings Inc. experienced a steep decline in its shares during early trading today due to several significant developments within the company. The New York-based IT infrastructure services provider, which was previously a part of IBM Corp. before spinning off in 2021, revealed that it will delay filing its Form 10-Q for the quarter ending on December 31. This delay is a result of an ongoing review by the audit committee regarding cash management practices, related disclosures, and the effectiveness of internal financial controls. Additionally, the U.S. Securities and Exchange Commission has made voluntary document requests to the company, prompting further scrutiny.

The review conducted by Kyndryl disclosed several material weaknesses in internal controls that span multiple periods, including the fiscal year that ended in March 2025 and the first three quarters of fiscal 2026. Consequently, investors are advised not to rely on previous assessments of internal controls or opinions issued by the auditing firm PricewaterhouseCoopers International Ltd. for fiscal 2025. Despite these issues, Kyndryl stated that the review is not expected to lead to restatements or significant impacts on financial statements.

In addition to these financial concerns, Kyndryl experienced a leadership shakeup with the departure of Chief Financial Officer David Wyshner and General Counsel Edward Sebold. To fill these vacancies, Harsh Chugh, who previously served as Kyndryl’s global head of practices, corporate development, and administration, was appointed as the interim CFO, while former Assistant General Counsel Mark Ringes was named interim general counsel. The company refrained from commenting on whether these executive changes were related to the ongoing financial review.

Besides the departure of key executives, Kyndryl also revised its fiscal outlook for 2026, now expecting a decline in constant-currency revenue of 2-3% compared to its previous forecast of 1% growth. The company also reduced its adjusted pretax income guidance and free cash flow expectations significantly.

CEO Martin Schroeter attributed the weakened outlook to various factors, including longer sales cycles, slow conversion of consulting investments into revenue, and shifts in customer consumption patterns due to the partnership with IBM. Despite these challenges, Schroeter affirmed the company’s confidence in its long-term strategy and reiterated its fiscal 2028 targets. Kyndryl continues to invest in its operating platform, automation, AI capabilities, and private cloud services while working to realign its cost structure.

Following these announcements, analysts have downgraded Kyndryl’s investment rating and adjusted price targets due to the uncertainty surrounding the company’s financial health and leadership changes. Despite the near-term turbulence, Kyndryl is focused on addressing internal control weaknesses, stabilizing its financial performance, and moving forward with its long-term strategic initiatives.