Dive Brief:
- Kyndryl inched toward profitability in Q1 2024, cutting net losses to $141 million. The IT infrastructure services company, which IBM spun off in 2021, reported a $250 million deficit during the same period last year.
- While total revenue declined 2% year over year to $4.2 billion, the company’s technology consulting practice boomed, growing 20% and accounting for 14% of the company’s first-quarter revenue, CFO David Wyshner said during a Tuesday earnings call.
- “By delivering and accelerating customer business outcomes that are informed by our extensive operational experience, Kyndryl Consult will support our future revenue growth and margin expansion,” Chairman and CEO Martin Schroeter said during the call.
Dive Insight:
When it split from IBM, Kyndryl’s business was built around six global practices: cloud, applications, core enterprise, security, network and digital workspace.
Those pillars remain, with cloud now comprising one-third of the company’s business, Wyshner said. But, as enterprises grapple with complex hybrid IT ecosystems, technical debt, mainframe modernization and skills deficits, consulting is pushing Kyndryl further into customers’ tech stacks.
“We're in a situation where hybrid environments are going to continue to be a really important dynamic for large enterprises,” said Wyshner. “We see that portion of our business and particularly mainframe modernization, as being an important source of revenues and signings for us going forward.”
Like its former parent company, Kyndryl was partially insulated from the spending cooldown that flattened revenue growth in cloud and other IT services. IBM saw consulting division revenues increase 4.3% year over year, to $5 billion in Q2 2023, while its overall revenue growth stalled.
Larger consulting firms with broader portfolios that extend beyond the tech stack, weren’t so fortunate. Accenture’s nearly $9 billion consulting business contracted 4% year over year during its Q3 2023, for the three-month period ending May 31, while the company’s overall revenue grew by 3%.
Opportunities for growth in Kyndryl Consult, which launched less than a year ago, offset the impacts of inflation, rising interest rates and general economic uncertainty, according to Wyshner.
“I do think that the macro matters,” Schroeter said during the earnings call. “But the role we play in the world and our unique perspective is mission critical.”
AI remains an important segment for Kyndryl. The company deepened an existing alliance with Microsoft Wednesday, announcing a joint venture with the hyperscaler to develop enterprise-grade AI solutions.
“We view artificial intelligence as a multifaceted opportunity for us as we both apply AI in our operations and enable our customers to use AI in their business,” Schroeter said.
Kyndryl committed to training thousands of its employees in Microsoft AI technologies and launched an AI-readiness program within its consulting business to explore the risks and benefits of various use cases, the announcement said.
