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Performance is increasingly driven by higher-margin post-spin signings, with 12-month signings reaching $14.2 billion and total signings exceeding revenue for the last six months.

The Kyndryl Consult segment grew 14% over the last 12 months, reflecting broad enterprise demand for designing and scaling Agentic AI across business workflows and modernizing complex hybrid IT environments.

Hyperscaler-related revenue streams grew 48% year-over-year, partially offsetting headwinds from legacy focus accounts and shifts in how customers procure IBM hardware and software.

Management is embedding AI-powered automation via Kyndryl Bridge to drive productivity, which has generated approximately $1 billion in cumulative savings since the company's spin-off.

Strategic positioning is centered on the 'run and transform' approach, helping customers manage mission-critical infrastructure while simultaneously deploying next-generation technologies.

The company is executing workforce rebalancing to address lower-than-normal voluntary attrition and streamline SG&A costs, with savings expected to materialize in the second half of the fiscal year.

Management reaffirmed fiscal 2027 adjusted pretax income guidance of $600 million to $700 million, assuming revenue remains flat to down 2% in constant currency.

Fiscal 2028 targets include delivering more than $1.2 billion in adjusted pretax income and $1 billion in free cash flow, achievable on low single-digit constant currency revenue growth.

Workforce rebalancing actions are projected to yield annualized savings between $400 million and $500 million starting in fiscal 2028.

Revenue trends are expected to improve each quarter, with second-half fiscal 2027 performance projected to be stronger than the first half based on recent signing momentum.

Guidance assumes continued top-line headwinds as customers increasingly procure certain IBM hardware and software directly from IBM rather than through Kyndryl.

Incurred $152 million in workforce rebalancing charges during Q1, which had a more than 4-point negative impact on adjusted pretax income margin.

The evolving IBM relationship resulted in a 3-point adverse impact on constant currency revenue performance, though management notes this has limited impact on earnings.

Free cash flow for Q1 was a $401 million outflow, attributed to seasonal working capital timing and higher payments for multiyear renewals and software subscriptions.

Net leverage remains low at 0.8x, with the company repurchasing 5 million shares for $64 million during the quarter as part of its capital allocation strategy.

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Management confirmed Consult is on track with high single to low-double digit growth expectations, supported by 50% signings growth in Q1.

July signings remained strong, providing confidence in the full-year revenue trajectory despite a tough year-over-year comparison expected in Q2.

Weakness in Europe (down 8% constant currency) was attributed to complex sovereign data discussions and deliberate decision-making cycles.

Management clarified that these trends were already contemplated in the annual guidance and do not signal a fundamental shift in deal cycle duration.

Kyndryl is using 'Agentic AI' internally with 1,800 agents to automate infrastructure tasks, allowing for the redeployment of tens of thousands of employees into higher-value roles.

The business model focuses on outcome-based payments, where automation improvements allow Kyndryl to retain a portion of the generated efficiency savings.

New logos and scope expansions now represent 30% of large deal value, up from 15% in fiscal 2025, driven by the proprietary Kyndryl Agentic Framework and Bridge platform.

Pricing discipline remains a priority, with signings maintaining projected gross margins in the mid-20s and pretax margins in the high single digits.