Guggenheim has downgraded Kyndryl Holdings Inc. (NYSE: KD) from Buy to Neutral and scrapped a previous $28 price target, highlighting a cluster of concerns the firm says cloud the company’s near-term visibility. The analyst decision follows a string of unexpected departures from Kyndryl’s senior ranks and a set of operating and disclosure developments that the research team said undermine investor confidence.
At the center of Guggenheim’s downgrade are recent exits among top executives - including the company’s Chief Financial Officer, General Counsel and Controller - steps the research firm said increase uncertainty around the company’s leadership and execution. Those personnel changes come on the heels of Kyndryl’s fiscal third-quarter 2026 results, which Guggenheim described as falling short of expectations, and a subsequent outlook revision the firm characterized as more negative than investors had anticipated.
Guggenheim also pointed to Kyndryl’s disclosure of material weaknesses in its internal controls over financial reporting. While the company indicated it does not expect any financial statement restatements, the disclosure itself raises questions about the reliability of controls and the timeline for remediation. The research firm said these unresolved control issues, combined with the management turnover, means investors will likely remain skeptical until there is clearer communication and concrete remediation from the company.
That skepticism is playing out in the market. Kyndryl’s share price has fallen sharply over the past year, recently trading near $10.59 - more than a 74% decline year-over-year and only about 5% above a 52-week low of $10.10. The drop accelerated after the company announced a delayed filing for its December quarter report, citing identified material weaknesses in internal control over financial reporting affecting the fiscal year ended March 2025 and the first two quarters of fiscal 2026.
Operationally, Kyndryl’s reported third-quarter 2026 earnings also disappointed. The company posted earnings per share of $0.52, missing the consensus forecast of $0.67, and reported revenue of $3.9 billion, narrowly below the expected $3.94 billion. The gap between reported results and expectations, together with the filing delay, contributed to a substantial decline in the stock price following the announcements.
Not all analysts moved in the same direction. Oppenheimer downgraded the stock from Outperform to Perform, flagging extended sales cycles and weakness in the business outlook - specifically calling out the Kyndryl Consult division. Both the Guggenheim and Oppenheimer notes emphasize a central question for the company: whether it can sustain organic top-line growth amid a more difficult sales environment.
Guggenheim did acknowledge the possibility of an operational recovery if profitability improves as post-spin contracts are implemented. However, the firm said such potential does not eliminate current credibility and execution concerns until management offers updates on remediation of material weaknesses and provides clearer evidence on the trajectory toward fiscal 2028 targets.
Separately, a research analysis referenced in market coverage suggests the stock may be undervalued at current levels and assigns a "GOOD" overall financial health rating, while noting gross profit margins remain weak at 21.89%. The analysis and an associated research report are available to subscribers seeking deeper detail on the company’s financial profile and the issues noted by analysts.
Key points
- Guggenheim downgraded Kyndryl from Buy to Neutral and removed a $28 price target, citing leadership exits, missed Q3 results, a worse-than-expected outlook revision and disclosed material weaknesses in financial controls.
- Kyndryl reported Q3 2026 EPS of $0.52 versus the $0.67 consensus and revenue of $3.9 billion versus $3.94 billion expected; a delayed filing tied to control weaknesses followed.
- Oppenheimer lowered its rating from Outperform to Perform, highlighting extended sales cycles and pressure in the Kyndryl Consult division; broader implications affect IT services and enterprise technology spending.
Risks and uncertainties
- Unresolved material weaknesses in internal controls over financial reporting may prolong investor concern and regulatory scrutiny - impacting the company’s financial sector and corporate governance perceptions.
- Continued senior management turnover could disrupt execution on contracts and remediation plans, affecting Kyndryl’s ability to stabilize sales cycles in IT services and consulting.
- Pressure on organic topline growth due to extended sales cycles and a weaker business outlook in consulting services could weigh on the broader IT services market and investor sentiment toward enterprise vendors.