Oppenheimer has moved Kyndryl Holdings Inc. (KD) from an Outperform rating to Perform, citing growing concerns about the company’s near-term business trajectory as sales cycles have extended and the broader outlook has become more uncertain. The change in stance reflects what the research firm characterizes as a slowdown in momentum within some of Kyndryl’s growth engines.
Market metrics show the stock trading at a low price-to-earnings multiple of 6.62, a valuation level the market is treating as materially below what analysts regard as fair value. Despite that low multiple, Kyndryl’s operational picture has weakened in recent reporting.
One focal point for the downgrade was the performance of Kyndryl Consult, a division previously identified as among the company’s faster-growing businesses. According to analysts, longer sales cycles in that unit have clouded the outlook for constant-currency organic topline growth. Management itself has revised its fiscal 2026 revenue guidance downward, now forecasting a constant-currency revenue decline of 2-3% year-over-year versus a prior expectation of 1% growth. The company attributes this guidance adjustment to the persistent extension of sales cycles and continuing headwinds from pre-spin and legacy IBM contracts.
Profitability metrics remain mixed. Gross profit margin is 21.4 percent, a level that observers say points to weak gross profit margins relative to expectations for the peer group. At the same time, Kyndryl produced diluted earnings per share of $1.68 over the trailing twelve months, and analysts continue to model profitability for the current year.
The company’s most recently reported quarter provided additional cause for concern. Kyndryl’s third-quarter fiscal 2026 results showed earnings per share of $0.52, missing the consensus estimate of $0.67. Revenue for the quarter came in at $3.9 billion, narrowly below the $3.94 billion analysts had forecast. Following the release, the company disclosed a delay in filing its December quarter report due to material weaknesses identified in internal control over financial reporting. These control issues were described as spanning the fiscal year ending March 2025 and the first two quarters of fiscal 2026.
Leadership turnover has compounded uncertainty. The departure of Chief Financial Officer David Wyshner was singled out by analysts as another factor increasing near-term risk and informing Oppenheimer’s decision to assume a more neutral stance on the shares. Executive exits more broadly, combined with the control weaknesses and the earnings miss, prompted a sharp decline in the stock price as investors reacted to the developments.
Oppenheimer’s adjustment reflects heightened caution about Kyndryl’s ability to deliver the topline growth previously anticipated amid operational headwinds. Investors and market watchers remain attentive to updates from management on remediation of control weaknesses, the company’s sales pipeline cadence and any additional executive changes. For now, the situation has placed the IT services firm under significant scrutiny, with analysts and investors offering differing assessments of the company’s medium-term prospects.
Contextual note: The company’s recent disclosures and guidance revision have translated into mixed signals for valuation and earnings durability; the balance between an apparently low earnings multiple and near-term operational risk is a central focus for market participants.