Kyndryl Holdings (KD) Stock Forecast & Price Target

Kyndryl Holdings Inc. is experiencing significant revenue growth in its cloud and hyperscaler business, with hyperscaler-related revenue projected to reach approximately $1 billion in FY25, a substantial increase from the previous years. The company's gross margins have also improved, with new signings reflecting margins in the mid-20% range, contributing to an overall increase in consolidated gross margins to 17.8% in FY24 and an anticipated 21.2% in FY25. Additionally, there is a positive outlook for sustainable long-term growth in revenues, with expectations of mid-single-digit percentage growth extending into FY28 and beyond, driven by expansion across all service practices, including a notable rise in the consulting segment.

Kyndryl Holdings Inc. is projected to experience a revenue decline of approximately 9% year-over-year in F1Q25, continuing a trend of reduced revenues with an anticipated $15,355 million for FY25, reflecting a 4.3% decline from the previous year. The company's profitability is at risk due to emerging business models that could adversely affect both demand for its services and operating margins, particularly regarding contract extensions. Furthermore, Kyndryl's goal for a high-single-digit pre-tax income margin by FY27, translating to a significantly optimistic EPS target, raises concerns about the feasibility of achieving such margins amidst increasing competition and a shrinking revenue base.