Kyndryl beats second-quarter revenue estimates on consulting strength

(Reuters) - IT services provider Kyndryl narrowly beat estimates for second-quarter revenue on Wednesday as businesses adopting generative AI technology turned to its consulting services.

The company, the former infrastructure services business of IBM, posted a 23% rise in consulting business revenue.

Kyndryl has benefited from companies upgrading their IT systems to incorporate the extensive data and processing needs of artificial intelligence technology.

"For every company which is considering AI and generative AI, the heart of that always requires data," CEO Martin Schroeter told Reuters.

"We play a role in helping them with their data architecture before they could even start to consider Gen AI."

Kyndryl's second-quarter revenue fell about 7% to $3.77 billion. The average estimate of four analysts polled by LSEG was $3.72 billion.

The company inherited multiple no-margin contracts from IBM and has been looking to re-work them to generate higher profits, a move that has led to an "engineered decline" in its revenue.

It will return to revenue growth by the end of this fiscal year, Schroeter said.

Kyndryl has a target of generating $1 billion in revenue in its fiscal year 2025 from so called hyperscalers. In the second quarter, Kyndryl recognized $260 million in revenue tied to customers using services from large-scale cloud providers.

The company narrowed its net loss to $43 million in the quarter ended Sept. 30, compared with a net loss of $142 million in the year-ago-period.

In response to a question on Donald Trump's election as U.S. president, Schroeter said: "I do expect there will be continued focus on the security aspects of data and importantly on the resiliency aspects of the systems that countries rely on."

"Helping customers get ready for a regulatory environment is going to be a tailwind for us."

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Anil D'Silva)