Kyndryl reaffirmed its fiscal 2028 targets of $1.2B in adjusted pretax income and $1B in free cash flow during its first-quarter earnings call on August 5, according to the company's earnings statement. The infrastructure services company is scaling workforce rebalancing charges to support the targets.
Kyndryl recorded approximately $152M in workforce rebalancing charges during the first quarter of fiscal 2027, with the company expecting $400M to $500M in annualized savings by fiscal 2028 from these actions. The charges reflect a shift in headcount allocation toward higher-margin service lines and away from lower-returning segments.
Kyndryl spun out from IBM in November 2021 as a separate publicly traded company managing hybrid infrastructure and cloud services for enterprise clients. The company had approximately 90,000 employees at separation and has been adjusting its workforce composition since then as it competes with managed service providers and cloud infrastructure competitors.
The fiscal 2028 targets were first announced in the company's February-to-May 2026 guidance cycle. Management reiterated them at the Q1 FY2027 earnings call. The $1B free cash flow target represents a meaningful jump from historical levels and depends on both the margin expansion from workforce rebalancing and working capital management.
Fiscal 2028 for Kyndryl runs through September 2028, giving the company approximately 14 months to execute the workforce reduction plan and realize the projected cost savings. The $400M to $500M in annualized run-rate savings at that point would need to flow substantially to operating income to meet the $1.2B adjusted pretax target, assuming revenue remains stable or grows modestly.
The reaffirmation anchors investor expectations around profitability improvement at a company that has traded between $15 and $23 per share since its public debut. Workforce actions of this scale typically take multiple quarters to fully realize savings, and any delays in reallocating headcount or unexpected customer losses could pressure achievement of the targets.
