Shares of Kyndryl Holdings experienced a severe selloff, plummeting approximately 54% to $10.71 during Monday's trading session. The dramatic decline followed the IT infrastructure services provider's disclosure of a delayed quarterly filing and a review by its audit committee into cash management practices and internal financial controls.
Regulatory and Internal Control Issues Surface
The company stated it was unable to file its Form 10-Q for the quarter ended December 31, 2025, on time. This delay coincides with an audit committee investigation prompted by voluntary document requests from the Securities and Exchange Commission's enforcement division. Kyndryl warned investors that previous assessments of its internal controls, including the auditor's opinion in its fiscal 2025 annual report, should no longer be relied upon, and it expects to report "material weaknesses."
Leadership Shakeup and Revised Outlook
In a significant management overhaul, Chief Financial Officer David Wyshner and General Counsel Edward Sebold have departed the company. Kyndryl's board has appointed Harsh Chugh as interim CFO and Mark Ringes as interim general counsel. Concurrently, the firm revised its fiscal 2026 guidance, now forecasting a constant-currency revenue decline of 2% to 3%, a downgrade from prior expectations.
For its third quarter, Kyndryl reported revenue of $3.9 billion and adjusted earnings per share of $0.52. Its full-year free cash flow projection is now between $325 million and $375 million.
Market Reaction and Analyst Sentiment
The confluence of negative developments dealt a sharp blow to market confidence. Analysts at J.P. Morgan downgraded the stock to underweight, citing the guidance cut and a "stunning" change in financial leadership. The firm highlighted the significant setback to Kyndryl's ongoing turnaround narrative. The stock's decline vastly underperformed the broader market and peers in the competitive IT services sector.
Investors are now focused on the company's next steps: filing the overdue quarterly report, detailing a remediation plan for its internal controls, and providing further clarity on the SEC's inquiries. The situation underscores the critical importance of transparent financial reporting and stable executive leadership for investor trust.
