Kyndryl Holdings, Inc. (NYSE:KD) has experienced a significant decline in its stock value, primarily due to weak bookings in its consulting division. As of December 24, 2025, the company’s shares closed at $27.28, reflecting a 22.03% drop over the past year. This downturn has raised concerns about the company’s future sales growth, particularly following its recent performance report.
In its third-quarter 2025 investor letter, the Loomis Sayles Small Cap Value Fund noted that Kyndryl, a provider of IT infrastructure services, faced challenges that detracted from its overall performance. The fund reported a 6.21% return for the quarter, significantly underperforming the 12.60% return of the Russell 2000 Value Index. The letter highlights Kyndryl as one of the stocks that negatively impacted the fund’s results during this period.
Kyndryl’s Market Position and Recent Developments
Kyndryl was spun off from IBM in 2021, creating the largest third-party provider of data center operations. Initially, the company struggled with low gross margins due to several contracts inherited from IBM that were tied to lower-margin services. However, over the past three years, Kyndryl has focused on establishing new growth opportunities, including re-negotiating long-term contracts to improve terms and expand service offerings.
Despite these efforts, the company reported a 1% decline in revenue for the second quarter of fiscal 2026, amounting to $3.7 billion. This decrease, which translates to a 3.7% drop in constant currency, has raised alarms about the sustainability of its sales growth.
The Loomis Sayles report emphasizes the current shift in market leadership towards “risk-on” and “low-quality” stocks, which has affected Kyndryl’s performance. The report states, “From an individual stock perspective, Kyndryl Holdings, Inc. detracted the most from performance.” The fund’s managers remain critical of Kyndryl’s future quarterly execution, indicating that the company’s recent performance may not align with their investment strategy focused on high-quality stocks.
Hedge Fund Interest and Future Prospects
As of the end of the third quarter, Kyndryl Holdings was not listed among the 30 Most Popular Stocks Among Hedge Funds. According to their database, 24 hedge fund portfolios held Kyndryl shares, a decrease from 36 in the previous quarter. This trend suggests a waning interest among institutional investors, which could further impact the company’s stock price.
While Loomis Sayles acknowledges the risks associated with Kyndryl, they express a belief that certain artificial intelligence (AI) stocks may offer more promising returns in the near term. They point to alternatives that could potentially yield higher returns, suggesting that investors may want to consider these options over Kyndryl.
In summary, Kyndryl Holdings continues to face challenges as it navigates a competitive market while trying to recover from recent setbacks. The company’s ongoing efforts to enhance its service offerings and improve contract terms are crucial for its future growth. However, the recent decline in bookings and hedge fund interest raises questions about its short-term prospects and overall market confidence.
