What Happened?
Shares of IT infrastructure services provider Kyndryl (NYSE: KD) fell 7.5% in the morning session after the company reported mixed third-quarter financial results, with investors focusing on a revenue miss despite an earnings beat.
The company posted adjusted earnings per share of $0.38, which surpassed the analyst consensus of $0.36. However, revenue for the quarter came in at $3.72 billion, falling short of the expected $3.83 billion and marking a 1.4% decline from the previous year. While the stock initially traded higher following the report's release, the subsequent sell-off suggests that concerns over the company's top-line growth and ongoing demand challenges are outweighing the stronger-than-expected profitability.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Kyndryl? Access our full analysis report here.
What Is The Market Telling Us
Kyndryl’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 3.3% on the news that markets became increasingly wary of high valuations following a significant AI-driven rally. The tech-heavy Nasdaq fell approximately 1.4% as a wave of caution swept through the market.
A key example of this trend is Palantir Technologies, which saw its shares drop around 7% despite reporting record quarterly results that surpassed analyst estimates and raising its full-year revenue outlook. This seemingly contradictory movement highlighted a broader sentiment shift. Investors appeared to be engaging in profit-taking, concerned that the recent surge in AI-related stocks had led to stretched valuations. This broader market caution affected high-growth technology companies that had previously surged on AI optimism but faced increased scrutiny, signaling a potential cooling-off period for the sector.
.Adding serious weight to this caution, leadership at both Goldman Sachs and Morgan Stanley highlighted the possibility of a correction in the equity markets over the next couple of years. Despite the euphoria driven by AI optimism and the promise of future rate cuts, these banks viewed this cooling-off period not as a disaster, but as a necessary and healthy feature of a long-term bull market.
Kyndryl is down 27.2% since the beginning of the year, and at $25.87 per share, it is trading 40.5% below its 52-week high of $43.45 from February 2025. Investors who bought $1,000 worth of Kyndryl’s shares at the IPO in October 2021 would now be looking at an investment worth $634.76.
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