Kyndryl's Accounting Review and Executive Exodus: What It Means for the IBM Spin-off

IBM's former services division faces a 55% stock plunge after revenue misses expectations and SEC scrutiny, with CFO and general counsel departing amid accounting practice reviews.

Kyndryl, the IBM services spin-off that began trading as a separate public entity in November 2021, is grappling with a perfect storm of financial and leadership challenges that have sent its stock price tumbling and raised questions about its transformation strategy.

The crisis erupted when Kyndryl announced its Q3 results, revealing revenue of $3.86 billion—a modest 3 percent year-over-year increase that nonetheless fell short of analyst expectations. The earnings per share also disappointed, triggering a massive market reaction that saw the company's share price plummet more than 55 percent in a single day.

But the financial miss was only the beginning. In a filing with the US Securities and Exchange Commission, Kyndryl disclosed that it was reviewing its accounting practices, specifically focusing on cash management practices and related disclosures regarding its adjusted free cash flow metric and other financial measures. The company stated that this review was necessitating additional time to finalize its Quarterly Report and complete its assessment of internal control over financial reporting.

Adding to the turmoil, Kyndryl announced the departure of several key executives. David Wyshner stepped down as CFO, Edward Sebold left his position as general counsel, and Vineet Khurana resigned as senior vice president and global controller. The company moved quickly to fill these critical roles, appointing Harsh Chugh as interim CFO, Mark Ringes as interim general counsel, and Bhavna Doegar as interim corporate controller.

Chairman and CEO Martin Schroeter addressed investors directly, explaining that the accounting review followed the receipt of a voluntary document request from the SEC. "The review included cash management practices, related disclosures, the effectiveness of internal control of our financial reporting and certain other matters," Schroeter said. "We are cooperating with the SEC. We do not expect a restatement or other impact to our financial statements. Due to the ongoing nature of these matters, we will not be able to comment further at this time."

The timing of these revelations is particularly challenging for Kyndryl, which has been working to reposition itself in the competitive IT services market. According to Kate Hanaghan, chief research officer at TechMarketView, the company had been making progress in shifting away from low-margin legacy work and improving profitability. "Investments in AI capabilities, sovereign and hybrid cloud offerings, and selective acquisitions—such as Solvinity in the Netherlands—have also been central to its repositioning strategy," Hanaghan noted.

However, the current accounting review and executive departures threaten to undermine the positive operational narrative Kyndryl has been communicating in recent quarters. "For Kyndryl, restoring confidence will depend not just on completing the accounting review, but on demonstrating that the underlying transformation story remains intact and that financial controls are robust enough to support the next phase of growth," Hanaghan added.

This crisis comes against a backdrop of ongoing challenges for the company. In 2024, industry insiders expressed doubts about Kyndryl's ability to win new business, and later reports indicated struggles in developing its consulting practice. The company has consistently declined to comment on these concerns when approached by media outlets.

The situation raises broader questions about the viability of the IBM spin-off model and the challenges facing traditional IT services companies in an era of rapid technological change. Kyndryl's struggles highlight the difficulty of transitioning from legacy service models to more modern, value-added offerings while maintaining financial stability and investor confidence.

For now, Kyndryl's immediate priority is completing the accounting review and addressing the SEC's concerns. The company's ability to navigate this crisis while maintaining its transformation momentum will be crucial in determining whether it can emerge as a viable independent entity or whether it will face further challenges in the increasingly competitive IT services landscape.

The coming months will be critical for Kyndryl as it works to restore investor confidence, stabilize its leadership team, and demonstrate that its strategic repositioning efforts can deliver sustainable growth despite the current setbacks.