Kyndryl Holdings, Inc. Revenue Disclosure
NOTE 3. REVENUE RECOGNITION
Disaggregation of Revenue
The Company views its segment results to be the best view of disaggregated revenue. Refer to Note 4 – Segments.
Remaining Performance Obligations
The remaining performance obligation (“RPO”) represents the aggregate amount of contractual deliverables yet to be recognized as revenue at the end of the reporting period. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed. The customer is not considered committed when it is able to terminate for convenience without payment of a substantive penalty. The RPO also includes estimates of variable consideration. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
At March 31, 2026, the aggregate amount of RPO related to customer contracts that are unsatisfied or partially unsatisfied was $32.8 billion. Approximately 59 percent of the amount is expected to be recognized as revenue in the next two years, approximately 37 percent in the subsequent three years, and the balance thereafter.
Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods
For the year ended March 31, 2026, revenue increased by $40 million for performance obligations satisfied (or partially satisfied) in previous periods, mainly due to changes in estimates.
Contract Balances
The following table provides information about receivables, contract assets and deferred income balances:
At March 31, | ||||||
(Dollars in millions) | | 2026 | | 2025 | ||
Assets | ||||||
Accounts receivable (net of allowances for credit losses of $7 at March 31, 2026 and $13 at March 31, 2025)(1) | $ | 1,300 | $ | 1,345 | ||
Long-term accounts receivable(2) | 80 | 15 | ||||
Sales-type leases receivable | 156 | — | ||||
Contract assets(3) |
| 44 |
| 50 | ||
Total | $ | 1,580 | $ | 1,410 | ||
Liabilities | ||||||
Deferred income (current) | $ | 888 | $ | 746 | ||
Deferred income (noncurrent) |
| 390 |
| 341 | ||
Total | $ | 1,279 | $ | 1,087 | ||
| (1) | Including unbilled receivable balances of $431 million at March 31, 2026 and $425 million at March 31, 2025. |
| (2) | Long-term accounts receivable included unbilled receivable balances of $46 million and immaterial at March 31, 2026 and 2025, respectively, and is included within Other noncurrent assets in the Consolidated Balance Sheet. |
| (3) | Contract assets represent services performed by the Company prior to billing the client, which give the Company the right to consideration that is typically subject to milestone completion or client acceptance. They are included within Prepaid expenses and other current assets in the Consolidated Balance Sheet. |
The change in deferred income is primarily driven by the timing difference of invoice billing and revenue recognition. The amount of revenue recognized during the year ended March 31, 2026 that was included within the deferred income balance at March 31, 2025 was $714 million.
The following table provides roll-forwards of the accounts receivable allowance for expected credit losses for the years ended March 31, 2026, 2025 and 2024:
Year Ended March 31, | |||||||||
(Dollars in millions) | 2026 | | 2025 | | 2024 | ||||
Beginning balance | $ | 13 | $ | 22 | $ | 32 | |||
Additions (releases) | 6 | (7) | 4 | ||||||
Write-offs | (13) | (1) | (4) | ||||||
Other* | 1 | (1) | (9) | ||||||
Ending balance | $ | 7 | $ | 13 | $ | 22 | |||
* Primarily represents translation adjustments.
The allowance for expected credit losses of long-term accounts receivable, sales-type leases receivable, and contract assets was not material in any of the periods presented.
Major Clients
No single client represented more than 10 percent of the Company’s total revenue during the years ended March 31, 2026, 2025 and 2024. No single client represented more than 10 percent of the Company’s total accounts receivable balance as of March 31, 2026 and 2025.
Deferred Costs
The following table provides amounts of capitalized costs to acquire and fulfill customer contracts at March 31, 2026 and 2025:
At March 31, | ||||||
(Dollars in millions) | | 2026 | | 2025 | ||
Deferred transition costs | $ | 761 | $ | 697 | ||
Prepaid software costs* |
| 1,809 |
| 876 | ||
Capitalized costs to fulfill contracts |
| 208 |
| 195 | ||
Capitalized costs to obtain contracts |
| 268 |
| 281 | ||
Total deferred costs† | $ | 3,046 | $ | 2,049 | ||
* Prepaid software costs include deferred costs for committed multi-year, on-premises software purchase contracts.
† Of the total deferred costs, $1,166 million was current and $1,880 million was noncurrent at March 31, 2026, and $1,009 million was current and $1,040 million was noncurrent at March 31, 2025.
The amount of total deferred costs amortized during the year ended March 31, 2026 was $1.7 billion, composed of $238 million of amortization of deferred transition costs, $1,001 million of amortization of prepaid software costs and $458 million of amortization of capitalized contract costs. The amount of total deferred costs amortized during the year ended March 31, 2025 was $1.7 billion, composed of $291 million of amortization of deferred transition costs, $986 million of amortization of prepaid software costs and $420 million of amortization of capitalized contract costs. The amount of total deferred costs amortized during the year ended March 31, 2024 was $1.8 billion, composed of $335 million of amortization of deferred transition costs, $921 million of amortization of prepaid software costs and $531 million of amortization of capitalized contract costs. There were no material impairment losses incurred in any period. Refer to Note 1 – Significant Accounting Policies for additional information on deferred costs to fulfill a contract and capitalized costs of obtaining a contract.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 29, 2026 | Showing above |
| 2025 | May 30, 2025 | |
| 2024 | May 30, 2024 | |
| 2023 | May 26, 2023 | |
| 2021 | Mar 10, 2022 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.