July 31 (Reuters) - IT services provider Kyndryl

Holdings ( KD ) recorded its first quarterly profit since its

spin-off in 2021, helped by growth in its consulting segment and

a shift to higher-margin deals.

The company, the former infrastructure services business of

IBM ( IBM ), also raised its forecast for 2024 core operating

margin and annual adjusted pre-tax income.

Kyndryl ( KD ) reported a net income of $11 million in the first

quarter, compared to a loss of $141 million in the year-ago

period.

Consulting business rose 10% as enterprises adopting

generative artificial intelligence applications sought expertise

on how to integrate the technology with their systems.

"The consult business from a profit perspective tends to

have margins that are two or three points higher than the

average within Kyndryl ( KD )," CEO Martin Schroeter told Reuters.

"So that mix shift is also what's helping profitability."

Companies adapting their technological frameworks to new

regulatory requirements is also driving demand for consulting

services.

"Regulation plays a role and we help advise them and get

them ready for a regulatory regime. Innovation plays a role

whether that's finding innovation in a cloud or their ability to

use genAI," Schroeter said.

In the first quarter, Kyndryl ( KD ) recognized $210 million in

revenue tied to customers using services from large-scale cloud

providers.

Kyndryl ( KD ), which inherited multiple no-margin contracts from

IBM ( IBM ), has been looking to re-work them to generate higher

profits.

As of the previous quarter, the company re-priced about half

of these contracts, and about two-thirds will see better pricing

this year, Oppenheimer analysts had said in a note in June.

Customers have also prioritized spending on Kyndryl's ( KD )

so-called "mission critical" services which are essential for

companies' IT infrastructure to operate.

Kyndryl ( KD ) reported revenue of $3.74 billion for the first

quarter. Five analysts on average had estimated $3.79 billion

according to LSEG data.