IBM has cancelled 15 federal contracts in Q1 2025 due to budget cuts by the Department of Government Efficiency (DOGE) totalling $100m in future payments. According to Reuters and Bloomberg, most of these were with USAID.
IBM’s consulting business makes up about 34% of its total revenue but the company is downplaying the long term impact. “This is less than $100m of backlog over several years” said CFO James Kavanaugh on the Q1 earnings call. “No one’s immune, but we remain cautiously optimistic.”
CEO Arvind Krishna said most of IBM’s federal contracts are for critical services like veterans’ benefit processing, government procurement systems and payroll implementations. “We have to do these” he said. “We’re good for government business.”
Despite a 2% decline in Q1 consulting revenue, $5.1bn, IBM thinks its broad portfolio will help it navigate the changing federal landscape.
