IBM says multiple contracts cancelled following US government DOGE probes - but it's not worried

DOGE’s cancelled contracts could cost IBM up to $100 million
IBM’s consulting business is worth $5.1 billion, down 2% year-over-year
IBM is still banking on revenue growth, noting continues interest in artificial intelligence

IBM CFO James Kavanaugh has revealed 15 federal contracts between the US government and the tech giant had been cancelled, paused or suspended as a result of Elon Musk’s DOGE efficiency initiative, potentially costing the company up to $100 million.

Both Kavanaugh and IBM CEO Arvind Krishna later downplayed the impact of DOGE’s cutbacks, citing them as a small fraction of their $30 billion consulting backlog.

“This is like less than $100 million of backlog over a duration of multiple years,” Kavanaugh said.

IBM loses US government contracts due to DOGE

The news came as IBM announced its first-quarter results for fiscal year 2025, noting a small 1% year-over-year increase in revenue to $14.5 billion.

Speaking about the lost contracts, Kavanaugh said: “While no one’s immune, we are absolutely focused on monitoring the identity dynamic process.”

According to TechCrunch reporting, federal contracts make up around 5-10% of IBM’s consulting business, but Krishna emphasized most contracts are for critical services like veterans’ benefits, GSA procurement and payroll systems, therefore only a small portion of its contracts are considered vulnerable to cuts.

Consulting revenues for the company in Q1 stood at $5.1 billion, or around 35% of its total revenue, but they were down 2% year-over-year. Its infrastructure business saw a steeper 6% drop in quarterly revenue, while software surged with a 7% rise in revenue to $6.3 billion.

“While the macroeconomic environment is fluid, based on what we know today, we are maintaining our full-year expectations for revenue growth and free cash flow,” Krishna said, noting that interest in generative AI continues to rise.

The news comes in the same month that the US Department of Defense shared a staggering $5.1 billion in savings by cancelling contracts, bringing its DOGE-fuelled savings to nearly $6 billion.