Tech and consulting firm IBM faced reductions due to cuts by the Department of Government Efficiency (DOGE). According to reports from Reuters and Bloomberg, 15 of IBM’s federal contracts were canceled as a result of these cuts during the first quarter of 2025, leading to a loss of $100 million in future payments as reported by Bloomberg. Federal contracts constitute between 5% and just under 10% of IBM’s consulting operations.
During IBM’s earnings call, CEO Arvind Krishna addressed numerous inquiries, clarifying that the contract cancellations were linked to cutbacks at USAID. Krishna, alongside CFO James Kavanaugh, sought to mitigate concerns over the potential effects of DOGE on the company’s future ventures. Kavanaugh highlighted that while several contracts were affected, these represented a small fraction of the company’s over $30 billion annualized consulting backlog.
IBM’s consulting division accounted for 34% of the company’s revenue in the first quarter. Krishna elaborated that most of the company’s federal government consulting contracts are focused on essential services, including processing veterans’ benefit claims, aiding the General Services Administration with procurement processes, and implementing payroll systems. He emphasized that the majority of their projects are critical rather than discretionary.
IBM’s consulting revenue decreased by 2% in the first quarter, with earnings slightly exceeding $5 billion. Krishna expressed confidence in IBM’s ability to adapt to the current environment, noting the company’s diversified business positioning and strong execution record as key strengths moving forward. He looked forward to updating stakeholders on their progress throughout the rest of the year.
