Tech and consulting behemoth IBM found itself impacted by the Department of Government Efficiency’s (DOGE) budget cuts.
During the first quarter of 2025, IBM had 15 of its federal contracts terminated as a result of DOGE-related reductions, resulting in a loss of $100 million in future payments. Federal contracts make up a significant portion of IBM’s consulting practice, accounting for between 5% and just under 10%.
Following intense questioning during IBM’s earnings call on Wednesday, CEO Arvind Krishna and CFO James Kavanaugh addressed the contract cancellations, attributing them to cutbacks at USAID. Despite the impact, both executives downplayed the potential consequences of DOGE on the company’s future operations.
Kavanaugh emphasized that the canceled contracts represented a small fraction of IBM’s annualized backlog of over $30 billion in total consulting revenue, reassuring stakeholders of the company’s ability to navigate the evolving landscape. IBM’s consulting business contributed 34% to its Q1 revenue, with Krishna highlighting the essential nature of their federal government consulting work.
In Q1, IBM saw a 2% decline in consulting revenue, totaling slightly over $5 billion. Despite the challenges, Krishna expressed confidence in the company’s diversified portfolio and execution track record to weather the current environment and drive growth in the upcoming chapters.
