Technology and consulting giant IBM confirmed during its first-quarter earnings call that it has been affected by recent federal budget cuts ordered by the Department of Government Efficiency (DOGE). The measures resulted in the cancellation of 15 of IBM’s federal consulting contracts, representing roughly $100 million in anticipated future payments. IBM’s executives, including CEO Arvind Krishna and CFO James Kavanaugh, addressed investor concerns by downplaying the ultimate impact of these cancellations on the company’s broader operations.
Federal contracts account for approximately 5% to under 10% of IBM’s consulting division. Kavanaugh highlighted that this $100 million, spread across numerous years, is minimal when compared to the company’s consulting backlog, currently exceeding $30 billion. He stated, “Although no company is completely shielded, the cancellations received represent a very small fraction of our outstanding commitments. We remain cautious and determined to carefully monitor any further developments in this constantly changing landscape.”
Consulting services comprise 34% of IBM’s total revenue for the first quarter. Even with the cancellations, IBM emphasized the critical nature of its federal consulting projects. Krishna noted, “The bulk of this work involves essential federal government functions—managing veterans’ benefit claims, assisting the General Services Administration with their procurement operations, and implementing payroll systems. These functions are essential services rather than discretionary spending. Any areas potentially impacted would only represent a very minor segment of our portfolio.”
IBM’s consulting revenue experienced a modest decline of 2% in the first quarter, totaling slightly over $5 billion. Despite this minor dip, Krishna expressed confidence in the diversified nature of IBM’s overall offerings and its strategic positioning to weather ongoing shifts in governmental spending.
“Our diversified portfolio strongly positions us to adapt to the present climate,” Krishna concluded. “Given our consistent execution record and deep market experience, I am very optimistic about our capacity for growth, and I look forward to keeping you updated throughout the year.”
