The consulting arm of IBM has taken a massive blow as a result of cuts to federal spending.
The recently installed Department of Government Efficiency (DOGE) cancelled as many as 15 of IBM’s government contracts.
Consulting revenue is down 2 percent for Q1 2025.
IBM has released quarterly results for Q1 2025 this week, and while the numbers are generally positive, with a reported revenue of $14.5 billion, some of the underlying data is of concern.
This as IBM had to address the fact that much of its consulting business has been impacted by cuts to federal spending under the recently installed Department of Government Efficiency (DOGE), Stateside.
To that end, reports suggest as many as 15 government contracts have been cancelled as a result of DOGE’s unfettered cuts, with federal contracts said to represent a little under 10 percent of the company’s consulting business.
It should be pointed out that consulting made up 34 percent of the company’s revenue in Q1 2025. While the results for the quarter are not overly negative, with a 2 percent drop reported for consulting compared to the same period last year, moving forward some issues may arise if IBM is not able to find other areas to pick up consulting work.
“We’ve had a handful of contracts, either statement of work, or cancel and on our annualized backlog of over $30 billion in total consulting. This is like less than $100 million of backlog over a duration of multiple years. So while no one’s immune, we are absolutely focused on monitoring the identity dynamic process. We’re prudently cautious around consulting for the year,” noted James Kavanaugh, CFO, to investors during this week’s earnings call.
Of concern to US citizens, regarding this development, is the fact that much of IBM’s federally contracted work was for essential services, as CEO, Arvind Krishna, pointed out.
“The vast majority is critical work — we actually process veterans benefit claims,” he explained.
“We help process how the (General Services Administration) does procurement. We help implement payroll systems. I don’t think of these as optional. Now, are there some areas around the edges which could be viewed as discretionary? Yes. But in our case that is the minority of our business, not the majority,” he added.
The CEO remains bouyant, unsurprisingly, of IBM’s ability to ride these DOGE-related issues, but with the company having also weakened its presence in African markets this year too, the future looks a little less sure at this stage.
“The diversity across our business positions us well to navigate the current climate. Our portfolio and track record of execution reinforce my confidence on this next chapter of our growth. I look forward to sharing our progress as we move through the rest of the year,” Krishna concluded.
[Image – Photo by Claudio Schwarz on Unsplash]
