The Department of Government Efficiency (DOGE), led by X owner Elon Musk, has canceled 15 federal contracts with IBM, marking a significant shift in the company’s longstanding relationship with the US government. To bolster investor confidence, IBM broke from its long-standing practice of not issuing quarterly forecasts. It also reported better-than-expected first-quarter earnings and maintained its target of achieving at least 5% revenue growth on a constant currency basis in 2025. The cancellations, part of DOGE’s broader cost-cutting measures, amount to approximately $100 million in future payments and have raised questions about the impact on IBM’s consulting business.
“We’ve chosen now, in light of the very unprecedented dynamic of uncertainty going on in the market, to give a second-quarter revenue guidance range. We felt incumbent upon ourselves to give as much transparency as possible to our investor group,” James Kavanaugh, chief financial officer IBM told Reuters.
Elon Musk’s DOGE scraps 15 IBM projects: Impact on IBM
IBM, which earns 5–10% of its consulting revenue from federal contracts, has minimized the financial significance of the cancellations. CEO Arvind Krishna emphasised that the majority of IBM’s federal contracts focus on critical services, such as processing veterans’ benefits and implementing payroll systems, which remain unaffected. However, the company acknowledged a 2% decline in consulting revenue during the first quarter of 2025.
DOGE’s broader agenda
The DOGE initiative, launched to enhance government efficiency, has targeted various programs, including diversity, equity, and inclusion (DEI) initiatives, underutilised federal leases, and redundant contracts. The tech billionaire has defended the cuts, stating that they are essential for reducing federal spending and streamlining operations.
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While IBM has assured stakeholders of its resilience, the cancellations highlight the growing scrutiny on federal spending and the challenges faced by contractors in adapting to DOGE’s aggressive cost-cutting measures.
With agency inputs
