Elon Musk’s Department of Government Efficiency (DOGE) has hurt IBM’s profit margin. According to media reports, IBM had 15 of its federal contracts canceled due to DOGE-related cuts during the first quarter of 2025. These cuts amount to $100 million in future payments, per Bloomberg.
“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,” James Kavanaugh, IBM’s Chief Financial Officer (CFO) said.
He added that this was less than $100 million of backlog over a duration of multiple years. He continued by saying that though no one was immune, they are absolutely focused on monitoring the identity dynamic process and that they’re prudently cautious around consulting for the year.
READ: DOGE goes after consulting firms under Trump (March 7, 2025)
After being questioned during IBM’s earnings call Wednesday, Arvind Krishna, IBM’s CEO, reportedly clarified that the cancellations were related to cutbacks at USAID.
Contract cancellations by the U.S. government could negatively impact IBM’s revenue, particularly in its government and defence-related contracts. As a major supplier of IT infrastructure and services, the loss of such contracts may lead to reduced business opportunities, financial setbacks, and potential layoffs in affected divisions.
In March, the Trump administration provided new guidance — the General Services Administration (GSA) had ordered agencies to provide information on their contracts with the top 10 consultancy firms. It was also noted then that some of the largest consulting firms in the world could suffer a loss of billions of dollars in federal contracts as DOGE decides to cut their spending.
What is IBM?
International Business Machines Corporation (IBM) is a global technology and consulting company headquartered in Armonk, New York. Founded in 1911 as the Computing-Tabulating-Recording Company (CTR), it was renamed IBM in 1924. Initially, IBM became known for its mainframe computers, which played a crucial role in business and government operations.
Over the decades, IBM evolved, focusing less on hardware and more on software, cloud computing, and artificial intelligence (AI). The company’s IBM Watson AI platform is one of its flagship innovations, with applications across industries like healthcare, finance, and customer service. IBM has also been a leader in quantum computing and cloud services, providing businesses with cutting-edge solutions.
In 2021, IBM spun off its infrastructure services division into a new company called Kyndryl. Today, IBM continues to be a key player in enterprise technology, offering a wide range of solutions from consulting to AI-driven innovations.
