IBM, the multinational technology and consulting corporation, has become the latest casualty of the Department of Government Efficiency's (DOGE) cost-cutting measures. According to reports from Reuters and Bloomberg, the company had 15 of its federal contracts cancelled in the first quarter of 2025, resulting in a loss of $100 million in future payments.

The cancelled contracts, which represent between 5% and just under 10% of IBM's consulting practice, are a significant blow to the company's federal government consulting business. However, during IBM's earnings call on Wednesday, CEO Arvind Krishna and CFO James Kavanaugh downplayed the potential impact of DOGE on the company's future business, citing the relatively small amount of lost revenue compared to the company's overall annualized backlog of over $30 billion in total consulting.

Krishna attributed the cancellations to cutbacks at USAID, emphasizing that the majority of IBM's federal government consulting contracts focus on critical areas such as processing veterans' benefit claims, procurement, and payroll systems. He noted that while some areas may be viewed as discretionary, they represent a minority of the company's business. IBM's consulting revenue, which made up 34% of the company's revenue in Q1, was down 2% overall, with revenue from consulting in Q1 slightly exceeding $5 billion.

Despite the setback, Krishna expressed confidence in the company's ability to navigate the current climate, citing the diversity of its business and its track record of execution. He reiterated his confidence in the company's growth prospects, looking forward to sharing progress as the year unfolds. Kavanaugh echoed this sentiment, stating that the company is "prudently cautious around consulting for the year" and focused on monitoring the identity dynamic process.

The DOGE cuts are part of a broader effort to streamline government spending and improve efficiency. While IBM is not immune to these cuts, the company's diversified business portfolio and strong track record in critical areas may help it weather the storm. However, the impact of DOGE on the company's federal government consulting business remains a key area to watch in the coming quarters.

As the technology industry continues to evolve, companies like IBM must adapt to changing market conditions and government priorities. The company's ability to navigate these shifts will be crucial to its long-term success and growth. With its strong foundation in critical areas and diversified business portfolio, IBM is well-positioned to emerge from this challenge stronger and more resilient than ever.