# IBM Navigates DOGE Cuts: Tech Giant Downplays Impact on Q1 Earnings

## IBM Navigates DOGE Cuts: Tech Giant Downplays Impact on Q1 Earnings

IBM, a prominent player in the tech and consulting landscape, has felt the impact of budget reductions initiated by the Department of Government Efficiency (DOGE). During the first quarter of 2025, the company faced the cancellation of 15 federal contracts as a direct result of these cuts.

According to reports from Reuters and Bloomberg, the canceled contracts represent a potential loss of $100 million in future revenue for IBM. Notably, federal contracts constitute between 5% and 10% of IBM’s overall consulting business.

During IBM’s earnings call on Wednesday, CEO Arvind Krishna addressed numerous inquiries regarding the DOGE cuts, clarifying that the cancellations stemmed from cutbacks at USAID. Both Krishna and CFO James Kavanaugh subsequently minimized the potential long-term effects of DOGE on IBM’s business trajectory.

Kavanaugh explained, “We’ve had a handful of contracts… canceled, 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 dynamic process. We’re prudently cautious around consulting for the year.”

IBM’s consulting division accounted for 34% of the company’s total revenue in Q1, generating slightly over $5 billion. Krishna emphasized that the company’s consulting contracts with the federal government primarily focus on essential services.

“The vast majority is critical work – we actually process veterans benefit claims,” Krishna stated. “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.”

The company’s first-quarter results revealed a 2% overall decline in consulting revenue. Despite the challenges posed by the DOGE cuts, Krishna expressed confidence in IBM’s ability to navigate the current economic climate. “The diversity across our business positions us well,” he asserted, adding, “Our portfolio and track record of execution reinforce my confidence in this next chapter of our growth. I look forward to sharing our progress as we move through the rest of the year.”