For IBM, it has been a challenge each time that the Department of Government Efficiency (DOGE), the department responsible for federal cuts, has cut federal contracts. Even in light of these disappointments, the firm continues to look ahead with excitement. It claims that the majority of its work is non-discretionary and mission-critical, particularly in adjudicating veterans’ benefit claims.
On the Q1 earnings call, IBM released that the DOGE cuts would save IBM approximately $100 million dollars in subsequent payouts. This decision couldn’t be more critical to its consulting business either. This $4 trillion-plus reduction—as IBM execs emphasized in the interview—is enormous. They trumpeted the fact that the firm’s backlog is below $100 million spread over multiple years, providing a cushion against short-term financial shocks.
IBM’s first quarter consulting revenue amounted to a little more than $5 billion. This figure highlights the company’s notable trump card in the consulting industry. Glaringly, federal contracts represent only 5% – just under 10% at most – of its entire business. James Kavanaugh, IBM’s CFO, noted that they have landed a handful of deals. He continued that their annualized consulting backlog has more than $30 billion in total consulting.
IBM’s leadership is still very wary on consulting for the rest of the year. Arvind Krishna, an executive at IBM, pointed out the company’s diverse portfolio, stating, “The diversity across our business positions us well to navigate the current climate.” He added, “The vast majority is critical work — we actually process veterans benefit claims.”
IBM executives were understandably rattled by the DOGE cuts. Yet, they boldly dismissed how the news could affect the company’s long-term business trajectory. Krishna and Kavanaugh conveyed deep faith in IBM’s ongoing transformation to better serve the public sector with services it critically needs.
Looking ahead, Krishna suggested that as IBM continues to work its way through the year, it will continue to provide progress reports. It shows that the firm is firmly committed to preserving continuity in its workforce. It takes proactively to address any challenges that emerge due to outside circumstances.
