Totaling $17.1 billion in FY 2024, federal spending on cloud computing goods and services rose to $19.2 billion in FY 2025, led by robust growth in civilian agencies. Cost concerns, a need to replace/retire legacy systems, and “commercial first” policy and legislation continue to be tailwinds in the market, leading Deltek to project that demand for vendor-furnished cloud computing goods and services will rise from $22.1 billion in FY 2026 to $26.3 billion in FY 2029.

Despite the strong pressures driving growth, the federal cloud market is showing signs of maturity, and this is shifting the direction in which contractors should look for business opportunities. A limited number of hyperscalers have largely locked up the Infrastructure-as-a-Service market and, to a lesser extent, Platform-as-a-Service. This reality leaves capabilities as service (i.e., Software-as-a-Service) as the segment offering the most possibilities, particularly in hybrid cloud environments, and where the capabilities offered fulfill functions beyond ordinary back-office applications. Additional opportunities can be found in cloud adjacent services, such as migration support, cloud environment operation and maintenance and engineering services.

The result is a market showing signs of ossification in some areas while others remain vibrant and competitive. Contractors that can position offerings within this evolving paradigm will have the best chance of success.

Key Findings

• Artificial intelligence adoption now functions as a secondary cloud market driver across both the defense and civilian segments due to a need for on-demand computing power and because the demand for SaaS-based AI capabilities is growing.
• Legislative and policy tailwinds continue driving cloud investment as agencies are pushed to leverage "commercial-first" technology and reduce legacy IT.
• Restructuring FedRAMP 20x could open federal cloud procurement to a larger number of small vendors previously priced out by 18-month compliance timelines and certification-related expenses.
• Cybersecurity and related security compliance work is one of the fastest growing market segments, being driven by Cybersecurity and Infrastructure Security Agency (CISA) policy requirements and the ability of providers to offer the most modern capabilities on demand.
• Structural obstacles related to cost control, outdated Federal Acquisition Regulation cloud definitions, workforce gaps and FedRAMP certification delays are cloud procurement headwinds at many large agencies.
• SaaS and cloud engineering spending dominate the market, reinforcing the conclusion that the highest-value competitive battleground is systems integration and application-layer work, not providing commodity infrastructure.
• OneGov deals are applying pressure on the profitability of contractor reselling and/or brokering services.

Critical Insight for Vendors

Deltek’s Federal Cloud Computing Market, 2026-2029 report provides insight into key policy, acquisition and spending trends that are shaping the federal cloud computing market.

The report provides:

• Insight into the factors, policies and strategies shaping the cloud market.
• Analysis of the dynamics shaping agency spending on cloud computing.
• Identification of opportunities for cloud business development.
• Database of identified federal cloud computing efforts
• Spending profiles and forecasts for the top 18 agencies using cloud computing solutions.
• Recommendations to help contractors evaluate the impact of trends on their business.

Deltek's Federal Cloud Computing Market, 2026-2029 report is delivered in PowerPoint® format, including a PowerPoint® Executive Summary and an Excel® data workbook.

Click here to download the free report summary.