The AI era has taken root in the federal landscape. Over the past five years, spending on AI-related goods and services by federal agencies—whether integrated into broader programs or pursued as standalone initiatives—has steadily increased. Recent policy developments, emerging use cases, and enablement efforts are expected to further accelerate this growth. AI also remains a central focus of the Trump Administration’s agenda.

Since January 2025, the federal government has released a series of executive orders, OMB memoranda, and strategic roadmaps outlining its approach to advancing AI innovation. Key initiatives such as building data center infrastructure, accelerating cloud authorization processes, and refining acquisition strategies are driving the broader adoption of AI across agencies.

With a focused lens on the remaining years of the current administration, Deltek projects the federal AI market to reach $2.7B in FY 2026 across both civilian and defense sectors, growing to $3.1B by FY 2028. Note that this forecast excludes spending within the intelligence community.

Source: Deltek

In addition to supportive policies, procurement strategies, and computing infrastructure, the federal AI market is poised for expansion driven by the technology’s potential to strengthen federal mission delivery and operational efficiency. Areas such as generative AI and agentic AI are expected to enhance agency transformation efforts, particularly amid ongoing agency reorganizations and workforce reductions. Furthermore, federal AI applications are evolving beyond basic, pre-programmed autonomy towards more complex challenges and tasks.

Key Findings

• Trump 2.0 AI Priorities. The White House is leveraging private sector expertise to advance its goal of U.S. AI global dominance. Key AI priorities under the Trump Administration include removing obstacles to innovation, expanding automation across government operations, promoting American-made AI, and boosting U.S. AI exports.
• Federal Enablement. Recent AI policy actions are aimed at overcoming key barriers to scaling AI within federal agencies, including insufficient support infrastructure, limited technical expertise, and concerns surrounding test and evaluation of AI systems.
• New Policies. AI-related policies issued since January 2025—including OMB memoranda on AI usage and procurement, the AI Action Plan, and the DIB AI Roadmap—are instrumental in shaping the future trajectory of the AI market.
• Acquisition Methodologies. The growing emphasis on Other Transaction Authorities (OTAs) and the addition of multiple AI solutions to the GSA Multiple Award Schedule (MAS) reflect a deliberate effort to streamline and accelerate agency access to AI technologies.
• Growth in Opportunities. The growing number of AI-related opportunities reflects a shift in agency priorities, from cautious skepticism to a more proactive focus on scaling and implementing AI technologies.
• Federal Applications. Defense AI use cases continue to build on ongoing efforts to mature AI for battle-space decision support and logistics, while civilian agency use centers on productivity, improving customer experience and fraud prevention.
• Generative and Agentic AI. Recent workforce reductions and the push for more efficient government operations will drive agencies to increasingly explore AI capabilities such as generative and agentic AI to augment these changes.
• AI Maturity Gap. AI spending remains concentrated among select departments and top vendors across prime contracts, OTAs, and SBIR/STTR awards.

Deltek’s new Artificial Intelligence (AI) Market, 2026- 2028 report provides an in-depth look at these and other drivers enabling expansion of the federal AI market.