Are We Headed for a $50 Billion IT Spend in the Fourth Quarter of FY 2025?

Increasingly, federal agencies look to commercial information technology (IT) solutions to meet their operational and efficiency goals, as demonstrated by their willingness to spend billions of dollars with IT contractors and suppliers each year. However, while most agency IT budgets have grown to support their needs, agencies have often faced budget delays while operating under continuing resolutions (CRs) from Congress.

Fiscal year (FY) 2025 has been one of these years, filled with multiple changes in the federal contracting landscape, as well as a full-year CR impacting agency budgets.

This raises the questions, “How have all the changes and delays in FY 2025 impacted agency IT contract spending so far?” and “What might be some reasonable expectations for the fourth quarter (Q4)?” when federal agencies traditionally spend a sizable portion of their yearly IT budgets.

Estimating Q4 FY 2025 IT Spending: Methodology, Assumptions and Caveats

While any precise predictions for the near term are inherently uncertain, it is possible to make a rough estimate of federal Q4 IT spending by leveraging the contract spending data we have available from the government.

My general “back-of-the-envelope” analysis methodology compares Q1, Q2, and Q3 of FY 2024 and FY 2025 and then applies an assumption that agencies will spend in FY 2025 90% of what they spent in total in FY 2024. (This is an admittedly arbitrary proportion, but hopefully it is cautious enough to guard against overstating the Q4 amounts.) I then can arrive at an approximation of what each agency might have left to spend in Q4 of FY 2025.

To build my case, I took the federal IT contract obligations reported for each federal agency for FY 2024 and FY 2025, quarter by quarter, reported as of July 15, 2025. Even though the third quarter of FY 2025 closed at the end of June, agencies may still be reporting their Q3 contract data (especially the Department of Defense, which traditionally lags in their reporting), so this analysis is a snapshot in time in the hope that most agencies have submitted their Q3 data within a month of the quarter ending.

To estimate how much IT spending might remain for Q4 of FY 2025 I applied my assumption that agencies would spend 90% of what they had spent in FY 2024 again in FY 2025. This may underestimate both the FY 2025 total and Q4 IT spending for some agencies and potentially overestimate it for others.

For each agency, I then applied the relative proportions for each quarter’s obligations in FY 2024 to the corresponding quarters in FY 2025. The approach was to look at how each department spent in each quarter of FY 2024 and then use that proportion to estimate how their spending might occur across the four quarters in FY 2025, again assuming they will spend 90% of what they did in FY 2024 again in FY 2025.

The highlighted column in the table below provides an estimate of what each of the top 20 federal departments and agencies might spend on IT in Q4 of FY 2025, if they spend at least 90% of what they spent last year, overall. It is not a perfectly predictive methodology, but it is a good faith effort at conservatively estimating what might be in play for this Q4 buying season.

FY 2024 and 2025 Quarterly IT Contract Obligation Levels Compared

The twenty top-spending departments accounted for nearly $122B in IT spending in FY 2024, which is 96% of the $127B in total federal IT contract obligations for the year. Both the top twenty and total IT contract obligations amounts for FY 2024 were higher than they were in FY 2023, when the top twenty accounted for $115B of the total $120B in spending for that year. The point: top-line federal IT contracted spending continues to consistently rise over the last several years.

Looking at quarterly spending in FY 2024, these twenty agencies accounted for $18.5B, $24.8B, $32.4B and $46.3B in Q1, Q2, Q3 and Q4, respectively. This shows that the top twenty agencies spent a disproportional 38% of their FY 2024 IT dollars in Q4, compared to 15%, 20% and 27% for Q1, Q2 and Q3, respectively.

How does FY 2025 compare? For FY 2025 to date, these top twenty departments have reported $20.7B, $26.9B and $13.9B for Q1, Q2 and Q3, respectively. Both Q2 and Q3 are higher compared to FY 2024, but Q3 FY25 is considerably lower than Q3 FY24, at least at this point in the fiscal year. This is largely due to the DoD components lagging in their contract data reporting up to 90 days. Therefore, Q3 for DoD is largely underreported, and even Q2 data may still be somewhat understated. Civilian departments may also update their reporting on previous quarters, but generally not to the same degree as DoD.

Impacts of Continuing Resolutions on Quarterly Spending

A second factor that may cause lower Q2 and Q3 FY 2025 obligation levels may be the effects of delayed congressional appropriations and the length of continuing resolutions (CR) that keep agencies waiting to see what their budgets would be for the year. For FY 2025, after passing multiple continuing resolutions (CR) since October 2024, Congress passed a final full-year CR in mid-March 2025, nearly at the end of Q2.

Operating under CR will usually suppress some spending and shift it into future quarters, as agencies wait for their final budgets to be approved. The eventual passing of a full-year CR for FY 2025 adds further uncertainty, as agencies grapple with many of the constraints that operating under CR bring. This factor is magnified among agencies that got budget increases or decreases in the final FY 2025 CR. As a result, there may be even more pent-up spending that is pushed into Q4.

Impact of the One Big Beautiful Bill Act on Q4 FY 2025 IT Spending

A final factor to consider in the timing of contract obligations for Q4 FY 2025 is the impact of the FY 2025 budget reconciliation bill, H.R.1, the One Big Beautiful Bill Act. This bill adds billions of dollars in FY 2025 appropriations to several large departments . . . right at the beginning of Q4.

While only a portion of this funding may go to IT contracts, the potential impact may be significant.

Prospects for the Remainder of FY 2025

For the remainder of FY 2025, if these top twenty agencies spend 90% of what they did in all of FY 2024 – and that is likely a conservative outlook – then they will have nearly $49B to spend in Q4 alone. If we factor out the impact of the DoD’s 3-month reporting lag, the civilian portion of these top twenty departments accounts for nearly $18B of that $49B Q4 estimate.

In a year that has seen a tremendous level of change and uncertainty, it remains to be seen how these factors will impact the traditional “federal busy season.” If the trend toward year-over-year growth in contracted IT spending continues to hold, as the data so far suggests, and my 90% assumption proves conservative, we could be looking at a $50B+ Q4 across all federal departments and agencies.