After spending slowed in the final year of the previous Presidential administration, the outlook for the federal cloud market picked up considerably in FY 2025. According to Deltek’s new Federal Cloud Computing Market FY 2026-2029 report, identifiable federal cloud spending reached a new high of $19.2B that fiscal year, setting the stage for stronger growth to come. Accordingly, Deltek projects that agency demand for vendor-furnished cloud computing goods and services will rise from an estimated $22.1B in FY 2026 to $26.3B in FY 2029.

Federal spending on Software-as-a-Service (SaaS) continues to outpace that on all other service delivery types. Driven in part by investment in cloud-based artificial intelligence and cybersecurity solutions, agencies also are buying SaaS capabilities to replace or upgrade legacy applications formerly managed on-premise. Spending on the other major types of service delivery, Infrastructure-as-a-Service and Platform-as-a-Service, also rose over the last three fiscal years, as did investment in cloud engineering services. Agencies count on contractor-provided engineering expertise to enable multi-cloud environments and migrate data from legacy systems.

Changes at the General Services Administration (GSA) also continue reshaping cloud acquisitions. GSA’s OneGov Strategy and designation as the federal government’s executive acquisition agent have shifted procurement toward the Multiple Award Schedule, as well as to frequently used Government-Wide Acquisition Contracts Best-in-Class (BIC) contracts, such as SEWP and Alliant 2. Industry partners selling to the government must continue to pay attention to acquisitions flowing through those and other BIC contracting vehicles.

Market Outlook is Positive

Cloud computing remains the federal government’s leading and preferred method of modernizing IT capabilities and infrastructure. Deltek concludes, therefore, that the outlook for federal spending on cloud is positive through 2029.

Key Research 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, 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.

Deltek's Federal Cloud Computing Market, 2026-2029 report is available now. It offers a 4-year strategic view of the trends, drivers, and challenges shaping federal cloud computing adoption. The report provides insight into the policies and legislation influencing the cloud market, analyzes agency spending on cloud computing, and identifies opportunities for cloud business development. Spending profiles and forecasts for the top 18 agencies (by spending) using cloud computing solutions are included, as are recommendations to help contractors evaluate the impact of market trends on their business.