After reaching $17.5 billion in FY 2023, federal cloud computing spending dipped to $16.7 billion in FY 2024 due to the end of several large contracts and multiple short-term agreements for cloud-based prototypes. Although headwinds exist, Deltek remains optimistic about federal cloud market growth, projecting that agency demand for vendor-furnished cloud computing goods and services will rise from $19.6 billion in FY 2026 to $21.0 billion in FY 2028.

The arrival of a new presidential administration in January 2025 has introduced unprecedented instability to the market. In addition to IT budgets being closely scrutinized by new agency heads, Department of Government Efficiency (DOGE) activities led to the termination of cloud contracts valued at hundreds of millions of dollars, office closures, mass layoffs and the shuttering of entire agencies. These factors, as well as agency efforts to cut costs and find efficiencies, put pressure on the market in FY 2025. Despite these challenges, cloud computing is still the federal government’s preferred method of modernizing information technology (IT) capabilities and infrastructure.

Changes at the General Services Administration (GSA) are reshaping cloud acquisitions. GSA’s OneGov Strategy is shifting the procurement landscape toward heavier use of the Multiple Award Schedule, as well as creating uncertainty about the future of large, frequently used Government-Wide Acquisition Contracts (GWACs), such as SEWP, CIO-CS, OASIS and Alliant 2. The effects of these changes are still sorting themselves out, requiring industry partners to remain nimble.  

The Defense Department’s increasing use of Other Transaction Agreements (OTAs) for cloud-based prototypes introduces some spending volatility. OTAs are short-term agreements for limited duration efforts exploring the use of cloud technology for specific purposes. Rapidly awarded, and often of high dollar value, OTAs can end quickly, either because the effort proved successful or because the project was completed ahead of schedule.

Key Findings

• Vendor Licensing Drives Multi-Cloud. Restrictive license practices by some industry partners that result in cost increases and vendor lock-in are among the forces driving federal agencies to stand up multi-cloud environments.
• Cloud Adoption Enables Artificial Intelligence. Cloud adoption is proving to be a key enabler of AI/ML adoption by federal agencies.
• Enterprise Licensing Strategies Pressure SaaS. Enterprise software agreements negotiated by GSA as part of the OneGov strategy, and even individual agencies such as the U.S. Army, will put pressure on SaaS spending.
• DOGE Cuts Hit Small Business. Thus far, DOGE contract terminations have hit small businesses providing cloud solutions and services the hardest.
• Cybersecurity Modernization Drives Spending. Zero trust implementation continues driving spending on cloud-based cybersecurity, especially in the civilian sector.
• Government-Wide Acquisition Contracts Remain Most Used. Federal customers continue procuring cloud solutions through Government-Wide Acquisition Contracts the most. GSA’s Multiple Award Schedule is the second most used method, followed by open market competitions.

Critical Insight for Vendors

Deltek’s Federal Cloud Computing Market, 2026-2028 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, 2026-2028 report is delivered in PowerPoint® format, including a PowerPoint® Executive Summary and an Excel® data workbook.