Can IBM's Lucrative Federal Contracts Boost Its Future Growth?

International Business Machines Corporation IBM has partnered with Contiem, a global provider of content software and services, to support the UK Ministry of Defence’s (MoD’s) Defence Equipment Engineering Asset Management System (DEEAMS) program. The deal strengthens IBM’s position as a key government partner, highlighting its expertise in AI and defence IT.

IBM has secured a £320 million contract to deliver the DEEAMS program, which will replace 17 legacy systems with a single AI-driven platform for managing defence equipment across land, air, and naval assets. The program is expected to generate more than £1 billion in long-term savings by reducing IT costs, improving maintenance, and supporting the MoD’s digital transformation.

IBM will design, develop, and deliver the platform, while supervising systems integration, AI, cloud, and security, and coordinating partners like Contiem to ensure accurate and reliable defence equipment data across all domains.

In addition, the company also gained a $31 million contract with the U.S. Federal Emergency Management Agency to support federal programs, including Navy ERP technical support and benefits transformation platforms. Such government deals give IBM opportunities for a recurrent revenue stream and strengthen its reputation in large-scale digital projects.

How Are Competitors Performing?

IBM faces competition from Oracle Corporation ORCL and Microsoft Corporation MSFT. Oracle has been awarded an $88 million contract with the U.S. Air Force to provide cloud service support under the Cloud One program. Oracle is also supplying cloud compute and storage services to the U.S. Army’s Enterprise Cloud Management Agency to support the Army’s digital transformation.

Microsoft recently secured a $170 million contract with the U.S. Air Force to provide Azure cloud services for military operations and modernization. The company has also signed a multi-billion-dollar deal with the U.S. General Services Administration under the OneGov program to provide discounted cloud, AI, productivity, and cybersecurity services to federal agencies.

IBM’s Price Performance, Valuation & Estimates

IBM shares have gained 17.7% over the past year compared with the industry’s growth of 111%.

From a valuation standpoint, IBM trades at a forward price-to-sales ratio of 4.03, below the industry average.

Earnings estimates for 2026 have increased 1.1% to $12.35 over the past 60 days, while the same for 2027 have increased 1.7% to $13.29.

IBM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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