Shares of International Business Machines fell over 6% in premarket trading on Thursday after the company said some of its federal contracts were suspended, while an uncertain economy poses a further threat to its consulting business.

IBM said uncertainty in the economic environment and federal government spending cuts could cause clients to pull back on purchases.

IBM said it is prudently cautious around its Consulting business for the year amid potential impact from initiatives at the U.S. Department of Government Efficiency, or DOGE. "Consulting is also more susceptible to discretionary pullbacks and doge-related initiatives.

The company's CFO, James Kavanaugh, told investors during IBM's Q1 2025 earnings call on Wednesday that the contracts represented around $100 million in future payments. In total, federal government contracts account for around 5 percent of IBM's annual revenue, and just under 10 percent of IBM's consulting business.

IBM CFO James Kavanaugh has revealed 15 federal contracts between the US government and the tech giant had been cancelled, paused or suspended as a result of Elon Musk's DOGE efficiency initiative, potentially costing the company up to $100 million.

International Business Machines said 15 of its government contracts were shelved under a cost-cutting drive by the Trump administration, a setback that eclipsed its upbeat revenue forecast and dragged its shares down over 6% after hours.