Database giant Oracle Corp. has signed a new multibillion-dollar contract with the Pentagon that will see it supply its software to branches of the U.S. military, Coast Guard and intelligence agencies over the next decade.
The deal, worth nearly $7 billion, includes a five-year base period for perpetual and subscription-based software licenses, maintenance and consulting, Pentagon officials said.
Kirsten Davies, who serves as the Defense Department’s chief information officer, said her agency managed to negotiate a contract that will result in at least $441 million in savings for taxpayers by “fundamentally improving the way we source Oracle capabilities locally.”
Investors reacted positively to the deal. Oracle shares, which have come under pressure this year on fears that artificial intelligence will disrupt traditional software vendors, rose more than 3% following news of the deal.
The deal follows a push by the Trump administration to rein in Defense Department spending on software services and licensing. Since taking office last year, Defense Secretary Pete Hegseth has detailed several efforts to reduce the agency’s technology spending by eliminating duplicate contracts and non-essential software agreements for the Pentagon’s information technology systems.
A 2025 memo asked the Defense Department to create an action plan on how it can negotiate cheaper prices for cloud and on-premises software so that it doesn’t pay more than other American companies. While some see the Pentagon’s cuts as a win, that number pales in comparison to the estimated $37.5 billion the U.S. has spent on the Iran war since February.
Oracle has a long history of serving the U.S. government. In fact, the Central Intelligence Agency was their first ever customer. In 1977, co-founders Larry Ellison (pictured), Bob Miner, and Ed Oates received a $50,000 contract to build a relational database management system for the CIA, codenamed “Oracle,” and this project eventually inspired the name of the company they would found.
Ellison, who is now chief technology officer and executive chairman of Oracle, is a long-time supporter of US President Donald Trump and has reportedly contributed $45 million to his 2024 presidential campaign through a donation to a nonprofit group. Notably, he was one of the first guests to visit the White House after the start of Trump’s second term and used the opportunity to announce his company’s participation in the $500 billion Stargate initiative to build AI data centers in the United States. Trump has also been a supporter of Oracle’s efforts to secure a 15 percent stake in TikTok’s U.S. operations.
Despite the strong government support Oracle has received, the stock has taken a hit this year due to the rise of AI software. Additionally, Oracle is taking on tens of billions of dollars in debt as it seeks to become a player in the AI ​​infrastructure space by expanding its network of global data centers.
In its most recent earnings report last month, Oracle said software revenue fell 2% year-over-year. However, cloud revenue remains a bright spot, growing 47% thanks to strong demand from its AI customers for computing resources.
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