The Pentagon has officially shut down a major human resources tech overhaul, and it’s a serious blow to Oracle (NYSE: ORCL) and Leidos (NYSE: LDOS). What began as a $75 million effort to modernize the system for managing 900,000 civilian employees turned into a six-year debacle, ballooning to $280 million over budget. Defense Secretary Pete Hegseth didn’t mince words, calling further investment in the project a “waste of money.” While Oracle’s involvement was never publicly acknowledged, contract records confirmed its role.
The Department of Defense now has 60 days to regroup and draft a new modernization strategy.
Warning! GuruFocus has identified 5 warning signs for ORCL.
Investors reacted swiftly. Oracle shares fell 2%, while Leidos dipped 0.7% as of 10 a.m. today. Both companies declined to comment on the decision.
The cancellation comes as part of broader federal budget tightening under President Trump’s government efficiency push, now overseen by a new White House department led by Elon Musk. The shake-up has put federal software contractors on edge, especially those reliant on long-term government deals. Oracle’s behind-the-scenes exposure in this failed program serves as a stark reminder of the risks tied to such contracts.
Oracle has long been a major player in the federal tech space, previously landing deals like the $16 billion upgrade to the Department of Veterans Affairs health records system. But with cost-cutting now a top priority—and Musk increasingly influencing both tech and budget policy inside the administration—even politically connected firms are finding themselves vulnerable.
The takeaway for investors: government tech spending is entering a new era, and the fallout from this cancellation could signal bigger changes ahead for federal contractors.
4o
