Governments, on Periodic FundingNarrow moat

IBM (IBM) — moat facet

IBM's government clients are among the hardest to lose and the easiest to delay, because their contracts depend on periodic funding approval.

Among IBM's largest groups of clients are governments, and their contracts carry terms private clients do not. IBM's annual report says its customers "include numerous governmental entities within and outside the U.S., including the U.S. Federal Government"1. Some agreements "may be subject to periodic funding approval," and some "may contain provisions allowing the customer to terminate without cause"2.

Revenue by region, 2025 ($M)33,342 (+6.6%)Americas22,189 (+14.2%)EMEA12,004 (-0.4%)Asia PacificIBM 2025 Annual Report
The largest region grew slower than Europe.

IBM does not disclose how much revenue comes from governments. The nearest figure is geographic: Americas revenue was $33,342 million in 2025, up 6.6%3, and revenue from clients in the United States was $26,892 million4.

The risk is not that a government leaves; public-sector systems are among the hardest to replace. It is that funding arrives on a political calendar. IBM warns that "Funding reductions, delays or work stoppages could adversely impact public sector demand"5. A consulting project or a hardware refresh can be postponed for a budget cycle without any change in the underlying need.

Governments also buy the products with the deepest lock-in: mainframe capacity, the software on it, and the services to run it. That makes them sticky clients whose timing IBM cannot control.

IBM also warns that its public-sector agreements may carry "higher liability limits" than private ones6, alongside the right to terminate without cause. That combination is the price of the most durable client relationships IBM has. The rewards appear in the installed base; the costs appear in contract terms that private clients would not be granted.

What would reveal pressure here is growth in the Americas. At 6.6% in 20257, it was below the company's 7.6 percent; a year of decline in the region while the rest of the world grew would suggest public spending on IBM was being delayed.

Moat trajectory: Holding steady

Americas revenue +6.6% in 2025.

The number that tests this moat
Reported
Americas revenue growth, full year
+6.6% to $33,342M (FY2025)

The region holding the U.S. Federal Government; a decline while other regions grow would suggest public spending on IBM was being delayed.

Source: IBM 2025 Annual Report ↗
References
  1. ReportedIBM's annual report says its customers "include numerous governmental entities within and outside the U.S., including the U.S. Federal Government".
    IBM Form 10-K for 2025 - Item 1 business, competitors and strategic partners, Item 1A risk factors, executive officers. — FY2025 · publ. 24 February 2026 · source ↗
  2. ReportedSome agreements "may be subject to periodic funding approval," and some "may contain provisions allowing the customer to terminate without cause".
    IBM Form 10-K for 2025 - Item 1 business, competitors and strategic partners, Item 1A risk factors, executive officers. — FY2025 · publ. 24 February 2026 · source ↗
  3. ReportedThe nearest figure is geographic: Americas revenue was $33,342 million in 2025, up 6.6%, and revenue from clients in the United States was $26,892 million.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - geographic revenue and major clients. — FY2025 · publ. 24 February 2026 · source ↗
  4. ReportedThe nearest figure is geographic: Americas revenue was $33,342 million in 2025, up 6.6%, and revenue from clients in the United States was $26,892 million.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - geographic revenue and major clients. — FY2025 · publ. 24 February 2026 · source ↗
  5. ReportedIBM warns that "Funding reductions, delays or work stoppages could adversely impact public sector demand".
    IBM Form 10-K for 2025 - Item 1 business, competitors and strategic partners, Item 1A risk factors, executive officers. — FY2025 · publ. 24 February 2026 · source ↗
  6. ReportedIBM also warns that its public-sector agreements may carry "higher liability limits" than private ones, alongside the right to terminate without cause.
    IBM Form 10-K for 2025 - Item 1 business, competitors and strategic partners, Item 1A risk factors, executive officers. — FY2025 · publ. 24 February 2026 · source ↗
  7. ReportedAt 6.6% in 2025, it was below the company's 7.6 percent; a year of decline in the region while the rest of the world grew would suggest public spending on IBM was being delayed.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - segment note: segment revenue, segment profit, margins and reconciliation to reported revenue. — FY2025 · publ. 24 February 2026 · source ↗
Sources
Generated September 28, 2026