US executives are working to calm worries that recent cuts by the Department of Government Efficiency (DOGE), an initiative led by Elon Musk, might hurt their profits. They believe that a more modern public sector will be more likely to use their products and services.
This cost-cutting effort has become a hot topic among investors. Data shows that DOGE was mentioned over 200 times by 79 companies in their earnings calls this quarter. While downsizing may cause some short-term challenges, experts suggest it could also create significant opportunities for businesses. Nancy Lazar, Chief Global Economist at Piper Sandler & Co., stated that freeing up resources could lead to better productivity and lower regulatory costs, especially for medium-sized companies.
Companies in the industrial and technology sectors, which often rely heavily on government contracts, are discussing DOGE the most. For instance, Okta Inc., a provider of infrastructure software, expressed confidence in its ability to help modernize outdated government systems. ServiceNow Inc. highlighted its role in saving the federal government significant costs by improving efficiency and automating tedious tasks.
Many firms are trying to cut costs to stay competitive. Northrop Grumman’s CEO, Kathy Warden, noted that the government doesn’t face the same competitive pressures, making it a logical place for DOGE to start. Booz Allen Hamilton, which earns nearly all its revenue from government contracts, is optimistic about a quick adjustment period followed by new opportunities.
Cybersecurity companies are also seeing potential benefits from DOGE. Scotiabank analyst Patrick Colville mentioned that the rise in cybercrime could prompt the government to enhance its defenses, which would be a significant opportunity for these firms.
Kratos Defense & Security Solutions Inc. described DOGE as a major win, stating they have already secured contracts related to this initiative. However, they also acknowledged that budget pressures could negatively impact their revenue. Similarly, Workday Inc. expressed initial enthusiasm for DOGE but later recognized the current uncertainty surrounding government cuts.
Despite the optimism from some sectors, there are concerns about the immediate impact of these changes. Robert Ruggirello, a managing director at Brave Eagle Wealth Management, warned that the cuts could hurt public companies in the short term since the government is a major spender. He noted that companies often put a positive spin on their earnings calls to avoid alarming investors.
As these developments unfold, the balance between potential long-term gains and short-term challenges remains a key focus for both companies and investors in the landscape shaped by DOGE.