Alphabet’s (GOOGL) Google will offer massive discounts to the U.S. government for its cloud computing services amid the Trump administration’s broader push to cut federal costs. The news was first reported by the Financial Times, citing a senior official from the General Services Administration (GSA). The administration is determined to slash IT (information technology) procurement costs through the Department of Government Efficiency (DOGE) Committee, which was previously headed by Elon Musk.
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The news comes on the heels of software giant Oracle’s (ORCL) deal with GSA, announced last week. Oracle agreed to offer a 75% discount on its license-based software and a “substantial discount” on its cloud services through the end of November. The report noted that Google’s contract could also fall into a “similar spot” and is expected to be finalized within weeks.
Why Is the Government Targeting Big Tech?
The White House is negotiating its IT spending contracts with big tech firms, including Google, Oracle, Microsoft (MSFT), and Amazon (AMZN), to secure discounts on the technology services they provide to the government. Together, these four firms account for the majority of the government’s annual spending on cloud services, which currently exceeds $20 billion. The report added that discussions with Amazon Web Services (AWS) and Microsoft Azure are still in the early stages.
Notably, Google is already offering a 71% discount on its business apps package to American federal agencies. The discount will run through September 30, 2025, and is expected to save up to $2 billion in federal spending if the package is adopted government-wide.
Earlier in May, the GSA signed similar deals with Salesforce (CRM), Adobe (ADBE), and consulting firms such as Accenture (ACN). Major tech companies are trying to get into Trump’s good books by agreeing to such massive contract cuts or risk losing these federal contracts altogether.
Amazon’s AWS faced a similar situation during Trump’s first term in 2019, when the administration awarded the $10 billion Joint Enterprise Defense Infrastructure (JEDI) cloud project to Microsoft instead of AWS. Amazon later challenged this decision in court, claiming it was influenced by Trump’s “personal vendetta” against founder Jeff Bezos and the Washington Post.
Is GOOGL a Good Stock to Buy?
Analysts remain highly optimistic about Alphabet’s long-term stock outlook. On TipRanks, GOOGL stock has a Strong Buy consensus rating based on 29 Buys and nine Hold ratings. Also, the average Alphabet price target of $201.85 implies 13.6% upside potential from current levels. Year-to-date, GOOGL stock has lost nearly 6%.
