The Pentagon has signed a significant ten-year, $7 billion contract with Oracle to enhance its software capabilities across various military branches and intelligence agencies.
The Pentagon announced on Thursday a landmark contract with Oracle, co-founded by Larry Ellison, valued at $7 billion over a decade. The agreement initially spans five years, with the potential for a five-year extension.
Under the terms of this contract, Oracle will provide its on-premise software, which will be directly installed on servers utilized by the Pentagon, the U.S. Coast Guard, and the U.S. intelligence community. The five-year contract includes both perpetual and subscription-based software licenses, as well as maintenance and consulting services.
The deal is structured in two parts, with the initial five-year base period worth approximately $3.31 billion. Should the contract be extended, the total value could reach nearly $7 billion.
This agreement consolidates various software procurement efforts into a single contract, streamlining the process and eliminating the need for separate negotiations by different military branches with Oracle. Kirsten Davies, the Department of Defense’s chief information officer, stated that this approach is projected to save taxpayers at least $441 million by fundamentally improving the procurement of on-premises Oracle capabilities.
Known as the “Enterprise Software Agreement,” this contract was negotiated by the Department of Navy. The Oracle deal follows a similar agreement signed with Microsoft in May, which was worth $9.69 billion. That contract also aimed to consolidate software licenses used across military and intelligence agencies into one unified agreement. Together, these contracts are part of the Pentagon’s broader initiative to reduce costs by eliminating redundant software expenditures through enterprise-wide agreements.
Ellison, a long-time supporter of former President Donald Trump, has maintained close ties with the Trump administration. He notably donated $45 million to a nonprofit organization supporting Trump’s 2024 presidential campaign and was the first guest to visit the White House during Trump’s second term. During that visit, he announced the “Stargate” AI data center project. Additionally, Trump endorsed Oracle’s involvement in TikTok’s U.S. operations, and in May, the Defense Department revealed agreements with Oracle and other technology firms concerning AI deployments in classified networks.
Following the announcement of the Pentagon contract, Oracle’s shares experienced a 3% increase. This uptick comes after a period of decline, as Oracle had previously faced a significant drop in its stock value due to heavy spending on artificial intelligence initiatives. The company’s shares had fallen approximately 38% this year and about 27% in the previous month. While quarterly software revenue saw a 2% decline compared to the previous year, cloud revenue surged by 47%.
Earlier this week, Defense Secretary Pete Hegseth estimated that the ongoing conflict in Iran, which began in February, has cost the U.S. approximately $37.5 billion to date.
According to The American Bazaar, this contract represents a significant step in the Pentagon’s efforts to modernize its software infrastructure while achieving cost savings for taxpayers.