A $1.5 trillion defense budget: The IT programs contractors should be watching

IT solutions vendors focused on providing defense-related AI, cybersecurity, and autonomous systems, especially in the areas of air and missile defense, may see more opportunities in the coming fiscal year. The administration’s proposed fiscal 2027 budget earmarks considerable funding to expand defense capabilities in these areas.

In fact, the Department of Defense is set to receive the largest budget increase of any federal agency, at a time when many other agencies are seeing no increases at all.

The funding request is record-setting. The White House has requested $1.5 trillion for DOD in fiscal year 2027, a $441 billion increase, about 44 percent, from the fiscal 2026 budget. Of that total, $1.1 trillion is allocated for discretionary budget authority, with an additional $350 billion in mandatory spending requested to expand munition stocks and the defense industrial base.

The Congressional Budget Office estimates DoD will outlay an additional $42 billion in 2027 from the One Big Beautiful Bill Act, legislation that authorizes roughly $143.3 billion in defense spending across 10 priorities from through fiscal 2034.

Of the $143.3 billion from OBBBA, some $45.6 billion is dedicated to IT-related spending. Fiscal 2026 and 2027 together account for an estimated $82.3 billion, about 30 percent of the 10-year total, with $42 billion projected for spending during fiscal 2027.

As noted above, the single largest spending category in fiscal 2027 under the bill is expected to be air and missile defense, driven largely by the administration's Golden Dome initiative.

Let’s take a closer look at the technology categories that are poised to experience the most increase in the proposed defense budget.

Autonomous systems and Golden Dome draw biggest investments

The largest line item in the IT-related budget is autonomous and unmanned systems, which draws $63 billion in funding. The Office of the Secretary of Defense accounts for the bulk of that at $54.6 billion, through a program called the Defense Autonomous Warfare Group. The scale of that single program is a clear sign that autonomous warfare has become one of the Pentagon's top modernization priorities.

Golden Dome, the administration's proposed missile defense architecture, accounts for $17.5 billion in direct references in the fiscal 2027 budget. All that funding is routed through the OSD, though the Missile Defense Agency is the primary recipient in that structure, receiving $7.2 billion. The largest single program in this category is Golden Dome for America – Space Programs, at $4.5 billion.

C4I (command, control, communications, computers, and intelligence) programs account for $29.5 billion in the request. Among the branches of service, the Army has the largest share of that program activity at $5.4 billion.

Of the $29.5 billion, the key areas of funding include:

• $500M for air support
• $3.1B for base communications
• $10B for communications and electronics equipment
• $9.4B for emerging capabilities
• $800M for ground support
• $200M for information security and assistance
• $100M for sea support
• $5.4B for technology development

The single largest program in the command-and-control category is the Joint All-Domain Command and Control Development and Experimentation Activities (JADC2), managed by the OSD, which is slated to receive $2.1 billion. JADC2 is the Pentagon's long-running initiative to link sensors and shooters across all military branches and domains into a unified network.

Networks, cyber, and AI remain top tech concerns

Network and communications programs receive $15.5 billion in the fiscal 2027 request. The Air Force holds the largest share of that proposed allocation, at $6.6 billion. The top individual program in this category is the Air Force Physical Security System, budgeted at $1.7 billion.

Cyberspace activities overall account for $20.5 billion in the budget. That level of funding is not surprising, given the administration’s recently released Cyber Strategy for America, to modernize federal government networks. What’s more, the DoW’s November 2025 memo to senior Pentagon leadership, combat commands and field activity directors laid the groundwork for migrating to post-quantum cryptography. Cybersecurity is clearly top of mind for the federal government in general and the DoW in particular.

Of the $20.5 billion budgeted, funding for key program areas include:

• $12.1B for cybersecurity
• $7.7B for cyberspace operations, $4.1B of this going to USCYBERCOM
• $633M for cyber R&D

U.S. Cyber Command has the largest request in the cybersecurity category at $3.9 billion overall, with $1.8 billion of that in its primary program. The bulk of cyber funding sits in the DoD's Operations and Maintenance account, which includes both cyberspace operations and cyberspace activities.

Another key driver of the IT budget for FY2027 are AI programs. AI funding accounts for $58.5 billion in the budget request, with some of that being multi-year funding. Of that $58 billion, funding for key programs includes:

• $46B for multi-year mandatory investment in a “sovereign AI arsenal”
• $6.8B to integrate commercial and DoW-developed AI technologies
• $2.2B for R&D of AI technical approaches and capabilities

It’s important to note that the budget contains fewer direct AI references than previous years; funding for several efforts managed by the Chief Digital and Artificial Intelligence Office came in lower than in prior cycles. That said, the budget figure likely understates total federal AI investment, because many programs incorporate AI capabilities without being named explicitly in budget documents.

Of course, there are still many hurdles to be cleared on the pathway to approval of the fiscal 2027 defense budget. Federal contractors will be well served, however, to track the progress of the programs laid out in the proposed budget, and to present their capabilities in that context.

Joshua Iseler is a senior market intelligence analyst for immixGroup, a public sector business of Arrow Electronics. immixGroup delivers mission-driven results through innovative technology solutions for public sector IT. Visit http://www.immixgroup.com/ for more information.