Federal Contracting Q1 FY2026
The first quarter of FY2026 (October-December 2025) set the pace for the fiscal year. Here is what the data shows about agency spending rates, early winners, and market signals.
Top 5 Agencies by Q1 Obligations
| Agency | Q1 Spend | Share |
|---|---|---|
| Department of Defense | $76.2B | 62.3% |
| Department of Health & Human Services | $7.8B | 6.4% |
| Department of Veterans Affairs | $6.9B | 5.6% |
| Department of Energy | $6.4B | 5.2% |
| General Services Administration | $4.3B | 3.5% |
Key Takeaways
Full-Year Appropriations Provided Certainty
Unlike the prior two fiscal years, FY2026 began with enacted appropriations rather than a continuing resolution. Agencies were able to issue new contracts immediately, contributing to a 3.8% increase in Q1 obligations compared to the prior year.
Cloud & Cyber Continue to Accelerate
NAICS codes 518210 (Cloud/Data Hosting) and 541512 (Computer Systems Design) saw double-digit growth in Q1, consistent with zero trust and cloud migration mandates.
Small Business Tracking Above Goal
Small business awards represented 27.1% of Q1 obligations, above the 23% statutory goal. WOSB programs showed the largest quarter-over-quarter increase.
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