Salesforce wins $5.64B Army contract for AI, cloud technologies
10-year IDIQ deal accelerates Defense Department adoption of agentic AI and data analytics
Salesforce shares rose 0.6% to $229.40 on Monday after the software company secured a potentially transformative contract with the U.S. Army, underscoring the growing intersection of artificial intelligence and national defense procurement.
The indefinite-delivery, indefinite-quantity (IDIQ) contract, worth up to $5.64 billion over 10 years, positions the cloud computing giant as a critical technology provider for the Department of Defense. The agreement includes a five-year base ordering period with an additional five-year option, providing the Army with access to Salesforce's artificial intelligence, data analytics, and cloud technologies through its Missionforce National Security product suite.
The contract represents more than just a revenue opportunity for the San Francisco-based company—it validates Salesforce's strategy of expanding beyond its traditional customer relationship management roots into government and defense markets. According to Washington Technology, the agreement builds upon existing Salesforce relationships with the Army, including ongoing projects with the Army Human Resources Command and Army Accessions Information Environment.
"We've got to have trust in our data first and foremost," said Peter Lington, Area Vice President for Department of War business at Salesforce, in a statement about the contract's strategic importance. "So I think that once we ground ourselves in good data that we can trust and we can start to take actions, you'll see agents and service members working together."
The deal's significance extends beyond its headline value. By reducing procurement timelines from months to days, the contract addresses a longstanding bottleneck in defense technology acquisition. Salesforce's platform will connect disparate data sources and systems into a unified framework, enabling the Army to accelerate deployment of what the company calls "agentic AI"—autonomous software agents that can execute complex tasks with human oversight.
Alan Webber, program vice president for defense and intelligence at IDC, described the contract as "a shift from buying software to orchestrating outcomes at scale," highlighting how government procurement is evolving toward outcome-based technology partnerships rather than traditional software licensing arrangements.
For Salesforce, the Army deal arrives at a pivotal moment. The company's stock has struggled to recover from its 52-week high of $364.71, currently trading 37% below that peak despite delivering strong quarterly earnings growth of 38.6% year-over-year. Analysts remain bullish on the stock, with 44 firms rating it a buy or strong buy compared to just 13 holds and one sell, and an average target price of $329.65 suggests significant upside from current levels.
The contract's strategic value may outweigh its immediate financial impact. With a market capitalization of $217 billion and trailing twelve-month revenue of $40.3 billion, the $5.64 billion ceiling represents roughly 14% of Salesforce's annual revenue spread across a decade. However, the IDIQ structure means actual spending could vary significantly based on the Army's requirements and technology adoption rates.
Lington outlined a phased implementation approach, suggesting initial AI applications would focus on "back-office use cases first, like an HR case for benefits," before progressing to logistics and eventually operational applications where "you definitely want to have a human and the agent working together, not an agent working autonomously."
The contract also aligns with the Defense Department's Modular Open-Source Approach (MOSA), an initiative to move away from proprietary systems and enable greater data interoperability across military branches and civilian agencies. This strategic alignment could position Salesforce for additional government contracts as other branches pursue similar technology modernization efforts.
Investors will be watching closely for execution updates in coming quarters, particularly as Salesforce seeks to demonstrate that its government sector growth can complement its core enterprise business. The Army contract provides a tangible validation of the company's AI capabilities beyond commercial applications, potentially opening doors to additional public sector opportunities.