DOD’s $66B IT budget pivots to AI and efficiency

Where does the Defense Department plan to spend its increased budget for the 2026 fiscal year? Not surprisingly, the DOD as a whole — as well as each branch of service — is adding to its artificial intelligence investment, with cuts planned to some previously ongoing line items, such as defense business systems and cloud.

The department’s total IT budget request for fiscal 2026 is $66 billion, a $1.8 billion increase from 2025. The IT budget includes: $14.3B dedicated to cyberspace activities, which is a $967 million increase; and $51.8 billion dedicated to non-cyber IT, which is an $837 million increase from fiscal 2025.

The largest spending increases include:

• $1.53 billion, a 6.7 percent increase, for IT infrastructure
• $396 million, a 22 percent increase, for financial management
• $305 million, a 55.4 percent increase, for centrally-managed enterprise software licenses

The largest IT spending decreases for FY2026 include:

• $446 million, a 13.9 percent decrease, for command and control
• $426 million, a 52.1 percent decrease, for battlespace awareness
• $320 million, a10.1 percent decrease, for logistics

Budget for the Army

The Army has requested a total IT budget of $16.7 billion for fiscal 2026. This is a decrease of $431 million, or 2.5 percent from 2025. AI tops their priority list, while force training is expected to see the biggest spending decrease from 2025. 

The largest IT spending increases for the Army are:

• $507 million, a 38.3 percent increase, for AI

• $443 million, an 820.4 percent increase, for force protection

• $135 million, a 435.5 percent increase, for DOD enterprise services

The largest FY2026 IT spending reductions for the Army

include:

• $613 million, an 11.7 percent decrease from 2025, for non-core network infrastructure

• $550 million, a 32.1 percent decrease from 2025, for force training

• $323 million, a 15.5 percent decrease from 2025, for defense business systems

Budget for the Navy

The Navy requested a total IT budget of $13.3 billion for fiscal 2026. This is an increase of $343 million, or 2.7 percent, from 2025. AI and infrastructure saw the largest increases, while both IT management and HR management are projected to experience double-digit cuts.

The largest IT spending increases for the Navy include:

• $493 million, a 25.7 percent increase from 2025, for non-core network infrastructure

• $308 million, a 22.7 percent increase from 2025, for AI 

• $251 million, a 14 percent increase from 2025, for cyberspace activities

The largest IT spending reductions for the Navy are projected to include:

• $583 million, a 56.4 percent decrease from 2025, for IT management

• $223 million, a 31.4 percent decrease from 2025, for human resources management

• $219 million, an 8 percent decrease from 2025, for defense business systems

Budget for Air Force 

The Air Force requested a total IT budget of $11.8 billion for fiscal 2026. This is a decrease of $477 million, or 3.9 percent, from 2025. As with the other service branches, the Air Force is expected to increase its spending in AI, although force application is expected to experience an even more substantial bump. Cloud investment is expected to be less in FY2026 than in FY2025. 

The largest IT spending increases for Air Force include:

• $415 million, a 21.7 percent increase from fiscal 2025, for AI 

• $405 million, a 14.7 percent increase from 2025, for cyberspace activities

• $230 million, a 143.8 percent increase from 2025, for force application

The largest IT spending decreases for Air Force are projected to include:

• $276 million, a 31.1 percent decrease from 2025, for cloud

• $169 million, a 10 percent decrease from 2025, for core network infrastructure

• $157 million, a 9.6 percent decrease from 2025, for defense business systems

Big Beautiful Bill IT priorities

Much of DOD’s and the services’ requests are in keeping with funding priorities approved by Congress in the One Big Beautiful Bill Act.

The OBBBA funds nearly $143 billion to the department across 10 use areas; about $45.6 billion of that is dedicated to IT-related spending.

The largest investments are in command-and-control systems for air and missile defense to begin funding Golden Dome efforts. The bill also includes more than $9.8 billion for the development of autonomous and unmanned systems across the DOD.

Technologies emphasized in the OBBBA include development of low-cost weapons derived from unmanned systems, AI-enabled analytics, and cyber and electronic warfare.

AI. The OBBBA funds about $2.5 billion for AI. The largest area of funding is $1 billion to improve munition depth and supply chain resiliency, with next-generation automated munitions production factories.

Autonomy and unmanned systems. The bill calls for $9.8 billion for autonomy and unmanned systems. The largest funding line item is $5.1 billion to enhance shipbuilding through expansion of the unmanned vessels fleet.

Command and control. Under OBBBA $13.5 billion is allocated to command and control. The largest amount of funding is $7.2 billion to air and missile defense for development, procurement and integration of military space-based sensors.

Cybersecurity and electronic warfare. About $3.7 billion is earmarked for cybersecurity and electronic warfare. The largest funding area is $1.6 billion to improve munition-depth supply chain resiliency by cryptographic modernization activities.

Infrastructure and modernization. Funding for infrastructure and modernization is $8.9 billion. The largest part of that funding, $2.5 billion, is for readiness improvements through Air Force facilities sustainment, restoration and modernization.

Network and communications. Funding for these projects is set at about $1.3 billion, with the largest amount, $500 million, going toward low-cost weapon development through the accelerated development and integration of advanced 5G/6G technologies.

Commercial solutions and program elimination

The DOD is increasing its preference for commercial solutions and establishing new procedures for non-commercial acquisitions. Policies are indicating a preference for acquisition through Other Transaction Authorities (OTAs) and Commercial Solutions Openings (CSOs) across the DOD. Proposed changes would remove the requirement that a non-traditional defense contractor be involved in OTAs.

DOD also is eyeing the elimination of over-cost and behind-schedule programs.

Executive Order 14265 initiated a review of major defense acquisition programs, with any program 15 percent behind schedule or over budget to be considered for cancellation. 

Authority-to-operate (ATO) is being sped up with The Software Fast-Track (SWFT) initiative. SWFT aims to reform the traditional ATO process and to begin continuous authorities-to-operate (cATO). This includes reviewing software supply chains, open-source software, security requirements and information sharing mechanisms. Companies will need their Software Bill of Materials (SBOMs) to undergo third-party assessment for factors, including the company’s cybersecurity posture and overall financial health. Certified documentation will be uploaded to Enterprise Mission Assurance Software Service (eMASS), the DOD web-based application used to automate Risk Management Framework (RMF) processes, manage cybersecurity compliance and generate system authorization packages. That documentation will be analyzed using AI tools to grant an ATO.

Consumption-based solutions are also emerging as a trend. The DOD may acquire solutions such as cloud and AI via a consumption-based model. 

Section 809 directs the Secretary of Defense to establish a pilot program to explore the use of consumption-based solutions to address DOD needs. The pilot program will result in contracts and other agreements for anything-as-a-service, i.e., technology-supported capability using any combination of software, hardware or equipment, data and labor services. Under this pilot program, anything-as-a-service capability must be metered and billed based on actual usage of fixed price units. program. This pilot program is intended to promote continuous competition and better business practices at the DOD.

Finally, new policies are set to reform program and budget structures away from a program-centric model to a capability-centric model. These changes would place programs under Major Capability Activity Areas (MCAAs) with focuses such as unmanned aircraft systems (UAS), counter-UAS, electronic warfare and others. 

Programs within an MCAA would be granted modified transfer authority of up to 40 percent of the total MCAA appropriation without requiring Congressional approval. It is unlikely that Congress will give away their authority over this, but it may change to specialized temporary pools of money for modernization.

Takeaways

When responding to RFIs, here are some key things to remember:

Emphasize efficiency, department-wide usefulness and past commercial successes.

Mission fulfillment is still critical across the DOD, but agencies will look at how solutions can increase efficiency while helping accomplish the mission.

Highlight how your solution can cut government waste, cut costs and speed timelines. The DODis prioritizing solutions that can be used across the entire department, not just one service or agency.

Detail past commercial successes. Explain how your solutions have already helped organizations with similar missions. The DOD is emphasizing dual-use technologies and wants to cut non-commercial solutions from its portfolio.

To understand more details about the Defense Department’s fiscal 2026 budget and discover actual program opportunities, contact immixGroup .

Joshua Iseler is a market intelligence manager for immixGroup, the public sector business of Arrow Electronics. immixGroup delivers mission-driven results through innovative technology solutions for public sector IT. Visit immixGroup.com for more information.