The Pentagon just pulled the plug on a major HR tech overhaul—and it's bad news for Oracle (ORCL, Financial) and Leidos (LDOS, Financial). What was supposed to be a $75 million game-changing system for managing 900,000 civilian employees turned into a six-year headache, running $280 million over budget. Defense Secretary Pete Hegseth called it out bluntly: pouring more money into the program would be a waste. Oracle's role in the project was never officially disclosed, but contract records confirmed it. Now, the Department of Defense has 60 days to regroup and come up with a new modernization plan.

Investors didn't take the news lightly. Oracle stock dropped 2%, while Leidos slipped 0.7% at 10am today. Both companies stayed silent, declining to comment. This decision comes amid broader budget tightening driven by Trump's push for government efficiency—now centralized under a new White House department led by Elon Musk. That's put software vendors on edge, especially those tied to big federal contracts. The fact that Oracle was this exposed without public acknowledgment is a wake-up call for anyone betting on long-cycle government deals.

Oracle has historically been a federal favorite, landing high-profile contracts like the $16 billion VA health records upgrade. But with cost-cutting now front and center—and Musk influencing tech and budget decisions from inside the administration—even firms with deep political ties aren't safe. For investors, the message is clear: government tech spending isn't what it used to be, and the ripple effects could reshape the landscape for contractors in the months ahead.