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Google will heavily discount cloud computing services for the US government, as the Trump administration pressures technology groups to slash prices on long-standing, lucrative contracts.

The agreement comes after Oracle last week cut a deal with the government, including a 75 per cent discount on some software contracts for a limited period and “substantial discounts” on its wider cloud computing contracts.

Google’s cloud contract is likely “to land in a similar spot”, according to a senior official at the General Services Administration (GSA), which is renegotiating the contracts. A deal is expected to be finalised within weeks.

Equivalent discounts from Microsoft’s Azure and Amazon Web Services (AWS) are expected to follow soon, they said, but those talks are less advanced than with Alphabet, Google’s parent company.

“Every single of those companies is totally bought in, they understand the mission,” the senior official said. “We will get there with all four players.”

Together the four companies account for the bulk of the government’s annual spend on cloud services, which currently exceeds $20bn a year.

President Donald Trump’s administration has been attempting to slash the cost of IT procurement as part of a government-wide effort championed by the so-called Department of Government Efficiency (Doge), previously run by Elon Musk.

The tech giants are keen to avoid a repeat of the adversarial relationship they had with Trump during his first term, which saw AWS lose a lucrative defence contract.

Amazon claimed the move was retaliation for critical coverage of the administration in the Washington Post, owned by the company’s founder Jeff Bezos.

The push by the GSA, which co-ordinates US government procurement, follows similar efforts by the Trump administration to reduce the amount spent on consulting groups such as Booz Allen Hamilton and Deloitte.

The senior official said the GSA would also be renegotiating agreements with ridesharing companies that have contracts with the federal government.

Google agreed to give the US government a 71 per cent “temporary price reduction” on some Workspace contracts in April, until the end of September. The company declined to comment on the pending cloud deal.

Microsoft declined to comment. Amazon and Oracle did not respond to requests for comment. A spokesperson for GSA declined to comment on the ongoing negotiations.

The agency’s cost-saving effort, spearheaded by acting administrator Stephen Ehikian and Federal Acquisition Service commissioner Josh Gruenbaum, follows a series of executive orders signed by Trump that mandate the government to save money in federal procurement.

In the past few months, the GSA had reached deals with Adobe and Salesforce. The latter company cut the price it charged the government to use the messaging service Slack by 90 per cent until the end of November.

Big Tech leaders including Meta’s Mark Zuckerberg and Google’s Sundar Pichai have courted Trump — appearing prominently at his inauguration and ending corporate diversity programmes.

Bezos has also worked to rebuild his relationship with the president — whom he previously criticised as a “threat to democracy”.

During Trump’s first term, in 2019, the $10bn Joint Enterprise Defense Infrastructure (Jedi) cloud project was awarded to Microsoft instead of Amazon. AWS alleged in a lawsuit that Trump “used his power to ‘screw Amazon’” due to a “highly public personal vendetta” against Bezos and the Washington Post.

Ultimately, Jedi was cancelled under Joe Biden and replaced with a $9bn contract that was awarded to Amazon, Google, Microsoft and Oracle.

Larry Ellison, the billionaire founder of Oracle, has formed a close alliance with Trump. Oracle is involved in talks to split viral video app TikTok’s US business from its Chinese parent ByteDance, and is part of a $100bn US data centre infrastructure project alongside OpenAI.

India is set to reach a record year in initial public offerings and Big Pharma is facing a wave of patent expiration dates. Plus, Meta goes to trial over who to hold accountable for corporate scandals.

Mentioned in this podcast:

India on track for record IPO year

The looming ‘patent cliff’ facing Big Pharma

Today’s FT News Briefing was produced by Sonja Hutson, Katya Kumcova, Henry Larson and Marc Filippino. Additional help from Kelly Garry, and Michael Lello. Our acting co-head of audio is Topher Forhecz. Our intern is Michaela Seah. The show’s theme song is by Metaphor Music.

Read a transcript of this episode on FT.com

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Here we go again. That must have been the first thought on the minds of many Tesla shareholders this week as Elon Musk waded back into the political fray, declaring his intention to launch a third party to rival the Republicans and Democrats.

It is less than two months since Musk’s moonlighting for Donald Trump’s administration led a group of Tesla shareholders to call for their chief executive to devote at least 40 hours a week to his day job, and the latest distraction wiped 7 per cent from the stock price on Monday. Musk was unmoved. He told one analyst who suggested the board should tie his pay to the time he spends at work to “shut up”.

But at a time when Tesla is facing sagging sales and mounting competition, anxiety is on the rise and activists are again urging the company’s board to hold its CEO to account. The financial squeeze has raised a question over the carmaker’s heavy investments: Despite a severe cut to capital spending in the latest quarter, free cash flow still amounted to only about half its quarterly average over the previous three years.

Viewed through the lens of the company’s stock price, however, Tesla’s shareholders would seem to have little reason to feel blue. True, much of the euphoria that pumped up the shares following Trump’s re-election has leaked away. But they are still up 15 per cent since the election, handily outperforming the wider market. Tesla’s market cap still dwarfs the rest of the car industry, even though it only accounts for about 2 per cent of global auto sales.

The Musk effect still underpins Tesla’s market cap. The shareholders who have pumped up its stock price are fixated on the technology future that he has conjured up, not the electric car business that is the company’s bread and butter today.

Morgan Stanley, for instance, estimated Tesla’s auto business accounts for less than a fifth of the company’s potential value. Most of the rest depends on its cars achieving full autonomy: After that, it can start to rake in fees from running a network of robotaxis, while also cashing in on the software and services the company’s customers will use once they no longer need to keep their attention on the road.

Full autonomy has been a long time coming. It is nine years since Musk first laid out his robotaxi plans. But he knows how to keep the futuristic vision alive — and make it one that only he can deliver. This week, for instance, he promised that Grok, the large language model from another of his companies, xAI, would soon be embedded in Tesla vehicles — a taste of things to come, when artificial intelligence transforms the experience in robot cars.

Could anyone else persuade investors to suspend their scepticism for so long? The huge Musk premium in Tesla’s shares is an extreme version of Silicon Valley founder syndrome, the belief that only a company’s founder has the vision, and the authority, to pursue truly groundbreaking new ideas (Musk wasn’t around at Tesla’s actual founding, though he was an early investor and became a member of the board soon after). 

Rubbing more salt into the wounds of shareholder activists this week was the revelation that Tesla had failed to meet a legal requirement to hold its annual shareholder meeting on time. The event will now take place in November, nearly four months late.

For boardroom experts such as Nell Minow who have long complained about Musk’s approach to governance and the response of Tesla’s board, this amounted to open contempt for normal corporate transparency: “This is one where he’s really backed himself into a corner. The requirements are very clear.”

Musk told Tesla shareholders before news of his plans for a third party broke that he would give the company much more of his attention. But there are other things that Tesla’s directors could be doing to assuage investor’s worries. One would be to work with him to rebuild Tesla’s executive ranks, which were depleted by another senior departure last week, as well as laying out a long-term succession plan.

Another would be to solve the mess caused by a Delaware court’s rejection of Musk’s $56bn stock compensation plan. Musk has warned he might lose interest in Tesla if he is not given a larger ownership stake.

Who knows, maybe Tesla’s directors could manage to organise annual meetings on time in future. The one thing they will probably never do, though, is prevent their CEO from blindsiding his own shareholders the next time he gets carried away with an idea that has nothing to do with electric cars.

richard.waters@ft.com