The FY27 federal budget request was released on April 3^rd, and is providing an initial look at the momentum and impact IT investments will have in the coming years.

The Department of War’s unprecedented $1.5T request underscores attention on national security and pushing towards next-generation warfighting capabilities, while across the whole of government, there is expected to be a continued mandate to drive efficiency, consolidate systems and align technology investments with administration priorities.

On a typical day in 2024, the Defense Health Agency (DHA) reported the military health system (MHS) encountered 164,000 patients and 205,000 procedures across military hospitals and medical clinics globally. Assuming this pace continues throughout the fiscal year, MHS is estimated to have managed 60 million occurrences in FY25. The sheer volume of data generated across the MHS is immense. Optimizing this data is critical for clinicians and healthcare providers to support the health and readiness of service members.

In June 2025, Texas signed the Responsible Artificial Intelligence Governance Act into law, outlining statutory requirements for the state’s use of AI. In response to this, the Texas Department of Transportation (TxDOT) released an updated Artificial Intelligence Strategic Plan in January 2026.

The Air Force (DAF) has been aggressively pushing for the modernization of its networks, legacy systems, and software; in line with these efforts is an equally robust acquisition overhaul designed to speed up procurement of everything it buys, from weapon systems to cloud services and digital applications. For IT companies, this shift is creating new opportunities but also means new expectations, greater competition, and challenges. 

In mid-March, AFCEA NOVA hosted the Naval IT Day in Chantilly, Virginia with the core message on how Navy and Marine Corps digital priorities are enabling the naval force. The message was clear, IT is not just a necessary function, it is a mission-critical warfighting capability.

In early March, the White House released the National Cybersecurity Strategy, outlining a six-pillar framework designed to guide federal cyber policy, investment, and operational priorities over the coming years.

During this year’s Smart Cities Connect Conference and Expo in Raleigh, NC, one topic garnered considerable attention: AI. Within many city governments, AI is past experimentation and has moved into production. In 2026, city IT leaders are prioritizing  safe, secure, and data-driven AI deployments that deliver measurable outcomes in mobility, public safety, infrastructure management, and climate resilience.

However, as cities move toward operational AI, challenges exist around data readiness, governance, and integration across departments.

In 2023, California Governor Gavin Newsom signed Executive Order N-12-23, directing state government institutions to utilize AI. These state entities are now beginning to move from the theoretical planning phase into the deployment phase with concrete plans.

This year’s Beyond the Beltway conference highlighted key strategic findings from IT leaders that signal where 2026 technology investments will be made and where to focus efforts for success. In 2026, state and local governments are at an inflection point: with rising expectations evolving alongside tightening budgets, staffing and timelines, success will depend on alignment of solutions to modernization requirements, workforce challenges and measurable ROI-driven outcomes.

The Golden Fleet, a US Navy initiative introduced by the administration in December of 2025, aims to revitalize the US shipbuilding industry, develop and sustain a new class of naval fleet and change how it does business to rapidly address maritime threats, particularly from China, in the Indo-Pacific region. The first frigate is planned for full operation in 2028.