Government contractors and architecture and engineering (A&E) firms continue to invest in artificial intelligence while navigating labor shortages, rising costs and cybersecurity risks, according to Deltek's latest annual Clarity industry studies.
The reports, based on survey responses from 917 government contractors and 896 A&E firms across the U.S. and Canada, found organizations are pursuing growth but continue to face pressure on profitability, workforce capacity and technology adoption.
Among government contractors, firms reported average revenue growth of 15% in 2025 and project another 16% growth in 2026. However, nearly 90% of respondents said at least one financial metric declined, with rising labor costs, overhead expenses and subcontractor costs cited as the primary factors.
Artificial intelligence adoption also continues to accelerate. Ninety percent of government contractor respondents said they are using or plan to use AI in at least one business function in 2026, but only 5% described their organizations as fully mature in AI implementation. Nearly half said they remain uncertain about AI's return on investment, while data privacy, cybersecurity and inaccurate forecasting remain top concerns.
The study also found compliance and cybersecurity continue to play a larger role in business operations. Ninety-six percent of respondents expect compliance costs to remain elevated or increase, and cybersecurity ranked among the top audit risk areas.
For A&E firms, respondents forecast 9.5% net revenue growth in 2026, although workforce constraints continue to limit project delivery. Firms reported staff growth of just 1.2% alongside employee turnover exceeding 13%, while utilization and operating profit both declined compared with previous years.
AI adoption among A&E firms increased from 53% to 70% year over year, but only 38% of respondents reported measurable business benefits from the technology. Many firms said they are still determining how to integrate AI into daily operations and measure its impact.
Cybersecurity also remains a concern, with 93% of A&E firms reporting at least one cyberattack attempt during the past three years and one in five experiencing a successful attack that resulted in financial or reputational damage.
