Microsoft Awarded $22 Billion Contract To Supply U.S. Army With AR Headsets

Microsoft Corp. has agreed to build custom augmented-reality headsets for the U.S. Army in a deal worth up to $21.9 billion, expanding the technology company’s role as a major government supplier.

The augmented reality systems are based on its HoloLens 2 device called Integrated Visual Augmented Systems (IVAS). The devices are designed to help soldiers, "fight, rehearse and train using a single platform," the Army said in an announcement confirming the contract.

In a blog post, Microsoft Technical Fellow Alex Kipman said the headsets are designed to deliver “enhanced situational awareness, enabling information sharing and decision-making in a variety of scenarios.”

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Under the terms of the contract, Microsoft would provide at least 120,000 headsets to the army’s entire close combat force, a company spokesperson said. The contract could be worth up to $21.9bn over 10 years, depending on how many devices were eventually delivered, the spokesperson added.

The contract builds on the two-year $480 million contract that Microsoft won back in 2018 to outfit the U.S. Army with augmented reality tech. At the time, the contract detailed that the deal could potentially result in follow-on orders of more than 100,000 headsets. “Augmented reality technology will provide troops with more and better information to make decisions. This new work extends our longstanding, trusted relationship with the Department of Defense to this new area,” a Microsoft spokesperson said at the time.

Even so, the IVAS award opens up a sizable new line of business for the Redmond, Wash.-based computing giant, which is among several large West Coast tech companies looking to expand their business with the military. In 2019, Microsoft beat its rival Amazon to win the $10 billion contract for the Defense Department’s central cloud computing system, known as JEDI. The JEDI award has been tied up in bid protest litigation ever since.