Why on earth would defense contractors and the military outsource data storage???? The Chinese haven't been able to hack into the normal secured servers?
"The cloud" is just a term for "somebody else's datacenter", and it's filled with honkin' big compute resources as well as data storage.
Some of the contract work we and other defense contractors do requires compute resources beyond those we can readily place on-premises and maintain in a cost-effective way for short-term use (a 1-yr contract for example). So we make use of AWS GovCloud compute capabilities. Some data storage is involved, of course, but it's typically just that which is directly tied to the compute instance.
The security aspects of any datacenter are real, and nothing is absolutely, perfectly secure, but the concerns are adequately addressed by both Amazon's (AWS) and Microsoft's (Azure) datacenters, at least to the government's satisfaction, and thus to ours.