MUMBAI: Tata Consultancy Services (TCS), India’s largest IT services firm, is preparing to reduce its workforce by 2% in the financial year FY26, impacting around 12,200 jobs. Media reports indicate that the layoffs will primarily affect middle and senior-level management roles as the company adjusts to the realities of AI-driven transformation and weakening global demand.
The decision marks the third cost-reduction initiative by the company in just three months. Earlier in April, TCS deferred employee wage hikes, followed by a June policy limiting the non-billable period for employees to 35 days annually. These measures are part of the firm’s efforts to maintain operating margins in a challenging business environment.
Jefferies Flags Attrition Risk, Compares Situation to Cognizant’s Past
Global brokerage firm Jefferies expressed concern over the layoffs, stating they could trigger short-term execution risks and long-term attrition issues. Despite not being the best paymaster, TCS has enjoyed lower-than-industry attrition levels due to career stability. But ongoing cost controls may reverse that,” Jefferies stated in a recent note.
Drawing parallels with Cognizant’s restructuring between 2020 and 2022, Jefferies warned that TCS could see a spike in employee exits if it fails to balance efficiency with workforce morale. The firm also noted that TCS’s focus on cost optimisation may reflect a broader trend in the IT sector, where productivity demands are rising amid AI integration.
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Layoffs Echo Global IT Job Cuts
While TCS is the first major Indian IT company to announce layoffs this year, global tech giants have already acted. In February, Google trimmed 5% of its workforce, around 3,600 roles, targeting low performers and reallocating resources to AI functions. Microsoft laid off 9,100 workers, nearly 4% of its staff.
TCS CEO K. Krithivasan, in a recent interview, emphasised the need for agility. “We need to be future-ready. The ways of working are changing with new technologies and operating models,” he said.
Jefferies concluded that the slowdown in global IT hiring, evident since FY22, reflects prolonged moderation in the demand outlook. While the TCS layoffs may be company-specific for now, they signal growing challenges for the sector as it adapts to the next phase of digital evolution.