TCS to Slash Over 12,000 Jobs in FY26: A Bold Move or a Risky Bet?
On July 27, 2025, Tata Consultancy Services (TCS), the largest IT services company in India, shocked the IT industry when it announced it would be reducing its workforce by 2%, this equates to over 12,000 employees in the 2025-2026 financial year (April 2025-March 2026). TCS CEO K. Krithivasan said this was “one of the toughest” decisions during his leadership, with 80% of affected employees falling between middle and senior management. The TCS layoffs were a sign of the companies focus toward artificial intelligence (AI) and emerging technologies (Select the technology with the superior result) as TCS works to remain competitive. TCS, had a workforce of 613,069 as of June 2025, and sparked considerable controversy over the future of India’s $283 billion IT sector, job security for employees, and the role of government to address economic disruptions. What drove this drastic actions, and what does this mean to develop India?
The Layoff Plan: A Strategic Overhaul
The announcement from TCS is, as reported by Reuters and Moneycontrol, an organizational restructurization meant to make the company “future-ready and agile.” The layoffs, that impact approximately 12,200 employees, are not only about cutting costs; it is about employing a workforce that matches the required skills needed in a changing market. CEO Krithivasan pointed out that the depth of change in AI and automation has reduced the demand for certain roles like manual testing, leading to a need for a re-imagining of the workforce. Even though TCS added 6,071 employees in Q1 FY26, TCS is looking to focus on quality over quantity, and has over 1.14 lakh employees certified to work in advanced AI skills, which included 15 million hours of upskilling. The company maintains that it will treat this transition sensitively, and will offer severance packages, notice period pay, extended health insurance, and outplacement services to reduce the disruption for impacted employees.
Economic and Global Pressures
The downsizing occurs in the climate of economic constraints both globally and domestically. India’s IT industry, a key pillar of the economy, has sluggish demand, continued inflation, and uncertainty around U.S. trade agreements after the recent U.S. tariff reframing with Japan and the EU. Clients want 20-30% price discounts, forcing companies such as TCS to optimize their business to protect profit margins, according to Phil Fersht, CEO of HFS Research. While TCS grew 6% in net profits to ₹12,760 crore and 1.3% in revenue to ₹63,437 crore, the company reported extended lead times on clients making decisions and kicking off projects, suggesting a cautiousness in spending. Constraining factors along with growth of AI and disruptions to conventional labor-intensive models prompted TCS to reconsider its workforce policy.
Political and Social Implications
The layoffs have sparked a frenzy of worries, with social media platforms like X undergoing a flurry of activity. Users like @indraroy warned, “The AI threat is already present,” predicting “huge ramifications” for the IT sector in India, while @Finprofz estimated the layoffs could save TCS ₹1,200 crore – effectively raising profits by 2-3%. The Nascent Information Technology Employees Senate (NITES) slammed the layoffs from TCS, with NITES’s president Harpreet Singh Saluja contending that mass layoffs without transparent reasoning begins to erode not only job security, but also the social responsibilities to those taking care of employees as part of their mandate. The timing is also sensitive since the Indian Parliament is currently amid the Monsoon Session where national security and economic policies are important topics. It has also raised questions about the government’s plans to address job losses in an important industry. The opposition is likely to take advantage of this issue to challenge the BJP-led government’s economic management, particularly since IT is an industry where many of India’s youth are employed.
Industry-Wide Impact
TCS’s actions may set the tone for IT architecture. Other IT giants like Infosys and Wipro may follow suit as they also contend with struggles to make the changes required by AI technology and increased pressures from clients to cut costs. The attrition rate in the sector is at an all-time high, having risen to 13.8% in Q1 FY26 for TCS, creating even more uncertainty. As a side note, TCS has ambitious plans for Freshers Hiring in FY26, having already hit their current dining table goal of 40,000. However, as TCS and others have begun focusing on efforts tied to AI and automation in their working environments, there may be limited opportunities for those at the mid-level. With the shift towards AI, competition could increase while falling wages could provoke unrest, worried Reddit users have previously voiced their predictions about AI job losses of individuals unable to adapt quickly to changes within their role brought upon by automation. As evidenced, the government is relatively sheltered from such consequences to a certain extent of job strain in the public sector, but they have been pressured to provide the necessary funding to carry out reskilling programs of displaced workers.
What’s Next for TCS and India’s IT Sector?
While TCS enacts layoffs, it is also going big on AI as it implements investments in infrastructure and collaboration with hyperscalers. In terms of Krithivasan’s vision of a TCS that is “future ready,” the intent is to leverage AI at scale across client-facing applications as well as within internal operations; there is no denying the implications of going through this transition in the social aspect. The layoffs combined with recent bad press about TCS’s “bench” policy and the delays in bringing 600 lateral hires onboard have created lawsuits from employees for good measure into TCS’s burden with all of their struggles. The government could also feel the pressure in terms of influence over policy in the area of assistance with displaced workers, which might arise as re-skilling efforts or even tax-break incentives directed at IT firms that could hire these displaced individuals.
TCS cutting itself by over 12,000 jobs in FY26 is a pivotal moment for India’s IT industry that signifies the disruptive potential AI technology can have in addition to other economic factors globally present at the time. TCS might want to be as efficient as any firm can be, but immediate questions arise that involve job security, security in the overall economy and governmental agenda surrounding issues of navigating it as technology shifts. While these problems confront India, it would not be surprising to see the TCS layoffs open the door for a much bigger and complex IT sector future while it maintains a balance between innovation expectation and social responsibility. Kindly consider this issue as it develops.
