TCS Announces Layoffs, Shares Decline 2%

Tata Consultancy Services (TCS) announced plans to lay off around 12,000 employees, about 2% of its global workforce, due to a strategy to become a "future-ready organization." The company will provide benefits, outplacement, and support to the impacted employees. The move comes as India's top IT services companies have reported single-digit revenue growth in Q1FY26, citing macroeconomic instability and geopolitical tensions. TCS shares declined nearly 2% on the announcement.

Tata Consultancy Services (TCS), India's largest IT services provider, has announced plans to reduce its global workforce by approximately 12,200 roles, equivalent to 2% of its 613,000-employee workforce, by the end of fiscal year 2026. The restructuring, termed a "future-ready transformation," will primarily target mid- and senior-level positions as the company reallocates resources toward artificial intelligence (AI) adoption, digital infrastructure, and expansion into new markets [1].

The decision follows a challenging first-quarter performance for TCS, marked by a 3.1% decline in constant currency revenue and a 1.1% drop in dollar revenue. These declines were attributed to delayed client decisions, inflationary pressures, and reduced discretionary spending in key markets like the U.S. and Europe [2]. CEO K. Krithivasan acknowledged that near-term growth targets remain difficult to achieve, as clients increasingly defer projects and demand lower pricing for new contracts [3].

The layoffs aim to streamline operations while retraining and redeploying staff to align with TCS's evolving business model. The company has already begun scaling AI deployment and identifying future skill sets, stressing the need for the company to remain "agile" and "future-ready" [4]. Phil Fersht of HFS Research highlighted that traditional labor-intensive models are being disrupted, forcing large firms like TCS to restructure workforces to protect profit margins amid client demands for 20–30% cost reductions [5].

The scale of the layoffs marks a significant escalation compared to past workforce adjustments. In 2012, TCS cut 2,500 roles due to underperformance, but the current reduction—nearly five times larger—reflects a more aggressive realignment with market dynamics [6]. The company assured clients that service delivery would remain unaffected, framing the move as part of a long-term strategy to deepen partnerships and invest in next-generation technologies [7].

India's IT sector faces compounding pressures, including a 3.9 million shortfall in cloud computing professionals and a 700,000 deficit in cybersecurity expertise. Meanwhile, only 51% of graduates are deemed job-ready for core technology roles due to outdated curricula and inadequate practical training [8]. These structural challenges, coupled with rising recruitment costs and profit margin pressures from underutilization and subcontracting, have intensified the need for cost optimization [9].

The announcement coincides with a global wave of tech sector layoffs. Over 80,000 tech workers worldwide were laid off in 2025 alone, including Microsoft’s recent decision to cut 9,000 jobs [10]. TCS’s move, however, is particularly notable given its reputation for employee stability. Industry observers suggest other top Indian IT firms may follow suit, with many already implementing hiring freezes or delaying onboarding until demand rebounds [11].

TCS shares declined nearly 2% on the announcement, reflecting investor concerns about the company's ability to navigate the challenging economic environment and maintain its growth trajectory. Despite the layoffs, TCS remains committed to supporting its employees through this transition, offering benefits, outplacement, and support services [12].

References:
[1] https://www.reddit.com/r/developersIndia/comments/1mak83m/tcs_to_lay_off_around_12000_employees_tata/
[2] https://www.cnbctv18.com/market/tcs-to-cut-2-of-global-workforce-in-middle-and-senior-grade-over-next-12-months-19644157.htm
[3] https://www.moneycontrol.com/news/business/tcs-to-cut-2-of-workforce-affecting-12-000-employees-amid-skill-gap-and-tech-shift-13333687.html
[4] https://www.ainvest.com/news/tcs-cuts-12-200-jobs-2-workforce-boost-ai-digital-push-revenue-slump-2507/
[5] https://www.cnbctv18.com/market/tcs-to-cut-2-of-global-workforce-in-middle-and-senior-grade-over-next-12-months-19644157.htm
[6] https://www.moneycontrol.com/news/business/tcs-to-cut-2-of-workforce-affecting-12-000-employees-amid-skill-gap-and-tech-shift-13333687.html
[7] https://www.ainvest.com/news/tcs-cuts-12-200-jobs-2-workforce-boost-ai-digital-push-revenue-slump-2507/
[8] https://www.cnbctv18.com/market/tcs-to-cut-2-of-global-workforce-in-middle-and-senior-grade-over-next-12-months-19644157.htm
[9] https://www.moneycontrol.com/news/business/tcs-to-cut-2-of-workforce-affecting-12-000-employees-amid-skill-gap-and-tech-shift-13333687.html
[10] https://www.ainvest.com/news/tcs-cuts-12-200-jobs-2-workforce-boost-ai-digital-push-revenue-slump-2507/
[11] https://www.cnbctv18.com/market/tcs-to-cut-2-of-global-workforce-in-middle-and-senior-grade-over-next-12-months-19644157.htm
[12] https://timesofindia.indiatimes.com/city/bengaluru/tata-consultancy-services-to-axe-12000-jobs-it-firms-biggest-layoff-ever/articleshow/122939485.cms