AI overhaul: India's TCS to cut 12,000 jobs this year after growth slows in Q1

Dubai: Tata Consultancy Services (TCS), India’s largest IT services provider, will cut 2% of its global workforce—or around 12,200 jobs—in the 2026 financial year, the company said Sunday.

The reduction will primarily affect middle and senior management, as TCS adapts to a changing business environment driven by artificial intelligence (AI), new market priorities, and tighter global tech budgets.

TCS, which currently employs 613,000 people, is undertaking what it called a “future-ready transformation,” aiming to streamline operations while retraining and redeploying staff to support AI-driven services and digital infrastructure. This marks the company’s second major workforce cut after a similar move in 2012 when it let go of around 2,500 employees for underperformance.

“This transition is being planned with due care to ensure there is no impact on service delivery to our clients,” TCS said in a statement, adding that the restructuring aligns with its long-term strategy to invest in next-generation technologies, deepen partnerships, and enter new markets.

The layoffs come as India’s $283 billion IT sector navigates a challenging global outlook. Persistent inflation, delayed client decisions, and reduced discretionary spending in the US and Europe have slowed growth across the industry. TCS reported one of its weakest first-quarter performances since the pandemic, with constant currency revenue declining 3.1% and dollar revenue down 1.1% for the quarter ended June.

AI disruption?

TCS CEO K. Krithivasan acknowledged that high single-digit growth may remain elusive in the near term, as deal conversions take longer and clients defer new projects.

Analysts have been flagging how widespread adoption of AI is beginning to disrupt the traditional people-heavy IT services model, pressuring firms to reduce headcount and rethink their pricing strategies. Some clients are reportedly pushing for 20–30% price reductions in new contracts.

While tech layoffs have been a global theme this year—Microsoft alone has announced more than 9,000 job cuts—TCS’s move is significant given its reputation for employee stability. According to Layoffs.fyi, nearly 80,000 employees have been laid off by 169 tech firms globally in 2025 so far.

Industry watchers say TCS’s decision could set the tone for similar announcements from India’s other top IT firms, many of which are already enforcing hiring freezes and delaying onboarding for new recruits until demand rebounds.