TCS Layoffs Just The Beginning? Experts Warn Of More IT Job Cuts Ahead
Experts say the fact that TCS — historically seen as one of the most stable employers — has taken this step signals a broader industry shift
IT Layoffs 2025: Tata Consultancy Services' (TCS) announcement of laying off 12,000 employees — roughly 2% of its global workforce — has sent ripples across the Indian IT sector, with industry experts cautioning that the move could trigger similar actions from other major players. According to TCS CEO and MD K Krithivasan, the phased job cuts will take place throughout FY26.
The decision, which marks one of the largest retrenchment drives in TCS's history, comes amid multiple structural challenges — ranging from margin pressures and skill mismatches to disruption from artificial intelligence (AI). TCS currently employs over 6.13 lakh people.
As of July 28, TCS shares closed 1.61% lower at Rs 3,083.95 on the BSE following the announcement.
'If TCS is doing it, it becomes more acceptable across the board," said Ashutosh Sharma, VP & Research Director at Forrester, in a statement to Moneycontrol. 'Every IT organisation has launched margin improvement initiatives. Margins are falling as managed services offer thinner profitability."
Even HCLTech, in its Q1 FY26 earnings call, confirmed a 'talent ramp-down" as part of a broader global restructuring strategy. CEO and MD C. Vijayakumar stated that this process has already begun in certain international markets and will be clarified further as plans are finalized.
'This is not a micro-level issue; this is a macro concern," added Pareekh Jain, CEO of Pareekh Consulting and EIIRTrend, to Moneycontrol. 'After TCS, more companies who weren't even considering layoffs may now see it as a viable option to manage headcount. It won't stop at just 2%."
According to Jain, recent acquisitions made by TCS's peers like Infosys, HCLTech, and Wipro may have added excess headcount, which could now come under review.
Staffing expert Sriram Rajagopal, founder of Diamondpick, pointed out that the biggest impact would be felt at the mid- and senior levels.
'After the pandemic, many were promoted quickly to offer growth opportunities. Now, with generative AI tools proving their efficiency, companies may not need as many in these layers," he explained. 'When margins are under pressure, the focus shifts to trimming non-billable roles."
In a note to clients, Citi Research observed that TCS, despite being a relatively lower paymaster, has traditionally had better-than-average attrition thanks to job stability and clear career growth. 'These layoffs could dent employee morale in the short term and might lead to execution gaps," Citi analysts wrote. 'Longer term, it could result in increased attrition, similar to the trend seen at Cognizant between 2020–2022."
Behind the Cuts: Margin Stress, AI & Changing Models
The layoffs follow TCS's recent update to its internal HR policy, mandating 225 billable days annually and restricting bench time to 35 days.
While Krithivasan emphasized in a recent interview that the layoffs were not directly tied to AI or margin pressures, analysts disagree.
As per Phil Fersht, CEO of HFS Research: 'AI is eating into the people-heavy service delivery model. Large firms like TCS are being forced to rebalance their workforces to protect margins and offer competitive pricing. Clients are demanding 20–30% rate reductions."
Fersht told the news outlet that the fact that TCS — historically seen as one of the most stable employers — has taken this step signals a broader industry shift.
Citi Research further noted that multiple factors likely drove TCS's decision — including productivity pressures due to AI, a decline in demand for certain legacy skills, slow redeployment, and ongoing margin strain amid tech transformation.
Krithivasan explained: 'We have been calling out new technologies, particularly AI and changing operating models. Some roles are no longer feasible to redeploy. This decision, though difficult, is meant to make us more agile and future-ready."
He added that the job cuts are primarily at mid and senior levels, and emphasized the company's investment in reskilling and career development for employees. 'Still, we found certain roles couldn't align with the direction we are headed."
Forrester's Sharma further told Moneycontrol that TCS has been margin-focused for years, setting ambitious profitability targets well above the industry average.
He pointed out that TCS, like other IT giants, ramped up hiring based on bullish forecasts, which didn't fully materialize.
TCS's Chief Human Resources Officer Milind Lakkad echoed this at the Q1 earnings call on July 10: 'Hiring should not be linked to quarterly growth. We had hired heavily early on and then faced business challenges, which created a mismatch."
HFS Research's Fersht believes this trend will last for at least a year as IT companies train junior employees in AI tools while phasing out those who cannot align with the emerging 'services-as-software" model. 'The new services industry is fundamentally different — fewer people, but sharper skills tied to core AI platforms," he explained.
What the Data Says
According to UnearthInsight, the IT sector is grappling with both demand slowdown and AI-driven disruption. Growth that used to range from 7–10% is now closer to 3–5%, while reskilling has proven difficult for many experienced professionals. 'This is a clear case of skill mismatch. Either TCS is offering services the market doesn't want, or its workforce lacks the skills that are in demand," said Gaurav Vasu, founder and CEO at UnearthInsight, told Moneycontrol.
As the industry transitions to AI-aligned delivery models and clients push for leaner, more cost-effective deals, TCS's move may only be the beginning of a broader reshuffle in India's $245 billion IT services landscape.
About the Author
Aparna Deb
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a...Read More
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July 29, 2025, 07:55 IST
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