IT firm, Tata Consultancy Services (TCS) plans to reduce its workforce by 2 per cent in the financial year FY26, as per media reports. The move is expected to affect around 12,200 jobs, from its total workforce of over 6.13 lakh. Jefferies believes the move could lead to short-term execution issues and a long-term spike in attrition.
The layoffs will mostly target middle and senior management roles as the IT giant looks to rebalance its workforce amid rising AI adoption and slowing global demand.
Third cost-cutting move in three months by TCS raises concerns
Jefferies flagged that this is the third major cost-cutting move by TCS in just three months. In April, the company deferred employee wage hikes, followed by new guidelines in June that limited the non-billable period for employees to 35 days per year.
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These efforts reflect TCS’s intent to protect margins in a tough business environment. However, Jefferies warned that this could hurt the company in the long run. “Despite not being the best pay-master, TCS has enjoyed lower-than-industry attrition levels as it offered long-term career path and job-stability to its employees. In the near term, the ongoing layoffs will hurt employee morale and could potentially lead to execution slippages. In the longer run, such policies could drive a sharp rise in attrition,” the brokerage said.
Will TCS layoffs spill over other Indian IT companies
Jefferies noted that while TCS’s layoffs appear company-specific, net hiring across the IT sector has dropped since FY22. “Aggregate net hiring at industry level has been weak since FY22, mainly due to the prolonged moderation in demand outlook,” Jefferies noted
Though TCS is the first among Indian IT peers to announce layoffs, international IT firms like Google and Meta had already trimmed their workforce earlier this year. In February 2025, it eliminated around 5 per cent of its workforce (approximately 3,600 roles), targeting so-called “low performers” across various divisions, as it ramped up hiring for AI-related roles. Microsoft also announced one of its largest job cuts this year, laying off 9,100 employees – nearly 4 per cent of its workforce.
Jefferies highlighted, “With cost optimization being the key driver for new deal wins,
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