Tata Consultancy Services (TCS), the largest IT exporter in India, has undertaken its most significant workforce reduction, laying off nearly 20,000 employees over the last quarter. This decision, influenced by pressures from artificial intelligence and uncertain US trade policies, has lowered the company’s total headcount to below 600,000, a figure not reached since 2022. In just three months, TCS’s workforce decreased by 19,755 employees, equating to a 3.2% decline from the preceding quarter, as per its latest earnings report. The company has set aside Rs 11.35 billion to address severance costs.
The restructuring primarily targets mid- and senior-level roles, with TCS Chief Human Resources Officer Sudeep Kunnumal indicating that this is a response to skill and capability mismatches, according to Bloomberg. The company is approximately halfway through its initiative to reduce 2% of its global workforce by March 2026, which is part of TCS’s broader strategy to emphasize AI and automation-led services, prioritizing technological efficiency over traditional staffing. Analysts at Citi expressed investor concerns regarding the layoffs, as they reflect a cautious business outlook amid declining global demand and stricter IT budgets.
Quarterly profits fell below expectations, primarily due to one-off costs linked to the layoffs, underscoring how even the most stable IT firm in India is adapting to the changes in the digital economy. Additionally, these workforce reductions occur against a backdrop of increasing geopolitical tensions, notably due to US President Donald Trump’s proposed rise in H-1B visa fees to $100,000 and potential tariffs on Indian imports, which have created uncertainty for India’s IT giants. While the direct impact of tariffs on TCS may be limited, the company is apprehensive about reduced IT spending from American clients, who form a significant portion of its revenue.
To mitigate policy risks, TCS has begun localizing its US workforce to lessen reliance on foreign work visas. Kunnumal emphasized that the company’s business model can adapt swiftly to immigration changes and that TCS will continue to hire talent with future-relevant skills such as AI, machine learning, and data analytics. This transition reflects a broader shift in India’s IT sector from labor-intensive outsourcing to more innovative, technology-driven operations that prioritize specialized expertise. As automation and artificial intelligence reshape the global technology landscape, TCS’s unprecedented layoffs may indicate a wider transformation within India’s IT industry, moving from a focus on manpower to high-tech proficiency.