TCS' layoffs jolt IT industry; further job cuts feared with mounting cost pressures, AI, automation

New Delhi: The shocking 12,000 layoffs in TCS may not be the end of job cuts, as analysts fear AI and automation will lead to more downsizing in the industry in the times to come.

A look at the headcount dashboard of TCS -- India's largest IT services company -- over the past years shows that the company's employee count peaked in FY23 at 6.14 lakh, and dropped in the next two fiscal years.

The employee tally grew from 4.48 lakh in FY20 to a record high of 6.14 lakh at the end of FY23, adding nearly 1.7 lakh employees in just three years. TCS experienced a notable decline of 13,249 in its workforce the following year, with the number falling to 6.01 lakh in FY24.

After FY24, the company saw a modest rebound -- its employee numbers rising to 6.07 lakh in FY25 and reaching 6.13 lakh in the first quarter of FY26.

In fact, between April and June 2025, the company's workforce increased by over 5,000 employees.

The Tata Group company has said it will lay off more than 12,000 employees, or 2 per cent of its global workforce, this year. The jolt will be felt most in the middle and senior grades.

TCS said the move is part of the company's broader strategy to become a "future-ready organisation", focusing on investments in technology, AI deployment, market expansion, and workforce realignment.

Tarun Pathak, Research Director at Counterpoint Research, believes TCS's move reflects a combination of macroeconomic pressures, shifting client expectations, and a broader industry pivot toward agile, outcome-based delivery models.

The introduction of a stricter bench policy underscores the focus on optimising workforce utilisation.

He observed that though TCS clarified that these cuts aren't driven by AI, the move comes at a time when automation and AI adoption are increasingly influencing workforce decisions across the tech industry.

Globally, he said, companies are reassessing roles and skills to align with new digital priorities.

"For Indian IT services companies, this marks a transition towards more efficient and performance-focused workforce models," he said.

Faisal Kawoosa, Chief Analyst and Founder of Techarc, noted that enterprises are expecting IT services companies to do more for less, using AI.

"So cost pressures will further force layoffs. We should see this as part of larger evolution of AI-driven IT where human agents will fast be replaced by AI agents who compete on skills and are proficient with current human skills," he said.

Prabhu Ram, VP, Industry Research Group (IRG), CyberMedia Research (CMR), said the TCS layoffs highlight several headwinds the company is facing, including margin pressures and evolving client priorities amid a challenging demand environment.

"As AI adoption accelerates, clients are placing greater emphasis on cost-efficiency and measurable productivity gains. In response, TCS and other IT majors are leveraging AI and automation to boost efficiency, striving to deliver more with existing teams or maintain output with leaner workforces to capture a larger share of client spending," Ram said.

TeamLease Digital CEO Neeti Sharma said every company today is looking towards an AI-led transformation -- in terms of people, processes, and technology.

"They are making heavy investments in upskilling their existing employees and the new ones being onboarded. The ones that do not upskill or fit the future structure, may have to be let go. So we will see changes across companies, many positive and few negatives in the long run," she said.

The TCS layoffs decision has unnerved IT sector workers, sparking widespread concerns and debate that has spilt over to social media platforms.

"TCS did not plan well or did not expect AI adoption by some of their clients/sectors so quickly, hence buffer staffing or client rejected resources are disengaged through this layoff," a user on X said.

A Reddit user said TCS's layoffs mean it is evident that job loss due to AI automation is "real". "Layoffs in any company are not good news...Now, competition will increase and pay will decrease," the user said.