Tata Consultancy Services (TCS) has reported a second consecutive quarterly decline in employee strength, raising fresh concerns about renewed stress in India’s IT job market.
At the end of Q3 FY26, TCS said its total headcount stood at 582,163, down by 11,151 employees from 593,314 in the September quarter. This followed a steeper reduction in Q2 FY26, when the company cut 19,755 jobs. In just two quarters, TCS’s workforce has shrunk by more than 30,000 employees, prompting questions about whether the sector is facing a deeper, longer-term employment slowdown.
GLOBAL SLOWDOWN AND FALLING ATTRITION DRIVE DECLINE
Industry experts attribute the headcount drop to a combination of global demand weakness and structural changes within the IT services industry.
Sarthak Sharma, founder of ModxComputers, said the reduction reflects both temporary pressures and permanent shifts. “TCS’s employee reduction is the result of multiple factors, including a slowdown in global technology spending and long-term workforce restructuring,” he said.
Over the past 12–18 months, companies in the US and Europe — which together account for nearly 70% of India’s IT revenue — have sharply curtailed tech spending due to high interest rates and geopolitical uncertainty. Sharma noted that spending on large digital transformation projects and system upgrades has fallen by 15–20% across sectors such as banking, financial services and retail.
At the same time, attrition in Indian IT firms has dropped significantly, from over 20% in FY22 to around 11–13% in FY25. “Lower attrition means fewer replacement hires, leading to a natural contraction in net employee additions,” Sharma explained.
SHIFT TOWARDS STRUCTURAL WORKFORCE REDUCTION
Experts say companies are no longer treating workforce cuts as short-term adjustments. Instead, IT firms are moving towards structurally leaner organisations by adopting automation, AI tools and vertical-specific solutions.
“Headcount reduction is now part of a permanent efficiency strategy,” Sharma said, adding that automation-led productivity gains are reducing the need for large teams, even when business conditions improve.
ENTRY-LEVEL AND MID-LEVEL ROLES HIT HARDEST
The impact has been most severe for entry-level and mid-level professionals. Sharma said fresher hiring has dropped by 30–40%, while mid-level engineers working on traditional technologies face growing pressure.
However, demand remains steady for specialised skills in areas such as cloud computing, cybersecurity, data engineering, AI governance and cloud architecture. Senior roles directly tied to client delivery and revenue have largely remained insulated.
AI AND AUTOMATION RESHAPING TEAMS
Automation and AI are delivering efficiency gains of 20–30% in areas like testing, application maintenance and documentation, Sharma said. “Large project teams are no longer required, regardless of the client spending cycle.”
Even as deal pipelines show signs of recovery, IT firms are keeping headcount tightly controlled to protect margins, with Tier-1 companies targeting EBIT margins of 24–26%.
INDUSTRY-WIDE TREND, NOT JUST TCS
Ajit Rai, Vice President of Human Resources at Stellar Innovations, said TCS’s numbers reflect a broader industry shift. He noted that TCS’s workforce has now fallen below 600,000 amid weak demand from US clients, tariff uncertainty and internal skill realignment.
“The pressure is visible across the sector,” Rai said, pointing out that Infosys and Wipro have seen over 42,000 professionals exit in the past two years.
While global slowdown plays a role, Rai said automation and AI are the biggest disruptors, particularly for mid-level engineers and support functions. Fresher hiring may appear stable on paper, but redeployment challenges persist, he added.
LONG-TERM TRANSFORMATION UNDERWAY
Both experts agree the IT sector is undergoing a long-term transformation rather than a temporary downturn. Bulk hiring is giving way to selective, skill-based recruitment.
“Companies have shifted focus from manpower quantity to talent quality,” Rai said. Future hiring will likely be linked to specific recovery phases, not large-scale expansion as seen before the pandemic.
For young professionals, Sharma stressed that basic coding skills are no longer enough. “Career longevity will depend on expertise in AI, cloud-native technologies, cybersecurity, data analytics and domain consulting.”
Rai echoed this view, adding that adaptability and skills in AI, machine learning, cloud computing, prompt engineering and product-focused roles will be critical as traditional IT services jobs continue to face pressure.
While TCS has reduced its workforce sharply, Infosys has taken a different path. The Bengaluru-based firm added 5,043 employees in Q3 FY26, marking its sixth consecutive quarter of headcount growth, and plans to onboard around 20,000 employees in FY26.
