Key Points:
- TCS workforce reduction continued in Q3 FY26 with 11,151 job cuts, taking total headcount decline to over 30,000 in two quarters.
- The cuts reflect a shift toward AI-led delivery amid cost pressures and cautious client spending.
- Profit fell year-on-year despite revenue growth, as TCS balances cost control with AI investment.
Tata Consultancy Services cut 11,151 jobs in the December quarter, extending a second straight workforce decline as India’s largest IT services firm continues its TCS workforce reduction while reshaping staffing amid cost pressures, selective client spending, and a shift toward artificial intelligence-led delivery.
Tata Consultancy Services, or TCS, reported a sharp sequential drop in employee strength in the third quarter of fiscal year 2026, underscoring a broader reset underway across India’s software services sector.
The company ended the December quarter with a total headcount of 582,163 employees, down from 593,314 at the end of the September quarter, according to its quarterly disclosures. The decline follows a steeper reduction of 19,755 employees in the second quarter, when headcount fell from 613,069 at the end of the June quarter.
Taken together, the TCS workforce reduction amounts to more than 30,000 employees over the past two quarters. That figure exceeds the company’s previously announced plan to cut about 12,200 roles, suggesting the contraction reflects both planned layoffs and elevated attrition.
Second Straight Quarterly Decline Signals Deeper Workforce Reset
The December-quarter decline marks a reversal from earlier gains in the fiscal year. In the first quarter of FY26, TCS added 13,090 employees, taking its workforce to 613,069, the highest level during the period.
In the previous fiscal year, headcount changes were modest. TCS closed the third quarter of FY25 with 607,354 employees and ended the year with 607,979. The sharp pullback in the September and December quarters points to a more decisive shift in workforce strategy behind the ongoing TCS workforce reduction.
Industry analysts say large IT services firms are reassessing staffing needs as automation increases and clients scrutinize technology spending more closely.
“The pace and scale of the exits show companies are no longer expecting a quick rebound in traditional demand,” said an analyst at a Mumbai-based brokerage, who requested anonymity because of client restrictions.
Layoffs, Attrition and AI Shift Drive Headcount Reduction
TCS announced in July that it planned to reduce about 2% of its global workforce, or roughly 12,200 employees, primarily across middle and senior levels. The company said the move was intended to make the organization more future-ready as technology and delivery models evolve.
Voluntary attrition in IT services stood at 13.5% on a last-twelve-month basis in the December quarter, the company said. While still elevated, attrition has stabilized from post-pandemic highs seen across the sector.
“Our associates are at the heart of our transformation into an AI-first enterprise,” said Sudeep Kunnumal, TCS’s chief human resources officer. “We are aligning our talent base to the skills our clients need today and tomorrow.”
Kunnumal said more than 217,000 TCS employees now have advanced artificial intelligence skills and are supporting client engagements at scale.
The company added that it has doubled its intake of fresh graduates with higher-order skills, even as overall headcount declines following the ongoing TCS workforce reduction.
Profit Falls as TCS Balances Costs and Skills Investment
The workforce contraction came in a quarter of mixed financial results. TCS reported a 13.9% year-on-year decline in net profit for the December quarter, with profit falling to 10,657 crore rupees from 12,380 crore rupees a year earlier.
Revenue from operations rose 4.9% from a year ago to 67,087 crore rupees, supported by steady client demand. Operating margin stood at 25.2%, unchanged from the September quarter and higher than a year earlier.
Employee costs under cost of revenue accounted for 44.9% of revenue in the December quarter, down from 46.9% in the previous quarter. Total cost of revenue declined to 59.2% from 60.4%, reflecting the impact of the TCS workforce reduction.
TCS said the total contract value of new deal wins during the quarter was $9.3 billion. Annualized revenue from AI-related work rose more than 17% to $1.8 billion.
The latest figures place TCS among several large IT services firms recalibrating their workforce as automation reshapes delivery models, and demand visibility remains limited. Management said future hiring will depend on client spending trends and the pace at which AI-led transformation converts into revenue growth.
