Why is TCS letting go of 12,000 of its employees? Is AI the reason?

Tata Consultancy Services, one of India’s biggest IT companies, has decided to axe 2 per cent of its global workforce, impacting about 12,000 jobs in the financial year 2025-26, the company announced on Sunday.

This marks one of the biggest workforce shakeups in the company’s history. Those affected include a large number of mid-to-senior-level professionals, although some junior-level staff have also been impacted,  especially those who have been on the bench for an extended period.

TCS chief executive officer and managing director K Krithivasan called the decision a hard but necessary reckoning.

The development has left many wondering, why is the IT behemoth known for its stability among most Indians, suddenly letting go of thousands? Is this just about performance, or is the rise of artificial intelligence playing a role? Here’s what we know.

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Why is TCS firing 12,000 employees?

According to Reuters, TCS, the most profitable company in the Tata Group, is going through a major restructuring phase as it expands into new markets, adopts fresh technologies, and leans into AI integration.

As part of this shift, around 12,200 employees will lose their jobs, even as the company insists it’s doing everything possible to minimise disruption.

“This transition is being planned with due care to ensure there is no impact on service delivery to our clients,” the company said, reports Reuters.

The layoffs won’t be geography or domain-specific and will be concluded over the next three quarters of FY26.

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Earlier this month, Executive Vice President and Chief Human Resources Officer (CHRO) Milind Lakkad stated in a company call that the workforce stood at 6,13,069 by the end of the first quarter.

“Net attrition during the quarter was over 5,000 employees. We have honoured all the job offers, and we’ll do so for the rest of the year. Lateral hiring will be recalibrated based on the demand outlook,” he was quoted as saying in The Indian Express report.

Lakkad also mentioned that TCS plans to keep investing in its business to stay in sync with the fast-evolving needs of its clients.

Is AI the reason behind TCS’s job cuts?

In an exclusive conversation with Moneycontrol, TCS CEO K Krithivasan explained that the job cuts are not driven by artificial intelligence efficiency gains but are actually a part of a larger vision that aims to make the company “more agile and future-ready”.

“It is not because that we need less people. We will continue to look for high (quality) talent, acquiring talent, training talent. That continues to happen. This is more about where there is a feasibility of deployment,” he said.

TCS has already trained over 550,000 employees in basic AI skills and around 100,000 in advanced AI, hoping to prepare its workforce for the next tech wave.

However, not all employees, especially those in senior positions, have been able to transition smoothly into new-age roles. The challenges are particularly stark for those accustomed to older project models.

“When we did programs in the old waterfall method, we had multiple leadership teams. That’s changing,” Krithivasan noted.

Despite this, experts suggest that AI and automation are silently reshaping the job market in IT. Roles like manual testing are increasingly being replaced by AI, and those who struggle to keep up with the pace of technological change are the ones most at risk.

And this trend isn’t unique to TCS. For the past couple of years, major tech companies have been slashing roles and leaning into automation. Earlier, Silicon Valley giant Microsoft said that roughly 30 per cent of the code is now AI-generated.

What will TCS offer the affected employees?

TCS has said the layoffs won’t happen abruptly. Instead, the company plans to carry them out in a phased and considerate manner, ensuring those impacted are given a chance at redeployment within the company before any final decisions are made.

“It will be coming through the year. We won’t do it in a hurry. We will first talk to the people that could be impacted. We will provide them an opportunity. When we are not able to provide the opportunity, then we will do what we need to do,” Krithivasan told Moneycontrol.

For those who do end up leaving, TCS has promised to support them through a structured exit process. The company said it will follow its standard HR policies, which include notice-period pay, extended insurance coverage, severance benefits, outplacement support, and access to counselling services. “We will do it in a very, very compassionate way,” Krithivasan added.

While the company hasn’t shared specific dates, the entire process is expected to roll out over the course of FY26.

With input from agencies