India’s largest IT firm reports a second consecutive quarterly decline in employee count despite stable profits and a growing AI talent pool.
In a notable shift in workforce dynamics, Tata Consultancy Services (TCS), India’s largest IT services exporter, reported a significant drop in its headcount during the third quarter of fiscal year 2026. This marks the second straight quarter of workforce reduction for the tech giant, highlighting broader restructuring efforts in response to evolving market demands and internal transformation initiatives.
As of Q3 FY26, TCS’s total employee strength stood at 5,82,163, a sharp decline of 11,151 employees from 5,93,314 in Q2 FY26. This drop follows an even steeper decline of 19,755 employees recorded in Q2, when the headcount fell from 6,13,069 in Q1.
While a portion of this reduction stems from planned layoffs (approx. 12,200 roles), the figures suggest a mix of voluntary attrition, role rationalization, and workforce realignment amidst the company’s push toward becoming an AI-first enterprise.
Hiring Trends and Workforce Strategy
TCS had added 13,090 employees in Q1 FY26, building from a base of 6,00,000 in Q4 FY25. This growth was short-lived as subsequent quarters reflected a reverse trend. Despite the reductions, Chief HR Officer Sudeep Kunnumal emphasized that TCS continues to focus on future-ready skills.
“As of this quarter, over 217,000 associates have advanced AI skills. We have also doubled our intake of fresh graduates with high-order capabilities,” Kunnumal stated.
The organization reported 51.2 million learning hours completed by employees year-to-date, alongside 3.8 million competencies acquired, a reflection of TCS’s significant push for internal upskilling.
Financials Remain Steady
Interestingly, the workforce downsizing did not negatively affect TCS’s financial performance. In Q2 FY26, the company posted a consolidated net profit of ₹12,075 crore, marking a 1.4% YoY growth, and revenue from operations rose to ₹65,799 crore, a 2.4% increase over Q2 FY25.
TCS also reported a gradual decline in its cost of revenue (COR), with employee costs dropping from 46.9% of revenue in Q2 to 44.9% in Q3, suggesting cost optimization through workforce rationalization.
Meanwhile, SG&A expenses saw a slight increase, with employee costs under this segment rising to ₹8,399 crore, up from ₹7,541 crore in Q2.
Layoffs, Attrition & Diversity Breakdown
TCS had publicly announced plans to cut 12,200 roles in July 2025, focusing primarily on mid- to senior-level positions. The voluntary attrition rate as of Q3 stood at 13.5%, a figure closely watched in the competitive Indian IT sector.
Diversity figures showed women making up 35.1% of the workforce, with employees from 149 nationalities, underlining TCS’s global footprint and inclusive hiring practices.
What Lies Ahead?
With the tech industry rapidly transforming, TCS’s approach signals a pivot towards leaner, AI-skilled teams. As businesses worldwide prioritize digital transformation, TCS’s strategic workforce shifts and aggressive reskilling programs appear to be preparing the company for a future driven by artificial intelligence, automation, and hybrid delivery models.
