Tech giant TCS to cut 12,000 jobs due to AI-related uncertainties
Tata Consultancy Services (TCS), one of the world's largest IT services companies, has announced plans to lay off approximately 12,000 employees, representing around 2% of its global workforce. The majority of the affected employees are mid- to senior-level staff, including some junior staff who have been on extended bench time.
In a recent statement, TCS CEO K. Krithivasan clarified that the layoffs are not a direct consequence of AI replacing jobs or aiming for 20% productivity gains. Instead, they are due to skill gaps and challenges in redeploying trained employees, particularly at senior levels. Despite extensive upskilling programs, some senior staff find it challenging to transition to technology-heavy roles, leading to a structural mismatch between available skills and business needs.
The move forms part of TCS's transformation to become a "future-ready" organization, aligning its workforce with evolving business needs, technology service delivery demands, and cost optimization goals. Industry experts also view the layoffs as a cost-cutting measure to improve operating margins amid slower demand and an overall IT sector slowdown.
Rishi Shah, an economist with Grant Thornton Bharat, believes that AI is leading to a rapid enhancement of productivity, forcing businesses to reassess their workforce structure. He suggests that this trend is not unique to TCS but is a broader challenge being faced by India's IT sector.
The layoffs started in the first half of July 2023 and will continue throughout FY26. Affected employees will receive severance packages, extended insurance, outplacement assistance, and counseling to help them navigate this transition.
Not everyone is convinced that AI hasn't played a role in TCS's layoffs. The U.S-based demand for IT services has been impacted by President Donald Trump's tariffs, and analysts suggest that companies are pausing on discretionary IT spending due to tariff uncertainties and global sourcing strategy reconsiderations.
The industry body Nasscom has intensified upskilling efforts to address the lack of AI skills among IT professionals. India needs a million AI professionals by 2026, but only 20% of IT professionals in the country are AI-skilled. As a response, TCS is focusing on investments in technology, AI deployment, market expansion, and workforce realignment as part of its strategy to become a "future-ready organization."
However, the EEOC is currently probing TCS for discrimination allegations, as mentioned in a previous article dated April 23, 2025. This investigation adds another layer of complexity to TCS's ongoing transformation efforts.
In summary, TCS's 2025 layoffs of mostly mid- to senior-level employees arise from a strategic realignment focused on addressing skill mismatches and workforce deployment challenges amid technological shifts—especially AI adoption—rather than being a direct consequence of AI automation replacing jobs. The company is balancing technology transformation with cost efficiency and future-ready positioning, amidst a broader IT industry slowdown.
- Despite the company's extensive upskilling programs, some senior staff find it challenging to transition to technology-heavy roles due to skill gaps, leading to a structural mismatch between available skills and business needs in the finance and business sectors.
- As part of TCS's strategy to become a "future-ready" organization, the company is focusing on investments in technology, AI deployment, market expansion, and workforce realignment, especially in the finance and business sectors, to address the lack of AI skills among IT professionals and align with evolving business needs.
