TCS headcount falls by 11,151 in Q3 FY26, extending workforce decline

Tata Consultancy Services (TCS) reported a sharp decline in its employee base in the December quarter, marking the second consecutive quarter of workforce contraction as India’s largest software services exporter continues to realign its staffing amid technology shifts and cost pressures.

At the end of Q3 FY26, TCS’s total headcount stood at 582,163, down 11,151 employees from 593,314 at the end of the September quarter, the company said in its quarterly disclosures. The decline follows an even steeper reduction of 19,755 employees in Q2 FY26, when headcount fell from 613,069 in Q1 FY26 to 593,314.

The cumulative reduction over the past two quarters exceeds the company’s previously announced plan to cut around 12,200 roles, indicating that the contraction reflects a combination of planned layoffs and broader attrition.

A reversal after early FY26 additions

The latest decline contrasts with workforce growth earlier in the financial year. In Q1 FY26, TCS had added 13,090 employees, taking its workforce to 613,069, the highest level in the period under review.

In the preceding financial year, headcount movements were relatively modest. TCS ended Q3 FY25 with 607,354 employees, rising marginally to 607,979 in Q4 FY25, before increasing again in early FY26. The sharp reversals in the September and December quarters underscore a more decisive shift in workforce strategy.

Layoffs and workforce realignment

The contraction follows TCS’s announcement in July of plans to reduce around 2% of its global workforce, or about 12,200 employees, largely across middle and senior levels. The company said at the time that the move was aimed at making the organisation more future-ready as technologies and delivery models evolve.

As of Q3 FY26, voluntary attrition in IT services stood at 13.5% on a last-twelve-month basis, according to company data. While attrition remains elevated, it has stabilised compared with the post-pandemic peak seen across the sector.

Financial performance backdrop

The workforce contraction came in a quarter when TCS reported mixed financial performance. The company posted a 13.9% year-on-year decline in net profit for the December quarter, with profit falling to Rs 10,657 crore, compared with Rs 12,380 crore in the year-ago period.

Revenue from operations rose 4.9% year on year to Rs 67,087 crore, supported by steady client demand, while the operating margin stood at 25.2%, unchanged from the September quarter and higher than a year earlier.

TCS said its total contract value of new deal wins during the quarter stood at $9.3 billion, while annualised revenues from artificial intelligence-related work increased by more than 17% to $1.8 billion.

Focus on skills and AI

Commenting on workforce strategy, Sudeep Kunnumal, TCS’s chief human resources officer, said the company’s transformation towards an AI-first operating model remains central to its talent decisions.

“Our associates are at the heart of our transformation into an AI-first enterprise,” Kunnumal said. He added that more than 217,000 employees now have advanced AI skills, directly supporting client engagements at scale.

The company said it has doubled its intake of fresh graduates with higher-order skills and continues to invest in next-generation talent, even as overall headcount declines.

Cost structure and expenses

Employee costs under cost of revenue accounted for 44.9% of revenue in Q3 FY26, down from 46.9% in the previous quarter, reflecting the impact of workforce reductions. Total cost of revenue declined to 59.2% of revenue, from 60.4% in Q2 FY26, while selling, general and administrative expenses rose modestly.

The latest data places TCS among several large IT services firms recalibrating their workforce as client spending remains selective and automation reshapes delivery models. While management continues to emphasise investment in AI skills and fresh talent, the sharp exits in Q2 and Q3 signal a more cautious approach to overall headcount growth.

How quickly hiring resumes will depend on demand visibility in the coming quarters and the pace at which AI-led transformation translates into new revenue streams.